Members of the education select committee looked at freedom of information requests submitted by the National Day Nurseries Association (NDNA) and found that more than 90 out of 150 local education authorities had underspent by a combined £46m last year.

The NDNA said £229m intended for providers of free childcare had been underspent over the past four years, prompting MPs on the committee to express concerns that this money was being used to offset deficits or add to reserves.

Parents in England who work more than 16 hours a week and earn less than £100,000 are entitled to 30 hours’ free childcare a week for children aged three and four. The Government has announced plans to expand the scheme to all children over the age of nine months.

But childcare providers have long complained that the scheme is chronically underfunded.

Robin Walker, chair of the education selection committee, said: “In terms of coming through, we have seen figures from the NDNA suggesting, from freedom of information requests that it has made, that 15 local authorities reported an underspend of more than £1m, and that one of those local authorities had an underspend of £1m four years running.

“That sounds pretty concerning in terms of the money reaching the frontline where it is needed.”

Current guidance allows councils to “top-slice” 5% of the funding from Government, to allow flexibility for children coming into the system at different times. Claire Coutinho, the minister for children, said that on average councils were retaining less than this figure.

She told the committee: “It’s something we keep a careful eye on but the vast majority is passed on and is well spent.”

But NDNA chief executive Purnima Tanuku described the results of the freedom of information request as “shocking” and said the association was calling for the money to be ringfenced so it could only be used for early years places.

“At a time when providers will be under pressure to get ready to deliver funded places for all two-year-olds in less than a year’s time, they should be better supported by councils. This system needs fixing and reforming now if the early years sector is going to have a hope of delivering the government’s new plans,” she said.