The Government is "committed" to continuing to provide children at nursery school with free milk, health minister Anne Milton has said.
Last week the scheme was placed under review after it emerged the Government was being billed up to £1 a pint - double the retail price - for the milk.
Tories are particularly sensitive to allegations they want to scrap the scheme after Margaret Thatcher earned the nickname "the milk snatcher" for ending free school milk for the over-sevens while she was Education Secretary.
Only last year, the Prime Minister David Cameron slapped down Ms Milton for suggesting it could be scrapped, saying he "did not like" the idea.
But now, the Health Minister has insisted the supply of free milk to nursery schools would continue despite an internal Department of Health audit finding middlemen are charging around double the retail cost under a "scam" that is costing taxpayers an extra £10 million a year.
She told MPs in the Commons the Government "valued" the initiative.
Ms Milton added: "The only shocking thing is that the previous government has presided over a scheme where actually nursery milk is now costing double the retail price.
"We urgently need to look at that but we are committed to continuing the scheme, just shocked at what has gone on before."
The audit found last week that the cost of the milk had spiralled because the Government is obliged to pick up the bill, regardless of cost, submitted by firms that are acting as schools' go-between with suppliers.
Ministers have been shown figures suggesting that additional costs could hit £30 million a year in the next few years. Every child under five receives a third of a pint of milk free of charge at school each day and nurseries claim back the cost from the Government.