The federal government has labelled the money a ''union slush fund'' and says it will redirect the funding to training and development. Centres that had already signed contracts were also being asked to pay the money back. The ACT Labor government reacted angrily on Tuesday, describing the move as a ''slap in the face'' for some of the territory's lowest-paid workers.

Ginninderra MLA Yvette Berry led a chorus of criticism and said the sector could not retain workers on wages that started as low as $42,000 a year. Ms Berry organised the ACT's campaign for better pay for early childhood educators in her former role with the union United Voice.

''Everyone recognises those early years are the most important for children in terms of brain development,'' she said. ''To keep the workers in the sector they need to be paid a wage they can survive on.

''Even the federal Liberals agree they're underpaid and they're not going to do anything about it.''

On Tuesday, federal Assistant Minister for Education Sussan Ley described Labor's $300 million as a ''childcare union slush fund'' and said a report by PricewaterhouseCoopers showed the funding was inequitable.

Judy Small is the director of one of 10 ACT childcare centres that had not yet signed the contracts that would secure their workers' wage increases.

Mrs Small said she had 42 staff members who had been expecting ''substantial'' pay rises of between $3.50 and $5.35 an hour.

''We finally got something, or thought we were getting something, and it's been taken away,'' she said.

''They're very pissed off.''

Mrs Small said she feared the flow-on effect of the decision would be that workers who had stayed on and increased their qualifications would now leave the sector.

''There's probably a number that won't stay,'' she said. ''The biggest effect low wages have on children's services is the high turnover of staff.

''I know what parents want is low turnover of staff and what children need is low turnover of staff.''