Working parents are to get up to £2,000 of tax-free childcare in a move to target families who are "running to stand still".
The scheme will be worth up to £2,000 per child per year when it launches in autumn next year - £800 more than the £1,200 originally proposed last year.
The Deputy Prime Minister told Sky News the move would target hard-working parents who were "going out to work just to pay the nursery fees" saying many felt they were just "running to stand still".
It was only expected to apply to children under the age of seven, but parents will now be entitled to the money until their son or daughter's 12th birthday.
Nearly two million families could benefit from the scheme - twice as many as the present voucher scheme, which is only available where adopted by an employer.
However, it has been criticised for excluding couples where one parent does not work and for applying to richer households with incomes of up to £300,000. Those where one parent earns more than £150,000 will not be able to take advantage of the scheme.
Speaking to Sky News Nick Clegg denied the scheme was unfair and said families on Universal Credit would now have 85% of their childcare costs met.
Mr Clegg said: "If you have two children and you have to pay their childcare costs then it's (the scheme is) worth up to £4,000 to you."
David Cameron said the policy, which effectively covers 20% of childcare costs up to a maximum of £10,000 a year, would help "hard-pressed families" and "provide financial security for the future".
Asked by Sky News whether he would be taking advantage of the tax-free childcare scheme for his children he replied: "I won't be taking it up." His salary crosses the £150,000 limit.
Earlier this month , the Family and Childcare Trust said parents now spend more on part-time childcare than their mortgage repayments.
However, Labour's Lucy Powell, the shadow minister for children, said the proposals were "too little, too late".
"Mr Cameron has cut support for children and families by £15bn since he came to office," she said.
"This Government has done nothing in this Parliament to help parents experiencing a cost-of-living crisis."
As well as the childcare tax break, the Government is to give an extra £50m to nurseries looking after the most deprived three and four-year-olds.
Families claiming Universal Credit will also have 85% of their childcare costs met, up from 70%.
The announcement comes as the Chancellor prepares to unveil this year's Budget.
George Osborne, who will set out the Government's spending plans for 2014-15 next Wednesday, has warned of "difficult decisions" to come.
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