The college has called for steps to be taken to protect children's surgery from competition and other reforms such as payment by results.
Predicting a 'difficult' next few years, the report says that although clinical networks must be expanded the reform drive is holding back collaboration. It adds that more routine surgery must be available locally - although complex surgery should be centralised.
Surgery for Children: delivering a first class service says: 'Current health policy reforms that introduce competition can provide a disincentive for trusts to collaborate.'
Payment by results can make it difficult for parts of networks to get reimbursement, the report says.
It warns: 'These reforms should not be allowed to jeopardise provision of safe, local care for children.'
Keeping services local
The college calls for children's surgery to be commissioned separately from other types of surgery and says an increase in the tariff may be needed to keep surgery local.
But as it is unclear whether increased investment will be sustained after 2008, many trusts will 'remain vulnerable financially', it adds.
The report says: 'When considered along with payment by results, patient choice and contestability, the next few years will be difficult in terms of sustaining local services for children.'
The college says more specialist surgeons are needed but not nearly enough have been recruited. The current 104 children's surgeons must be more than doubled by 2010, it says.
The report, by the college's children's surgical forum, says there should be fewer but larger paediatric centres, each with four or five surgeons.
NHS Confederation deputy policy director Jo Webber said parents wanted to be able to a choose specialist centre 'regardless of whether it is the nearest to where they live'.
A Department of Health spokesman said the tariff arrangements for 2008-09 were being reviewed.
'We recognise that paediatric surgery may have higher average costs than similar procedures for adults and that is why the national tariff applies a top-up where the patient is a child and if the procedure is specialised,' he said.
The spokesman said the DoH was also taking action to address the underlying challenge of ensuring the tariff differentiates more effectively between routine and specialist work.