Number of children living in poverty set to rocket

The report by the Institute of Fiscal Studies for the Family and Parenting Institute (FPI) estimates by 2015-16 the average household with children will face an income drop of 4.2 per cent. For a couple with two children this is the equivalent to £1,250 a year.

Such a fall would plunge 500,000 children into absolute poverty, using the 2010 Child Poverty Act definition of 60 per cent of the 2010-2011 median income.

The report, The Impact of Austerity Measures on Households with Children, found the largest families and lone parents will be the hardest hit financially in the coming years.

While those households with no children face a dip in annual income of just 0.9 per cent within three years, those with three children will see income fall by 6.8 per cent.

Unemployed lone parents face a 12 per cent fall in their income by 2014-15, the equivalent of £2,000 a year.

The introduction of the universal credit, rising cost of childcare and below inflation pay deals are among key factors in the drop in family income.

The FPI is urging the government to ensure the UK’s poorest families are not disproportionately hit by austerity measures.

FPI chief executive Dr Katherine Rake said: "It is particularly surprising to see that some of the most vulnerable groups, such as families with new babies and lone parents out of work, are bearing the brunt of the tax and benefit reforms.

"Many families will be left struggling to understand why they have been singled out in this way and how this sits alongside the government’s ambition for the UK to become a family friendly nation."