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Lib Dem peer and former Play School presenter Floella Benjamin has called for a ring-fenced budget for children's films.
Baroness Benjamin called on the government to follow the example of Denmark where 25 per cent of the film budget is issued to children's films and animation.
During oral questions in the chamber on Monday, she asked the government whether they will "ensure that a proportion of the funding provided by the UK Film Council to the British Film Institute will be ring-fenced for the production of films whose target audience is children".
The former television presenter said: "The decline not just in children's television drama but in children's film production is denying our talented writers, our actors and our production teams a creative outlet."
She added: "Would you encourage the British Film Institute to adopt the Danish film institute's model so that we can have a solution to this crisis?"
For the government, Baroness Rawlings said from April 2011 the British Film Institute will manage all funding, after the abolishment for the UK Film Council.
She told peers the Lottery policy included the requirement to encourage funded projects to inspire children and young people.
And the policy will remain in place while the government conducts a review of film policy with the BFI later this year.
Lady Rawlings said: "The government feels that children are catered for in film productions.
"There were 191 films produced for children and a young person in 2010, that represents 30 per cent of the films passed by the British Board of Film Classification, which is slightly more in fact that the Danish model."
But she added that ring-fencing "is definitely being considered by the government".
Former Labour minister Lord Wills highlighted the recent success of the British film the King's Speech at the Baftas and looked towards the Oscars as well.
He said: "The King's Speech was actually brought to cinema screens by the UK Film Council which has now been abolished for reasons best known to itself by this government.
"How confident is the government that the efforts that you are making to restructure support for the British film industry will result in a replication of the success of the King's Speech next year and, indeed in the years to come?"
In response, Lady Rawlings too praised the "tremedous success" of British productions and actors at the Baftas.
She added: "The King's Speech did fantastically well and it had Lottery money as well as British Film Council money.
"The BFI and the UKFC are now working together on due diligence procedures and will publish detailed transfer plans shortly setting out which functions are moving across and when."
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