Speaking at the Nursery World Business Summit in London, Gyimah said the childcare funding review will be published on 25 November alongside the government's Spending Review.
He told delegates that inflationary pressures, such as the national living wage and pensions, will be reflected in the rate that providers receive.
Rates will also factor in overheads, children with special educational needs (SEN), and children in areas of deprivation, he added.
“We will pay a rate that allows providers to deliver the service free to children,” he said.
Under government plans, free childcare entitlement for three- and four-year-olds will be extended from the current 15 hours to 30 hours each week by 2017. A trial is due to get under way in September next year.
There have been concerns that in order to meet the cost of the extension, the government will alter childcare ratio requirements so providers can be responsible for more children at a time.
Gyimah said the government has “no plans” to alter child-to-adult ratios in order to deliver the promised 30 hours.
“But we need to face up to something,” he said, “that ratios are not the only hallmark of quality in early years settings.”
“It’s time to stop using the childcare ratio as a convenient stick with which to beat government, and focus on other factors needed to deliver and improve quality,” he said.
Purnima Tanuku, chief executive of the National Day Nurseries Association, said research by the organisation found that demand is likely to increase, with 80 per cent of parents planning to take up the full entitlement of funded hours.
“We are keen for quality not to be compromised in delivering the additional hours,” she said.
“We look forward to seeing the results of the funding review on 25 November as our sector and the future of childcare in this country hinges on the Chancellor giving nurseries a fair deal on hourly funding."
Neil Leitch, chief executive of the Pre-school Learning Alliance, said that with many government departments facing cuts at the upcoming Spending Review, it is vital that the government ensures that the 30 hours offer is adequately funded.
“This means more than a one-off uplift in funding rates: fundamental funding system changes are needed to ensure the sustainability of the sector in the long-term.
“Tinkering around the edges and telling providers to be more ‘innovative’ and ‘creative’ in order to cut costs is not enough – it is the government that made this pledge and so it is the government that must ensure that it is deliverable.”
In October, the Department for Education published its first stage findings for the funding review, which revealed that the department was "unable to understand" the true cost of delivering the free entitlement.
