The public but unpublished report, which was sent to the House of Commons education select committee last week and leaked to Labour MP Margaret Hodge, said that the plan to give parents of all four-year-olds a Pounds 1,100 voucher to spend on the nursery of their choice is unworkable.
But Wandsworth, another Tory borough in the capital, said it had not encountered problems. If heads had "a positive spirit", the scheme worked well, said a spokesman.
Westminster's education officers have listed their criticisms: * the Government's standards for nursery education are below those already achieved in Westminster's nursery schools; * it is unlikely a voucher scheme in an inner-city borough can create more places because premises are expensive and in short supply; * the scheme is bureaucratic and much of the administration falls on the schools; * authorities with a lot of nursery places suffer in competition with the private and voluntary sectors, and it is difficult for them to act impartially; * market forces on their own will not address the shortage of places in areas of deprivation where parents cannot afford to top up the voucher; * the vouchers are valid for the three terms before compulsory education, but, since Westminster, like other authorities, admits children who are "rising five" to reception classes, vouchers are useful for only two terms.
Margaret Hodge, who is Labour's under-fives inquiry coordinator, said: "Westminster, the jewel in the Tories' local government crown, has now joined the Labour party in giving a resounding thumbs-down to vouchers."
She has written to Education and Employment Secretary Gillian Shephard demanding that she evaluates the nursery voucher pilot before imposing the scheme on the rest of the country next April.
Graham Ellis, who is in charge of expanding Westminster's under-fives services, said the report was written in June, and since then the authority had resolved many of the problems and learnt some lessons.
The Department for Education and Employment said: "Of course, new places will not appear overnight. The whole point of nursery vouchers is that it will lead to extra places over time and there are encouraging signs in all of the phase one [pilot] areas.
"The DFEE has conducted some research among providers in all of the phase one areas and this research shows that over three-quarters surveyed found the administration easier than they expected.
The spokesman for Wandsworth said the borough had well-established private and maintained nursery sectors with "saturation" provision and had not expected vouchers to create more places.
But, he said, headteachers, whether for or against the scheme, had decided early on they would make vouchers work because they did not want to lose children to the private sector.
The working group monitoring the voucher pilot in Kensington and Chelsea has yet to see an expansion of nursery places. According to Rosemary Tapling, head of Ainsworth nursery school, there is no evidence that the private sector is about to move into nursery market to attract parents with vouchers.
"It is very difficult for new providers because of the high cost of places, " she said.
Nursery schools are having to deal with irate parents who cannot get a place for their four-year-olds.
"There have always been parents who have not been able to get a nursery place, but parents with vouchers feel more strongly about the issue," she said.
The other drawback to the scheme is the amount of time spent by the schools' administrative staff and council officers, she said.