Children as young as two are having to prove their ability in the scramble for prestige school places. Celia Dodd reports
'MY GOD, is Isobel reading already? James doesn't even know his alphabet. I'm wondering whether I should take him out of his nursery because they don't seem to be pushing him enough. And if he falls behind now he'll never get in to Oxford."

James is three. His mother's anxieties, overheard outside a London nursery school, are easy to laugh at, but if they are honest, most parents admit that these days the panic about education starts earlier and earlier. Many of the parents whose children have just heard they have won coveted places to private and public schools and the remaining state grammars believe that the achievement can be put down to not only getting them into the best primary schools, but the best nurseries as well.

The canniest families move to the catchment area of a highly desirable state primary (often harder to enter than the most academic prep schools) and put their child's name down at birth. The less organised face the uncomfortable prospect of their child being tested for a place at a selective prep school at the age of three or four. Many, who may not have made up their minds about state versus private, want to give their child a head- start just in case.

The result is that it is now common for toddlers who are barely out of nappies to take up places at private nursery schools within weeks of their second birthday, while in the state sector three-plus is still considered the desirable norm.

Parents are also demanding a more formal approach to learning and expect to see results which will stand their child in good stead for the next stage - whether it's an entrance exam or the baseline assessments which all children now face on entry to state primary school. Increasingly nursery school - once seen as a crucial stage of education in its own right, is viewed as preparation for "real" school.

And what about preparation for nursery? The headmistress of a selective nursery class in north London with four applicants for every place says she expects successful candidates (aged two) to have been to a playgroup, to know how to socialise. No wonder parents are queuing up to get their babies into Tumbletots.

At The Park Nursery School in Battersea, south-west London, staff are under pressure from parents to deliver a more formal curriculum. The vast majority of the Park's pupils - all but two this year - go on to selective private schools nearby or just across the river in Chelsea. Hot favourite is Thomas's Prep - notoriously difficult to penetrate, with four three- year-olds battling for every place.

The talk among those waiting to collect their children rarely strays far from which child has got a place at which school. One mother says: "There is a lot of hysteria about getting in. It's all people talk about at dinner parties and teas. People are obsessed. There's a lot of stress around."

Last term, anxious parents met the teachers and tried to persuade them to concentrate more on the three Rs. Christine Bowman, whose younger daughter started at the Park shortly after her second birthday, says: "The assessments have had a big knock-on effect. A lot of us want to make sure our children are prepared for the interviews and that they really do know their letters and numbers.

"I used to walk up to school thinking, 'my daughter's happy, she's having a fun time, that's the whole point of nursery'. But now I want this to be a teaching place, to make sure the girls are tutored to gain entrance to a prep school. But it's terribly early to start."

Christine speaks from experience: last year her elder daughter failed to get into Thomas's when she was three. She says ruefully: "I had been quite relaxed until I realised that all the other children had interviews at several other schools, whereas Lucy was only trying for Thomas's. I started thinking, my child's not going to get in anywhere. I was probably more stressed out than I've ever been - it was terrible.

"At Thomas's they take your child away in a group of other children for an hour, and you don't see what's going on. You're supposed to make polite conversation with the others but all the time you're thinking 'I hope she's not going to pretend she can't talk.' Then all you get is a letter saying she's 'not suitable'."

Schools like Thomas's say they are more interested in whether the child will fit into the school and can socialise; they don't want a child who climbs the wall and scribbles. Jill Kelham, vice-principal, says: 'We're not looking for a three-year-old who can already show evidence of reading and writing ability - although if a child spontaneously points out letters or numbers it's noted. We're looking at what their concentration is, what their level of vocabulary is, we're looking for the spark of curiosity, interest level, sociability - which I suppose adds up to teachability."

Other nursery schools are happier to adopt a more formal approach to learning: pupils practice correct letter formation, fill in worksheets, learn phonics and do homework. Some take the children for whole, rather than the more usual half-days; some have uniforms; the most desirable even select their pupils through tests at two.

Yet many experts on children's early development believe that such a formal approach is not merely counterproductive but even harmful in the long term. Earlier this year a study for Channel 4's Dispatches concluded that children in countries where formal school starts up to three years later than in Britain have much better results in literacy and numeracy. The report also suggests that boys in particular may suffer from an early start to reading. In the more educationally successful countries, such as Switzerland and Hungary, education before the age of six or even seven focuses on speaking, concentrating and listening - getting children ready to learn - rather than reading and writing.

Try telling that to a parent whose three-year-old has her Start-Rites firmly on the first rung of an increasingly competitive educational ladder, who loves tracing letters and is racing through the reading scheme.