A two-tier system of childcare provision is emerging which is “stigmatising” for disadvantaged families with young children, a report has warned.

It has become “common practice” for early years settings in England to ask families to pay additional charges on top of funded childcare hours they are entitled to, according to a study.

The report, by the Coram Family and Childcare charity, the Centre for Evidence and Implementation, UCL Centre for Education Policy and Equalising Opportunities and expert Ivana La Valle, identified a number of “barriers” to take-up of existing childcare entitlements among disadvantaged families.

Disadvantaged two-year-olds in England have been entitled to 15 hours of Government-funded childcare for a decade, but a “substantial minority” of children are still missing out, the paper said.

It said: “While some providers make inclusive free provision a priority, it now appears common practice (although not universal) for settings to constrain the number and structure of funded places offered and to ask families to pay additional charges for their entitlement.

“A two-tier system of provision is emerging in some cases, which, at its most extreme, is inferior and stigmatising for parents accessing the disadvantaged two-year-old entitlement.”

The research, funded by the Nuffield Foundation, said some children in settings who access only funded hours have “different experiences” to their peers from families paying for extra hours.

For example, children who access funded-only places may be kept in separate rooms from children of the same age whose families pay more, or they may not have access to the setting’s forest school.

The report added parents find the childcare system confusing and hard to navigate – and for some there is a “stigma” associated with the disadvantaged two-year-old entitlement which can deter them from taking up a place.

Councils said lengthy application processes and complex systems make accessing funded childcare entitlements difficult for parents with English as an additional language (EAL), or with low literacy or digital skills.

The report said the Government’s additional childcare entitlements for working families in England “appear to have complicated the picture”.

“They are sending conflicting and confusing messages to parents about eligibility for, and the purpose of, the funded hours, presenting more barriers to take-up and adding to the administrative burden for providers,” it added.

The expansion of funded childcare for working parents began being rolled out in England in April.

Working parents of children older than nine months are now able to access 15 hours of funded childcare, before the full rollout of 30 hours a week to all eligible families in September 2025.

The report calls for changes to ensure children from disadvantaged backgrounds can access high quality and “genuinely free” early education.

It recommends introducing a universal entitlement of 15 hours of funded early education for two-year-olds to reduce confusion and boost take-up among disadvantaged families.

Lydia Hodges, head of Coram Family and Childcare, said: “At a time when childcare seems to rarely be out of the spotlight, these findings show that children who may benefit the most from early education are often missing out.”

She added: “Right now, disadvantaged children are entitled to only half the hours of funded early education that children with working parents get, and at a later age. We have to ask ourselves if this is what we want for our children.

“Childcare is important for enabling families to work, but going to nursery isn’t just about childcare, it’s early education too.

“The Government has recognised that in their commitment to breaking down barriers to opportunity for every child, and their ambition to boost the number of children reaching their early learning goals. To do that, the funded entitlement must be accessible to all children.”

Neil Leitch, chief executive of the Early Years Alliance, said: “We know that access to early education has a proven impact on a child’s development and life chances, particularly for children from more deprived backgrounds – and yet, as these findings show, many disadvantaged families continue to face an unnecessarily complex and confusing system which is making it increasingly difficult for them to access early years places.

“Add to this the fact that continued underfunding for the three- and four-year-old offer is still leaving many providers with no option to increase fees and additional charges, and it’s clear that the current approach to early years policy is at risk of failing those families most in need of support.”

Education Secretary Bridget Phillipson said: “High quality early years is central to breaking down the barriers to opportunity young people face, and this report paints a stark picture of how parents, providers, and children have been failed by a lack of vision and ambition.

“Early years is my first priority – and I want to be clear that I am taking the concerns of parents and providers seriously.

“That’s why we have already launched the first round of funding to deliver school-based nurseries where places are needed most, and kicked off action to protect parents from overcharging.

“This comes on top of the additional training we have launched for educators to support children with SEND, and marks the first step towards an early years system that gives every child the best start in life.”