the latest research into brain development would suggest that there is no question that one on one consistent care is far preferable under the age of 36 months. allan schore is one of the guys at the vanguard of this stuff.
full time insitutionalised care under this age (the earlier the worse) is likely to result in emotional difficulties, which may not be fully apparent until adulthood. however even here there is a caveat which is that if the baby is lucky enough that a warm empathic worker at the nursery takes a special interest and spends a lot more time with it, then even in that setting they are getting one on one care (i'm trying to say, not very clearly that even in the biggest institutions one on one care is possible, just not probable).
there are other things that damage the emotional development of babies though: serious depression in the primary caregiver, with no surrogate available is one of them (so for a woman to stay at home and get v depressed by that experience is not a solution either).
basically, I agree that government policy is totally misguided, that it should focus far more on legislating for flexible working, and giving financial incentives for one parent to stay at home. childminders should be trained and invested in, as a good childminder is much preferable as a form of childcare to nurseries (for this age group).
i also believe that the nuclear family is to blame: we were never ever meant to take this on alone, as we are expected to currently....it's impossble to raise children with no support in isolation and remain sane!
we need to find ways of replacing the extended family scenario....i'm not sure how tho.