The Conservatives will allow nurseries to charge parents of three- and four-year-olds millions of pounds in "supplementary fees" if they form a government after 6 May, the Observer has learned. Campaigners have described the move, which would end the guarantee of a free place for every child that age, as "a huge blow to parents".

The party has kept the policy out of its election manifesto. But in a letter seen by the Observer, shadow ministers have assured nursery providers that under a Conservative government they will be allowed to charge top-up fees – at least temporarily. The move, which is designed to help struggling nurseries to survive, will require the party to suspend a code of practice put in place in 2006 that ruled out any additional fees.

Charities have warned that it could lead to the emergence of a two-tier system in nursery care. Alison Garnham, chief executive of the Daycare Trust, a childcare charity, said: "Any attack on free entitlement will be a huge blow to parents throughout the country who feel crippled by the cost of childcare… If the code is removed, providers will be given carte blanche to charge extra, and the value of these free places will be lost."

Garnham described the guarantee of free places as a "landmark policy". The entitlement, which offers 12.5 hours a week for 38 weeks a year, is used by 97% of children, including 559,400 four-year-olds and 541,700 three-year-olds. In a survey of 2,500 mothers, carried out by the Daycare Trust, 69% said they would be deterred from voting for a party that removed or reduced the entitlement.

Garnham said: "The free entitlement plays a vital role in improving child outcomes – this must continue, and the needs of children and families should come before the needs of the childcare industry." She urged politicians to assure parents that free care will be protected.

Anne Longfield, chief executive of the charity 4Children, described the move as a "hugely retrograde step" that would hit the poorest. "There is a worrying risk that a two-tier system develops in which those on lower incomes who need it most can no longer afford [a nursery place]."

Ed Balls, the secretary of state for children, said any move to introduce top-up fees was utterly wrong. "Let me be clear – under Labour the free entitlement will remain free, with no top-up charges for toddlers, and will be increased to 15 hours from September," he said.

However, nursery providers warned the sector was in crisis. It emerged yesterday that nearly 900 nurseries and playgroups in England shut last year – with many claiming that inadequate state funds for free places had made running the businesses financially untenable.

A campaign, known as Save Our Nurseries, has been calling for the suspension of the code of practice since 2006. The Conservatives say allowing nurseries to charge the top-up would be temporary while they tried to create a fairer funding formula to make the sector sustainable.

"The government has failed to ensure nurseries have enough funding to deliver free childcare," said Maria Miller, shadow minister for the family. "The situation really is critical and parents and children face a shortage of good-quality, affordable childcare in their area. We really need to fix this mess and reform the structure so nurseries get the money they need to provide free hours."

Purnima Tanuku, chief executive of the National Day Nurseries Association, said nurseries could not afford to sustain any further losses.

Seven out of 10 providers claim issues with the free entitlement are a serious threat to their survival and 15% of them have warned that if the problem is not resolved they will pull out of the scheme.