The latest Households Below Average Income figures, published by the Department for Work and Pensions (DWP), show that in 2008/09 2.8 million children were living in relative poverty before housing costs. This compares to 2.9 million in 2007/08.
The figures represent the first decline in child poverty rates since 2005. But according to the DWP inequality remains at "historically high levels".
Work and Pensions Secretary Iain Duncan Smith, was damning about the previous government's approach to tackling the issue.
"Vast sums of money have been poured into the benefits system over the past decade in an attempt to address poverty, but today's statistics clearly show that this approach has failed," he said. "A new approach is needed that addresses the drivers behind poverty and actually improves the outcomes of the millions of adults and children trapped in poverty."
Smith said that currently many people are trapped by the welfare system, dependant on benefits. He added that the new government should look at "making work pay" and getting a return on money invested in programmes supporting people into work.
But the Child Poverty Action Group (CPAG) slammed the new government's plans to reform tax credits and benefits. "Today's statistics show investing in child benefit and child tax credits is vital to reducing child poverty, as is access to disability benefits. But child benefits are currently under attack from commentators and politicians seeking to reduce the deficit," said CPAG chief executive Shan Nicholas.
Barnardo's chief executive Martin Narey said that government plans to cut child tax credits and child trust funds for the highest earners was a step in the right direction.
"To continue on the right foot all it [our government] has to do is invest that money saved in our country's poorest children," he added.
