The Institute for Public Policy Research (IPPR) found that 1.4 millionchildren now live in poverty despite having at least one workingparent.
While 600,000 children have been lifted out of poverty since 1997, thereport says, 'some households have just swapped workless for workingpoverty'.
It says that 48 per cent of the working poor are couples with children,and the Government needs to address this group if it is to meet itstarget to end child poverty in the UK by 2020.
The IPPR recommends introducing a new Personal Tax Credit Allowancebased on each individual's income, as current Working Tax Credit rulescould provide a disincentive for the second parent in a family towork.
It also suggests increasing benefits for poor couples with children,making changes to the minimum wage, and preventing benefit overpaymentswhich had been made in over a third of cases and have caused 'realfinancial insecurities for families' when retrieved.
Meanwhile, Danny Alexander MP, the Liberal Democrats' shadow work andpensions secretary, also blamed overpayments for a fall in thoseclaiming Child Tax Credit. Around 100,000 fewer people received thebenefit last year compared with 2006, according to December statisticsfrom HM Revenue and Customs.
He said, 'Families could be missing out on up to 6,090 a year,which can make a vital difference to children living in poverty.'