Councils are currently receiving a flat rate for 2013-2014 based on local labour costs, which provides an average of £5.09 for each 15-hour, two-year-old place.
After 2015, local authorities will be funded on a 'use it or lose it' basis, with money being withdrawn where children are not taking up places.
At First Class Child Care in the north of England, managing director Andrew Clifford is concerned that funding allocations could reduce in 12 months' time.
He said, 'In West Yorkshire, nurseries and childminders are receiving around £4.86 for each place, but it was suggested to me by one of my local authorities that this could reduce to £3.86 in a year's time. This would bring it down to the level we receive for the three-year-old offer and would not be realistic for two-year-olds.'
He added, 'As far as my nursery is concerned, we only have the overheads of the room as we have fitted twos into spare capacity. However, other providers have used capital funding to invest in expansion and may find themselves in a position where they cannot afford to accommodate two-year-olds because the funding is too low.'
One local authority childcare commissioner in Norfolk said she would not be surprised if funding ran into problems in a year to 18 months' time.
'At the moment, we have the situation where up to three children are accessing part of one 15-hour place. But, as the programme gathers awareness and more children come on board for the full offer, the cost will climb,' she said.
However, James Hempsall, director of Hempsall's, which with Mott MacDonald is supporting the implementation of the programme, said that funding levels are expected to remain the same.
'As yet, local authorities have been given their funding for 2013-14,' he said. 'Next year's funding will be announced around December.
'Our best advice to local authorities now is to plan on the assumption that funding levels will be the same. From 2015-16, it is expected that funding will be given on a participation basis, as is the case with threeand four-year-old funding.'
In Oxfordshire, providers are proceeding with caution. Sarah Steel, director of the Old Station Nursery Group, and private, voluntary and independent representative on the local Schools Forum, said that spare capacity is being used, rather than new places being created.
'So far, there is nothing to suggest that funding will be reduced but there are no guarantees either,' she said. 'We have been bitten by the funding for threeand four-year olds which simply isn't enough.'
