I can see this must be a huge disappointment to those using the nurseries, but I had never heard of council funded nurseries and was surprised that they existed.
The report says that (according to the council) that these nurseries are costing the council over £1m a year and that there are places available in other private nurseries (for which presumably government funding will be available in the normal way).
I think all councils have difficult decisions to make in managing their budgets. Most seem to be struggling to pay for the things they have a legal obligation to provide, such as social care and SEN education, so it’s perhaps not surprising that this council has decided to save £1m by cutting a service that they have no legal obligation to provide, however much it is valued by local residents.