In his pre-Budget report last week, Gordon Brown, Chancellor of the Exchequer, announced an increase in the tax credit equivalent to pound;700 per year for a family earning pound;34,000 per year with two children.
However, councils will have to ensure that children whose parents do not pay tax, and are thus not eligible for the credit, are not penalised.
The strategy aims to provide affordable, flexible, high-quality childcare for children up to 14 years old.
By 2010, the Government expects all secondary schools to be open from 8am to 6pm on weekdays all year round offering a range of activities such as holiday clubs, music and sport.
At primary level, ministers promise that all families will have access to school-based childcare by the same date. Half will do so by 2008.
A goal of 20 hours a week early education for three and four-year-olds for 38 weeks a year is included in the strategy.
A Sure Start children's centre within reach of every family, 3,500 across England, will co-ordinate pre-school provision and parents will be given more time off work following the birth of their children.
From 20067, pound;125 million per year will be available to improve services and train childcare and early-years workers.
David Hart, general secretary of the National Association of Head Teachers, said: "The Government's childcare strategy makes sense providing schools are given the funding they need to make it work. Too many of the very young turn up at school for the first time lacking basic social skills.
"But schools are not surrogate parents, and the strategy must not absolve parents from their prime responsibility for the upbringing of their children."
A spokesman for the Daycare Trust welcomed the strategy but said: "We are concerned that the strategy does not tackle the issue of childcare provision for one- and two-year-olds, nor does it mention any follow-up to the pilot scheme extending part-time early education places to two-year-olds in 500 areas around the country."
The strategy overshadowed next year's funding allocation to local authorities which was also announced on the day of the pre-Budget report.
David Miliband, school standards minister, said the settlement will give schools an average increase of 6.9 per cent per pupil in 20056, compared to 6 per cent last year.
The Government announced in July that every secondary will be guaranteed 4 per cent extra per pupil and every primary 5 per cent.
Charles Clarke, Education Secretary, and John Prescott, Deputy Prime Minister, have written to local councils telling them to pass on the education increases in full.
Councils will receive an additional pound;637m in grant in an attempt to head off politically damaging council tax increases.
John Dunford, general secretary of the Secondary Heads Association said:
"The additional money should ensure that every LEA passports at least 100 per cent of the education increase."
* Speaking at the annual Sure Start conference on Wednesday, Margaret Hodge, children's minister, said financial support for childcare would be extended to families who employ nannies.
Mrs Hodge said the proposals added up to "nothing short of a childcare revolution".