Figures released by the Department for Education and Employment show that between 1998 and 1999 there has been a fall of 47,000 places - with the closure of 700 playgroups and the loss of 10,000 childminders.

An independent inquiry is set to report on the continuing loss of pre-school places

The government, which accepts that there has been a 4.5% fall in places, says that it is still committed to its target of providing places for all four year olds and two-thirds of three year olds by 2002 - which will mean creating 190,000 extra places.

But the Liberal Democrats says there is no indication as to how such an expansion will be funded or how the fall in places will be reversed.

"We're sceptical of the numbers promised by the government, because they have never answered questions about how the extra places will be created or who will provide them," said a Lib Dem spokesperson.

Playgroups are uneconomic

The closures of playgroups have been blamed on the expansion of pre-school places in primary schools - up by 24,000 in a year - with many schools opening nursery classes to draw extra funding.

The school-attached nursery classes offer free places and there have been claims that these are forcing playgroups and childminders out of business. Even if only a proportion of children switch to school nurseries, it can make private playgroups uneconomic.

There are now 931,000 pre-school places available - 247,000 in day nurseries, 347,000 in playgroups and 337,000 with childminders.

In an attempt to prevent the closure of playgroups, earlier this year the Education and Employment Minister Margaret Hodge announced £500,000 in support and commissioned an independent inquiry into why places were being lost.

The early years' learning organisation, the Pre-School Learning Alliance, says it is withholding judgment on the government's strategy until the results of the inquiry are published.