PACEY highlighted the issue as part of its written evidence to the Public Accounts Select Committee, which members are due to discuss this week.
The committee is currently holding an inquiry into the free entitlement to early years education.
In its submission, which has been circulated among the MPs, PACEY states, 'The NAO report observes that local authorities have generally focused on improving the quality of existing early years providers rather than encourage new providers into the market.
'We would also like to make the point that the system in which many local authorities administer the early education entitlement actually serves to deter many providers from delivering it, particularly smaller groups settings and childminders.'
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