A report by think tank Localis recommends expanding the free 15 hours of childcare to one-year-olds on a means-tested basis in order to give low income families greater freedom and flexibility when returning to work.
The report recommends that the existing 15 hours of childcare should remain available for three-and four-year-olds, with an additional 15 hours, making a total of 30 hours, made available for disadvanatged three- and four-year-olds on a means-tested basis.
Localis said current government plans will put unnecessary pressure on childcare providers, calculating that there is a £103.5m black hole in the plans in terms of what it will cost compared with how much has been set aside.
The changes would ensure that all low-income families benefit from the extra hours and gives those with younger children greater flexibility around when they return to work, Localis, which estimates its alternative proposals would save the Treasury £56m, said.
Localis chief executive Liam Booth-Smith said: "Government are right to want to make childcare more affordable but it's irresponsible to overheat the childcare market by placing an additional financial burden on providers.
"The risk is you create a similar situation to the one we face in social care, where providers aren't able to make ends meet because the subsidy the government provides doesn't cover the cost of care.
"Our new report takes the principle of expanding affordable childcare but offers an alternative proposal which focuses on the lowest income families."
In February early years minister Caroline Dineage revealed that more than half of children (57.1 per cent) claiming 15 hours of government funded childcare would not qualify for the extended hours.
This is because it only applies to families where both parents work 16 hours a week, and to sole parents in single parent households working the same number of hours a week.
Localis' concerns around lack of funding for the free entitlement expansion are shared among providers. Earlier this month a Pre-school Learning Alliance survey found that just 44 per cent plan to deliver the scheme, with funding concerns cited as a key barrier.
Alliance chief executive Neil Leitch said: "The 30-hour scheme was a key Conservative manifesto pledge and so the wholesale changes proposed in this report are highly unlikely to be adopted by government. What is needed, therefore, is an approach to so-called ‘free childcare' that ensures that funding actually covers the cost of delivering places. This would not only enable early years providers to deliver quality, sustainable care and education, but also remove the need for cross-subsidisation, meaning lower costs for parents of children of all ages.
"There is simply no avoiding the fact that more money is needed in the early years system. Survey after survey has shown that, without adequate funding, the ‘free childcare' offer is unlikely to succeed in the long term. The government has made a big promise to parents; now it must invest what's needed to deliver it."
The 30-hour childcare entitlement, up from the current 15 hours a week, is due to be introduced from September this year.