Kent pays nurseries 8.22 per two-and-a-half hour session of free nursery education. A nursery owner from Sevenoaks said that she would stop offering free places if 'price fixing' meant she had to reduce the quality of care.
Another nursery school owner told Nursery World that she is seeking legal advice.
She claims that private providers are being 'coerced' to opt out of providing free education sessions under the nursery education grant because they cannot afford to run at a loss.
The provider, who does not wish to be named, said that the terms of the DfES Code of Practice, effectively mean that the Government is expecting private providers to run as a charity and subsidise parents. She said, 'I can't cover my staffing costs on 8.22. It doesn't cover my salary or things like insurance.'
She has written to David Willetts, shadow education secretary, claiming that the Government is in effect 'nationalising privately run providers of nursery education for under-fives by stealth' and warning of 'an impending crisis in the provision of nursery school education directly resulting from Government policy'. She adds, 'Parental choice isn't even on their radar.'
The council is running briefing sessions during June and early July on the KCC Delegated Conditions 2006 which PVI providers have to comply with to qualify for the NEG.
A summary to the document, which comes into effect on 1 September, says that it is intended to 'supplement the DfES Code of Practice on the provision of free nursery education'.
It asks providers who wish to register on Kent's PVI Directory to produce 'a formal business plan that clarifies the current position of the business and where it intends to go'.
The nursery owner says that she has sought legal advice and been told that the details required - including a personnel plan, financial information, marketing plans and other costs - could be an infringement of free trade and in breach of the Data Protection Act.
A statement from the council said, 'Each local authority agrees its own local implementation of this Code of Practice in the form of Delegated Conditions. The DfES Code of Practice and KCC's Delegated Conditions 2006 should be read alongside each other.' They did not comment on business plan requirements.
A spokesman for the Federation of Small Businesses, which represents 200,000 members, said, 'It may well be that other service providers in the area are having similar misgivings. If this nursery were to discuss its predicament with others locally they could lead a delegation to the council to ask them to reconsider their approach.'