Some private nurseries are being paid as little as £3.26 an hour to help deliver the Scottish Government’s flagship policy to expand free early leaning and childcare.

An overview of council payments to the private sector in 2019/20 shows the highest hourly rate is £5.40 with an average of £4.65 an hour.

The Scottish Government report says the average represents an increase of 26 per cent since 2017-18, but nurseries have warned the payments are too low and are threatening the “sustainability” of private nurseries.

Currently, all three and four-year-olds and eligible two-year-olds are entitled to 600 hours a year of funded childcare, but this will almost double to 1,140 hours by 2020.

Earlier this year a report by spending watchdog Audit Scotland warned of “significant risks” to the policy arguing it would require a large increase in the number of childcare staff and changes to premises which would be difficult to achieve in the time available.

The latest government report highlights the discrepancies in the payments to private providers.

It states: “As part of the transition to the statutory roll-out of 1140 hours ... there are considerable local variations in approaches across local authorities.

“This results in expected variation in terms of the rates on offer to funded providers across Scotland, and there may also be variations within local authority areas depending on the local approach.”

Under the expansion nurseries are also expected to increase the provision of free meals and the report said there was variation in the payments made to nurseries to fund this aspect of the policy.

The disparity between council areas was attacked by the National Day Nurseries Association (NDNA), which represents private nurseries.

Recent research shows 79 per cent of nurseries are unable to cover their costs with the funding rate they receive, with an average shortfall of £1.98 per hour per child.

Jonathan Broadbery, NDNA’s head of policy, said the report highlighted the “levels of confusion” facing providers and called for a voucher scheme where money went straight to parents.

He said: “We have consistently called for hourly rates to improve to meet the rising costs of delivering early learning and childcare places.

“While some progress has been made in moving away from cripplingly low rates of £3.26 an hour, it has been too slow. Providers and parents need rates that are sustainable so that these places are available, affordable and flexible.”

Mr Broadbery said the lower rates made it impossible for employers to afford higher wages for staff and in some cases was “threatening sustainability”.

He added: “Some councils have yet to set a rate for next month, leaving partner providers in the dark, while others will not be involving partner providers in the expansion this year at all.

“We have highlighted examples where parents choose providers that are not yet included in the expansion only to be told that they must move their children if they want to get the full 1140 hours.

“Neither parents nor providers can understand why some councils aren’t allowing choice about accessing those hours.”

Parents also expressed concern with Eileen Prior, executive director of Connect, highlighting similar concerns over funding in a recent survey.

She said: “This report confirms the findings in which parents described a confused and confusing picture of the trials of the 1140 hours.

“Local authorities have applied very varied eligibility criteria with some families benefitting from significant cost savings and the ability to study or work more hours, whilst others have lost out. This will hopefully be resolved in 2020 when the statutory roll out begins.”

However, Stephen McCabe, children spokesman for council umbrella body Cosla, said local authorities were committed to working in partnership with the private sector.

He said: “It is important that councils are able to set rates for provision that take account of the local circumstances including geography, deprivation and the needs and priorities of the local community.

“As this report set outs, the hourly rates paid to providers to deliver the current funded entitlement of 600 hours per year has increased in the last year and is higher in areas piloting the additional hours early.”