The chancellor has reaffirmed the government's commitment to "eradicate child poverty in Britain".
Alistair Darling said in his Budget speech on Wednesday that an extra £765m will be spent in the coming financial year and £950m in 2009/10 to take 250,000 more children out of poverty.
Ministers have admitted they are off-track in meeting their goal of halving the problem by 2010 and eliminating it by 2020.
But rather than redraw the target Darling said he would divert more resources towards meeting it.
"If we are to build a fairer future for our children then we must eradicate child poverty in Britain," he argued
"We have set ourselves an ambitious target to eradicate child poverty by 2020 and to halve it by 2010," he added. "And today I want to do more to deliver that ambition.
"I will help their families to escape permanently the cycle of deprivation that blights too many lives."
Work
"Central to this is helping more parents into work," the chancellor said.
He announced that a working family with one child on the lowest income will gain up to £17 a week through reforms to housing and council tax benefit "so that parents are better off in work than on benefits".
"This measure will lift 150,000 more children out of poverty," Darling told MPs.
Child Benefit for the first child will also be increased to £20 a week from April 2009, a year earlier than planned.
And tax credits will also be increased for low and middle income earners.
"I will increase by £50 a year above inflation the child element of the Child Tax Credit for families on low and middle income from April next year," Darling said.
"This means that a family with two children, earning up to £28,000 a year, will be over £130 a year better off."
And he added that he was publishing an analysis "on what further steps we intend to take to eradicate child poverty".
Response
The package was welcomed by the Campaign to End Child Poverty.
"In such a tight spending round, is it is reassuring to see the government is still serious about lifting children out of poverty," its director Hilary Fisher said.
"We are hopeful that our heightened campaigning and the government’s renewed focus on children and families are starting to get results.
"The chancellor boldly set out the government's intention to end child poverty with investments of nearly £1bn through increasing child benefit and child tax credits.
"The measures announced today will make a real difference to the lives of 250,000 children."
'Extreme poverty'
But earlier the Conservatives released figures showing that there has been an increase in the number of families living in extreme poverty.
Statistics from the Department for Work and Pensions showed that the number of households living on less than 40 per cent of the average income increased to 1.8 million households in 2005/06, up from 1.4 million in 1998/99.
The number of children in households below 60 per cent of average income has fallen by 600,000 from 3.4 million to 2.8 million in this period.
Shadow work and pensions secretary Chris Grayling said the figures were "a damning reflection of Gordon Brown's true record on poverty".
"Despite all the rhetoric, despite all the billions the government has spent, families in Britain are worse off under Gordon Brown," he said.
"I hope that the prime minister will follow the Conservatives' lead in today's Budget and end the couple penalty in the tax credits system, helping 1.8 million of the poorest couples with children, lifting 300,000 children out of poverty."
'Misleading'
However welfare reform minister Stephen Timms said the 40 per cent figure could be misleading.
"We do not present information covering 40 per cent of median income in our households below average income series as it is not a sound measure of poverty," he said.
"This is because households stating the lowest incomes to the family resources survey may not actually have the lowest living standards.
"Some people who report very low incomes appear to have high spending. Hence any statistics on numbers in this group may be misleading."
