The eradication of child poverty is the Government’s most distinctive social democratic commitment: described by Gordon Brown on Saturday as “the scar that demeans Britain”. Yet this target is hard to achieve, presenting an acute dilemma for Alistair Darling ahead of the March 12 Budget.

The original goal was to reduce the number of children in low-income households by at least a quarter by 2004, as a step towards halving child poverty by 2010, and eradicating it by 2020. This is based not on an absolute yardstick but a relative one, households with less than 60 per cent of median income. The figures vary, depending whether they are before housing costs ( the official measure), or after (adding one million to the total). International comparisons can also be deceptive since the measure is relative. The British threshold is eight times higher in cash terms than the Latvian one.

Significant progress has been made, as the Commons Work and Pensions Committee concluded yesterday. The number of children living in poverty was 3.4 million in 1998-99, having more than doubled over the previous two decades. Since then, this rising trend has been reversed, though the most recent data showed a slight increase, with the total on 2.8 million, down 600,000. So not only was the 2004 target missed, but now even the Government accepts that the 1.7 million target for 2010, is “extremely challenging”: that is, almost certain to be missed.

The Institute for Fiscal Studies has estimated that, in the absence of further policy changes, child poverty will be 700,000 short of the target by 2010-11, and possibly over one million short according to the Commons committee. The gap can only be bridged by spending an additional £3.4 billion on financial support for low income familites with children. But nothing on this scale is remotely on the cards given tight spending limits.

As Mr Darling will stress next week, the Government remains firmly committed to ending child poverty by 2020. But he realises that repeating these words will not be enough, and they need to be underpinned by further measures.

Inevitably, the word from Whitehall is that cash is not the whole answer. That is correct since many of of the problems are to do with the structure of benefits and of the labour market. The Work and Pensions report discussed the labyrinth of benefits which undermine the incentives of parents moving in and out of work, the main route out of poverty. The Treasury has been impressed by research highlighting differences in child poverty within Britain: being most linked to single parents in London but large families in the Midlands.

So, apart from some limited increase in cash benefits, we can expect changes in housing benefit rules and in the structure of income tax to assist single earners with children. This also ties in with expansion of Sure Start and childcare.

Tackling child poverty is not just about economic inequality, but it is also linked to later educational achievement and job prospects. It is the other side of the globalisation debate: a Labour Chancellor needs to balance child poverty and the retention of internationally mobile high-earners in Britain. Poor children matter as well as non-doms.

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