Paying parents to stay at home would help save the economy £24 billion per year, the government has been told.

As the chancellor prepares to unveil more money for childcare in his pre-Budget report, the Daycare Trust and the Social Market Foundation called for more to be done to allow children to be looked after at home.

The two groups commissioned the report from accountants PricewaterhouseCoopers, published on Wednesday, which set out "a vision for early years education and care in 2020".

It found that providing financial support to parents who want to remain at home beyond the current statutory 12 months parental leave would offer better value to the taxpayer than Gordon Brown's flagship child tax credit which rewards work.

By abolishing that scheme ministers could afford to fund a "home care allowance" for parents of children aged between one and two.

The report also said 20 hours of free nursery care should be paid for by the state for every two to four-year-old.

And government plans for "wraparound" schooling, offering childcare from 8.00am to 6.00pm were given support.

Together the package would boost the economy by £24 billion per year as more parents saved money on expensive childcare and were able to work.

Daycare Trust director Stephen Burke said it was "vital" to continue developing ambitious ideas.

"All parents and children should have the chance to enjoy time as a family and have access to quality affordable childcare and early education to get the best start in life," he said.