100,000 more children to be plunged into poverty

That's the number from working families who will be affected by benefit cap, minister admits

Esther McVey, the benefits minister, says rising earnings will help make up for cuts (Getty Images)

As many as 100,000 children from working families will be forced into poverty as a result of the Government's plans to cut benefits for the poorest, ministers have admitted for the first time.

Official figures show that a total of 200,000 youngsters from all families will be pushed into child poverty as a result of George Osborne's 1 per cent cap on benefits from April, in effect a real-terms cut in welfare payments. But Steve Webb, the Liberal Democrat pensions minister, revealed in a parliamentary written answer last week that 50 per cent of those children come from families where at least one parent is in work.

This new figure undermines claims by the Chancellor, George Osborne, that the cap on benefits is designed to target Britain's jobless "shirkers" . The children will join the 3.6 million already classed as living in poverty. Two-thirds of those are in families where at least one parent works.

Labour described the figures as proof the welfare changes are a "strivers' tax" because they are hitting those in work as much as those who are unemployed.

In his Autumn Statement last December Mr Osborne announced the 1 per cent cap on benefit rises, which ends the link with inflation. The changes affect all working-age benefits, and are due to last until 2016. Last month the Government's figures revealed that child poverty would increase by 200,000 as a result of the changes. Asked in a parliamentary written question last week by the shadow employment minister, Stephen Timms, what would be the effect on in-work poverty, Mr Webb replied: "We estimate around 50 per cent [of the 200,000] will be in families with at least one person in employment." Mr Timms said last night: "Labour is proud of our record on child poverty but David Cameron and George Osborne's policies risk undoing years of progress.

"The Government wants to run away from the problem and ignore the fact that half the children pushed into poverty as a result of the strivers' tax have parents who are working hard while this Government makes life even more difficult for them.

"Children should not pay the price of this Government's economic failure. That's why we need a clear plan to get the economy growing again and ensure all children are given the best start in life."

A study in 2011, before the benefits cap was introduced, found that the number of children expected to be living in poverty would increase to 4.2 million by 2020 – despite a pledge under the last Labour government to halve child poverty by this date.

Last week, the Work and Pensions Secretary, Iain Duncan Smith, delivered a speech calling for a redefinition of child poverty to take addiction into account. He said handing out more in benefits to the poorest families would not address the issue of child poverty because too many parents would spend it on alcohol or drugs, and that parental addiction was the main factor in determining a child's life chances.

The speech was designed to defend huge cuts to the welfare bill and the Government's focus on back-to-work programmes that would help those with alcohol or drug addiction. Yet Labour said the speech ignored evidence welfare cuts were hitting working families hard.

But ministers insist that in-work families with children will benefit from a steady rise in earnings, forecast by the Office for Budget Responsibility. The minister with responsibility for benefits, Esther McVey, told the Commons last month: "For some families this increase in earnings may be enough that their income rises in real terms (that is, after inflation is taken into account) even after the smaller increase in benefits.

"Where subject to an uprating, rates of benefits and tax credits will rise in cash terms. For instance, an out-of-work lone parent with two children receiving income support, child tax credit and child benefit would see a cash increase of around £4 a week over the two years covered by the Welfare Benefits Uprating Bill." But she added: "Because the relative poverty income line moves each year in cash terms, too, some families will move below this line over the period. We estimate that the uprating measures in 2013-16 will result in an extra 200,000 children being deemed to be in relative income poverty compared to uprating benefits by CPI."