Free nursery places for pre-school children may not have a lasting impact on their education, the Government's spending watchdog has suggested.

A report by the National Audit Office (NAO) found that it is not clear whether Government moves to fund nursery education for three and four-year-olds is leading to longer-term benefits.

Although it acknowledges there have been changes to free nursery education, and its link to children's results at age seven is not "straightforward", the NAO says the Department for Education "did intend that the entitlement would have lasting effects on child development throughout primary school and beyond".

While children's development at age five has improved, results at age seven remain unchanged, the report says.

Nationally, 59% of five-year-olds achieved a good level of development in 2010/11 compared to 45% in 2005/06, it says. But it adds: "National Key Stage One results, however, have shown almost no improvement since 2007, so it is not yet clear that the entitlement is leading to longer-term educational benefits."

Children's Minister Sarah Teather said: "We are pleased that the NAO has recognised the progress made since we introduced free early education for three and four-year-olds. There is lots more to do - and the report also sets out important national and local challenges to be addressed.

"We are determined to improve the availability of quality places in disadvantaged areas, and offering free early education to around 40% of two-year-olds will help by bringing even more money into the system.

"We also want to examine in more detail how to make sure the significant improvements we are seeing at five feed through into better results at seven."

However Daniela Wachsening, education policy adviser at the Association of Teachers and Lecturers, said: "There is absolutely no doubt that high-quality early years education makes a massive difference to children's development, and is particularly important for children from disadvantaged families.

"But the Government is jeopardising the chances of disadvantaged children by cutting the grants to local authorities, which has led to the loss of high-quality early years places and drastic reductions in children's and family services to the detriment of the most vulnerable children."