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There has been a drop in the proportion of childcare settings in England judged to be good or outstanding, Ofsted says.
Inspectors said 57% of 27,200 settings inspected in 2006-07 fell into these categories for overall care - a drop of four percentage points on 2005-06.
The education watchdog labelled 4% of childminders, nurseries and crèches as "inadequate", with weaknesses such as a lack of activities or staff training.
Ofsted chief Christine Gilbert promised further monitoring of childcare.
The report, Getting on Well: Enjoying, Achieving and Contributing, was based on inspections of childcare settings, including nurseries and individual childminders, between April 2006 and March 2007.
The Ofsted report follows a study from Durham University suggesting government initiatives in early years have done nothing to improve the educational standards of those entering primary school.
Ofsted said of the estimated 500,000 children cared for in the settings inspected this year, 285,000 were receiving "good" or "outstanding" care.
Childcare was rated as "satisfactory" or better in 96% of settings.
Some 3% of childminders were rated inadequate for overall care compared to 4% of day-care settings, such as nurseries. About one in 12 crèches were judged "inadequate".
And childcare provision in 7% of extended schools - which run after-school clubs and childcare - was also rated "inadequate", despite a major drive from the government to expand this sector.
Ofsted declined to say how many individual children were being cared for in inadequate settings.
The report shows that inspectors returned to almost 300 providers previously judged inadequate in providing government- funded early education.
Upon re-inspection 85% of these had improved, but 44 providers (15%) remained inadequate.
- reprinted from the BBC