Gordon Brown has refused to commit to increased spending to combat child poverty in this autumn’s spending review, despite admitting that his key inequality target was proving a challenge.

The Chancellor has been stung by the news this week that the number of children classed as poor has risen for the first time since Labour came to power.

But, speaking to the Commons Treasury Committee yesterday, Mr Brown hinted that rather than ply deprived families with more generous tax credits, the Government would switch to a strategy that emphasises that hard work is the only route out of poverty.

Recent data shows that the number of children living in households with incomes below 60 per cent of the national average — the Government’s benchmark of deprivation — rose by 100,000 in 2005-06 to 2.8 million.

Its target is to reduce this figure to 1.7 million by 2011.

Speaking to the committee after last week’s Budget, Mr Brown told MPs: “As your economy and your society gets better off, as real incomes grow, it becomes an even more challenging target . . . we accept the challenges and difficulties of meeting it.”

The Institute for Fiscal Studies has calculated that the Government needs to spend an extra £4 billion on helping poor families if it is to have a 50-50 chance of achieving its aim.

But the Chancellor gave every indication that no such generosity would be available when the comprehensive spending review takes place in October. Asked whether more money would be made available, he said: “It is the interaction between benefits and work that is the key to the future. The real key to the success of our child poverty strategy is combining rising benefits while . . . raising the number of people in work.”

He said that the institute’s figures were based on an assumption about the number of poor people in work that was now out of date and that the Budget contained schemes to boost employment.

He also hit back at criticism that the Budget would leave 5.3 million people, mostly low-paid workers, worse off.

Mark Neale, a senior Treasury official, had confirmed to the committee on Wednesday that 75 per cent of benefits for working childless couples went unclaimed.

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