The Department for Education had done its utmost to stop Jonathan Aitken, Chief Secretary to the Treasury, speaking at the conference organised by the Centre for Policy Studies, a right-wing think tank.

After all, Chief Secretaries to the Treasury are meant to be grey men who scurry about keeping an eye on the Government’s housekeeping, not darlings of the Right who make speeches about highly political issues within other Cabinet ministers’ responsibilities.

In the event, he seems to have appeared with the approval of his boss, the Chancellor, and his speech has been seen as part of a Cabinet skirmish over the way to fund the expansion in nursery education promised last October by the Prime Minister.

The skirmish is being closely watched - if not encouraged - by Sheila Lawlor, deputy director of the Centre for Policy Studies, who organised last week’s conference. Dr Lawlor published a pamphlet last December in which she recommended a voucher system for the under-fives and she has since been promoting the idea to both the Prime Minister’s office and the Department for Education.

She has the support not only of Mr Aitken but also, it seems, of Kenneth Clarke, the Chancellor, who is opposed to vouchers for the compulsory age range but may favour them for the under-fives as a way of keeping costs down.

Gillian Shephard, the Education Secretary, is thought to favour a bidding system, under which maintained, voluntary and private-sector providers would compete to provide the new nursery education places. (Sheila Lawlor has dubbed this “the departmental fudge”.) The bidding system might be run by a new agency; after the recent fiasco with the Student Loans Company, the Government is thought most unlikely to set up another company to run it and is equally unlikely to hand the task over to the local authorities.

The position of Mr Major himself is unclear but accounts that he is getting impatient with delays and demanding Mrs Shephard’s support for a full-blown voucher scheme seem far-fetched. “There is not so much as a cigarette paper between the Prime Minister and Mrs Shephard,” said one insider.

But it appears to be true that the nursery proposals are still being worked on within the DFE and that they have yet to be formally considered by a Cabinet committee, let alone the full Cabinet. If the chosen option needs legislation, as vouchers would, time is getting short. Mr Major has little more than a year in which to carry out his pledge to start expanding the number of places for four-year-olds before the next election.

Mr Aitken’s speech, which was obviously based on a DFE brief, did not go much beyond a statement of options and he did not stay for questions. It was his presence at the conference, in the company of noted supporters of vouchers, that prompted the press stories.

He stressed the need for a split between the purchasers and providers of nursery education and focused on two ways of doing it: vouchers and a bidding system.

A voucher system had “powerful attractions”, he said, but introducing it “would not be completely straightforward”. “If it were,” he added to Dr Lawlor’s visible exasperation, “we would no doubt have done it by now.” And he underlined the key issue of deciding how much a voucher should be worth, because it would affect both the diversity of services and the deadweight cost - that is, the costs met now by parents that would transfer to the taxpayer. Set high, it would be too expensive and threaten cheaper providers like playgroups that the Government is committed to supporting. Set low, it would be cheaper but could rule out existing nursery places for many parents.

Dr Lawlor believes that a voucher of Pounds 700 a year would be enough to enable parents to “buy” either a full-time place at a playgroup or half-day sessions at a private nursery school. If, after a transitional period, LEAs could not provide places out of that sum, they would have to offer the space to private or voluntary bodies. But the figure is dismissed as much too low by those involved with nursery education. Even in 1990, the average termly cost to parents of private nursery education was Pounds 650. A full-time place in a local authority nursery class is currently estimated to cost some Pounds 2,000 a year.

As for the legal aspect, a voucher scheme would imply fees since there would otherwise be no point to the voucher. However, local authority nursery schools and classes are forbidden to charge under the 1944 Education Act so a change in the law would be necessary. And could the right to charge be extended to primary-school reception classes, which are absorbing an increasing number of four-year-olds?

There are nearly 700,000 four-year-olds in England, of whom 80 per cent already have some kind of place at some stage, from playgroups through nursery classes and schools to reception classes in primary schools. About half of those have local authority places and the rest are in the independent sector. But finding a cheap way to provide places for the remaining 20 per cent, let alone providing some kind of consistent quality for all, appears a near-impossible task.