Prep schools and private nurseries are cashing in on the nursery voucher scheme in the four pilot local authorities.
An analysis of where vouchers are being spent shows that a quarter are being used to secure places in private institutions.
It also shows that across the pilot areas, Norfolk and the London boroughs of Kensington and Chelsea, Wandsworth and Westminster, nearly 1,500 children who were eligible for vouchers missed out.
Statistics provided by the Department for Education and Employment and Capita, the agency charged with administering the scheme, reveal that only 14,711 vouchers were issued to the 16,150 four-year-olds in the pilot areas.
Local authority nursery and reception classes won the lion's share of the vouchers - 55 per cent across the four councils - while playgroups were hit hard. Just four per cent of vouchers issued in the summer term were redeemed in voluntary and private playgroups.
In Norfolk, one of the four pilot authorities, six playgroups closed in July, compared to the normal two closures per term and a further 22 fear that they will close, four of them before Christmas. Nine out of 10 playgroups and preschools in the county applied for validation to take in children with vouchers but a third are now not sure whether they will do so next year.
Statistics collected by Capita for the summer term show that 97 per cent of the 9,300 four-year-olds in the county had vouchers. But just 84 per cent of the vouchers were redeemed. Under half were spent in local authority schools (49 per cent) while almost a third went to prep schools and private nurseries. Less than 3 per cent of the 8,796 vouchers that were issued in Norfolk were spent in playgroups.
Local authorities mopped up the bulk of the vouchers in the three other pilot authorities accounting for 59 per cent of the vouchers in Kensington and Chelsea, 68 per cent in Wandsworth and 61 per cent in Westminster.
Prep schools and private nurseries won more than one in five of the vouchers in Kensington and Chelsea, 14 per cent of them in Wandsworth and 11 per cent in Westminster. But while private nurseries appeared at first glance to have benefited, some have expressed concern. They claim that the four-year-olds were going into schools armed with vouchers, leaving them with the "more expensive" babies and toddlers.