Osborne said: "Last year, it was this Government that not only expanded free nursery education for all three and four year olds - but also gave children from the poorest fifth of families a new right to 15 hours of free nursery care a week at the age of two years old.
"I can tell the House today that we can double the number of children who will receive this free nursery care.
" Forty per cent of two year olds, 260,000 children, from the most disadvantaged families, will get this support in their early years."
But Sarah Jackson, chief executive of Working Families said: "This is bad news for working parents. The Chancellor has reneged on last year's promise to fund 'significant above indexation increases to the Child Tax Credit' which he said would protect against child poverty - that's £110.00 out of family budgets.
"What he gives with more free childcare for two year olds on one hand, he removes with the other by failing to address the rising cost of childcare for working parents.
"Working Tax Credits have been frozen and childcare is becoming unaffordable.
"Making work pay is vital to the recovery - we need to invest in Britain's social infrastructure as well as its roads and bridges. Today's measure will lead to higher levels of in-work poverty, or to more parents being priced out of work. "