Child poverty rose by 3% last year, sparked by a cut of up to £150 in the income of Britain's poorest families, a new report suggests.
While middle-income households saw their income growth fall to 0.9%, its lowest level since 2012, those in the poorest 30% of households fell by 0.3%, the Resolution Foundation said.
It blamed benefit cuts for the decline, including a 3% cut in the value of tax credits and child benefit.
It said that the findings of its annual Living Standards Audit meant that reductions in Universal Credit should be reversed to stem the increase in child poverty.
Labour branded the rise in child poverty "shocking" and called for the Government to end a freeze on benefits.
Adam Corlett, the Resolution Foundation's senior economic analyst, said: "Reducing child poverty has been a goal of politicians from all parties in recent decades.
"But our analysis shows that child poverty is likely to have risen last year, and that rises since 2010 have been underestimated in official Government data.
"Our analysis shows how important cash benefits like tax credits have been for supporting just-about-managing families and tackling child poverty since the millennium.
"It's vital that Government and other policy makers understand the positive impact that cash transfers have on low-income families, not least as they are in the middle of a huge multi-year programme of over £14 billion-worth of benefit cuts.
"The risk is that, unless the lessons of the past are learned, the future could spell squeezed incomes and further increases in child poverty."
The audit claims that there was a £37 billion "gap" between actual benefit expenditure and the level of benefit income used to calculate poverty rates last year.
The Foundation said this meant almost £1 in every £5 of benefits was not taken into account in official poverty figures.
It said this meant:
- Child poverty levels are lower than thought, with some 25% living in "relative poverty" instead of the official figure of 30%.
- Child poverty rose almost twice as fast as official figures show between 2011 and 2016, by 21% instead of 11%, because they started from a lower base.
- Falls in child poverty during the 2000s were larger than previously thought, from three million in 1998/99 to 1.6 million in 2010/11, instead of the official drop of 3.3 million to 2.3 million.
Shadow work and pensions secretary Margaret Greenwood said: "The sharp rise in child poverty on this Government's watch is shocking.
"Government denials can't disguise the impact that deep social security cuts are having on low-income families who are struggling to cope with basic household bills.
"The harsh reality behind the figures is one of families forced into debt and even turning to food banks to survive.
"All too many of these households have someone in work whose wages don't cover rapidly rising rents."
A Government spokesman said: "We are committed to ensuring every child gets the very best chance in life and there are one million fewer people living in absolute poverty than in 2010, including 300,000 children.
"We are spending more than £90 billion on working age welfare and this will continue to rise.
"Our welfare reforms offer parents tailored support to move into work and we are also helping families keep more of what they earn by raising the personal allowance, increasing the national living wage and doubling free childcare."
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