The plan, outlined by Gordon Brown in his speech to last week's Labour Party conference, is intended to give more than one in three two-year-olds access to free childcare for ten hours a week by the end of the next Parliament.
The Government said that the aim was to redirect money to where it is needed most, to help disadvantaged children access high quality childcare.
However, parents who use vouchers are due to lose out on around £1,000 a year.
This will not affect those currently using vouchers to pay for nursery care, as the move does not come into effect until April 2015. Tax relief will still be available for those parents who use workplace nurseries.
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