Details of the move, designed to cut the rising costs of the free nursery milk scheme, have been published by the Department of Health (DoH) and will come into force next year.
It follows a consultation with the sector and milk suppliers in 2012 on the future operation of the scheme.
Under the Free Nursery Milk scheme, children under five, who are in an early years setting for at least two hours a day, are eligible for 189ml of milk (1/3 pint) free of charge daily.
At the moment, childcare providers can pay for the milk themselves and claim the money back from the Government, or use an agent to arrange milk deliveries and claim on their behalf.
However, according to the DoH, some agents or ‘middle men’ have been claiming excessive amounts of money.
This, together with the increase in children receiving the free milk, has caused the total cost of the scheme to rise from £27m in 2007/08 to £61m in 2012/13.
The consultation proposed three cost-cutting options, including capping the price that can be claimed for milk, issuing e-voucher cards credited with a monthly payment, or directly supplying and delivering milk under a central contract.
Most respondents said that direct supply would deliver the best service and value for money, and reduce the administrative burden to childcare providers.
The Department of Health said using a direct supplier could generate savings averaging between £25 and £47 million per year over the next 10 years.
The nursery milk scheme contract will now be put out to tender.
The supplier, or consortia of organisations, that wins the tender, will deliver milk to childcare providers registered with the scheme in 2015 and claim back the money from the Government.
Childcare providers will have to register for the scheme, indicating the number of children they care for. The appropriate amount of milk will then be delivered ‘direct to their doorstep’.
Health Minister Dr Dan Poulter said, ''We are making changes to the school milk initiative so children continue to get free milk and the taxpayer saves money.
'Fresh milk has a huge number of benefits for children’s health, supporting healthy bones and teeth.
'The new nursery milk scheme will provide a much better deal for farmers who are the backbone of the rural economy and could save the taxpayer more than £36 million per year.'
Rob Harrison, chairman of the National Farmers Union (NFU) dairy board, said, 'The NFU welcomes the outcome of the Nursery Milk Scheme consultation which will continue to provide children under five with a daily drink of milk free of charge. This healthy and nutritious product is important for early development and it is pleasing that small and medium sized enterprises will be able to tender for contracts under the new Direct Supply system proposed, creating opportunities throughout the UK dairy industry.'
However, the School and Nursery Milk Alliance, made up of charities, dairies and nursery representatives, has warned that a ‘central-driven contract’ will end children’s access to milk.
The Alliance says that the contract is ‘unworkable’ and ‘doomed to fail’.
Jon Thornes, chairman of the School and Nursery Milk Alliance, said, ‘The Department of Health has spent two years and who knows how much money in reaching the wrong decision in support of a model that is as unrealistic as it is unworkable.
‘The Government has a poor track record, noted most recently by the Public Accounts Committee, of tendering for national contracts, setting unrealistic expectations, and ensuring their value for money. There is no reason to think this will be any different and we are concerned that such a contract will ultimately reduce the number of children receiving the milk they’re entitled to.
‘If a national contractor is unable to meet the needs of every setting or guarantee a high quality of service in the absence of competition, we will see the number of children receiving milk plummet. The health benefits of milk are well recognised and it is disappointing that the Government is pursuing such an unrealistic option, prioritising ill-conceived ideas of cost over children’s wellbeing. We are likely to see fewer children receiving milk as a result of this announcement.’