The federal government has dismantled a $1.2bn Labor scheme to increase the pay of aged-care workers, arguing the package was designed to impose “unionism by stealth”.

The move comes two days after the government announced a $300m fund earmarked for childcare worker wage increases would largely be redirected into professional development. Labor condemned the government for behaving like a “Christmas grinch” in its attitude to low-paid care workers.

The government used its majority in the lower house to strike down measures related to the workforce supplement that were part of the Living Longer Living Better aged care reform package. MPs voted to disallow determinations made by the former aged care ministers Mark Butler and Jacinta Collins. This does not involve repealing legislation, so the government does not need to get the changes through the Senate, where the Greens and Labor maintain a majority until July.

The assistant minister for employment, Luke Hartsuyker, said the government would now consider how to deliver the funds “in a more flexible and more targeted way”.

Hartsuyker said the former government had tied to the payments enterprise bargaining agreements. He said the Coalition had made clear it would “oppose this unionism by stealth” and had already suspended applications for the scheme on 26 September.

“It was never going to reach the majority of aged care workers,” he said of the Labor package. The Coalition had pledged to redirect the funds to the general pool of aged care funding.

Labor’s aged care spokesman, Shayne Neumann, said the decision was a blow to 350,000 workers who deserved and needed higher pay, noting a 40% workforce turnover rate and the challenge of an ageing population. He said childcare workers and Holden staff would similarly “have a very bad Christmas”.

“What this government is doing is attacking workers once again,” Neumann said. The aged care sector had already accessed about $100m of the $1.2bn set aside for the supplements, he said. “It’s heartless; it’s cruel; it’s wrong; it’s not the way to go.”

One of the measures disallowed – the Residential Care Subsidy Amendment (Workforce Supplement) Principle 2013 – ensured a provider with 50 or more residential care places could apply for the supplement only if it undertook to negotiate an enterprise agreement with staff. It said a provider with fewer than 50 places would not require such an agreement, but would have to pledge to meet the minimum wage requirements. In both cases, the provider would also spell out its plans for staff training, education and career development.

Another determination struck down by the lower house set the workforce supplement at 1% of the basic subsidy available for each care recipient.

Labor and the Greens had flagged separate efforts in the Senate to stymie the Coalition’s freeze on applications. The latest action would appear to end their hopes of keeping the scheme alive.

The Coalition’s aged care policy, released in September, took issue with Labor’s Workforce Compact, saying it appeared to be union-focused.

“As a first priority, if elected the Coalition will take the necessary steps to put back into the general pool of aged care funding the $1.2bn allocated to the Workforce Compact. We will work with providers to ensure available funding from the $1.2bn is distributed in a way that is more flexible and better targeted, without jeopardising the viability of aged care facilities.”