Owners of pre-schools and nurseries across Portsmouth and the surrounding areas have spoken of their concern over the 30 free hours of childcare given to working parents.
The government policy sees the money subsidised but not in real terms, the nurseriesÂ and pre-schools claim.
But parents said discriminating against working parents and only allowing privately-funded children is not fair.
Lauren Lockyear, from Hilsea, has a five-year-old daughter. She said: '˜I relied on that free childcare when Izzy was at nursery.
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'˜It was so important to me to ensure she interacted with other children while also meaning I could go back to work and have money left for us to do things together.
'˜She grew in confidence and was then ready for school. Without that funding, she wouldn't have started school as easily as she did.'
Mary Bishop, from Farlington, pays for her son's time at pre-school but said she understood the policy's importance.
'˜This is something the government needs to look into,' she said.
'˜It isn't fair that nurseries are losing money when providing such high-quality care.
'˜It also wouldn't be fair though if they stopped accepting children eligible for the free hours. That is discrimination against poorer families.
'˜Some parents don't have a choice but the government does. They should definitely look at it.'
Mum-of-two Lucy Taylor, from Cosham, was only able to send her daughter Daisy to nursery because of the free childcare.
The 26-year-old said: '˜I didn't realise how much nurseries were losing out.
'˜I do think it'sÂ badÂ they are losing money by accepting children on the scheme. Something needs to change.'