Alistair Darling yesterday placed the UK Government's pledge to eradicate child poverty at the centre of his Budget as he announced a series of measures to benefit families on low incomes.

The government has previously been warned that it would miss its target of halving child poverty by 2010 and wiping it out completely by 2020 without significant investment.

Yesterday, Mr Darling announced a package of measures worth around £900m annually to help it achieve its goal. They include welfare reforms so that parents are better off in work, an increase in the child element of the child tax credit and moving forward by one year the planned increase in the first child rate of child benefit.

Mr Darling told MPs that 600,000 children had been brought out of relative poverty since Labour came to power and said the announcements made yesterday would affect up to 250,000 more.

"There is no greater moral imperative than to make sure that every child has the highest aspiration and ambition," he said. "If we are to build a fairer future for our children then we must eradicate child poverty in Britain."

Campaigners welcomed the commitment, but warned that the government still faced an uphill struggle if it is to meet its targets.

Douglas Hamilton, Save the Children's child poverty spokesman, said: "Despite the new investment announced, the government will miss its own 2010 target by as many as 450,000 children. Save the Children is worried that his investment does not match his ambition."

New funding includes £125m to be spent over the next three years in piloting new approaches to increasing the number of parents who are employed, raising income and tackling deprivation in communities.

All long-term incapacity benefit claimants will have to undergo "work capability assessments" from April 2010. The tests are already carried out on new claimants, but will be introduced for existing claimants in an effort to help more people back into employment.

Changes will also be made to housing and council tax benefit so that, from October 2009, child benefit will no longer be counted when calculating income in a move which is designed to improve the work incentives for lowest-paid families.

Mr Darling said a working family with one child on the lowest income would be better off by £17 a week as a result of this change, which will lift 150,000 children out of poverty. The child element of the child tax credit will be increased by £50 a year above inflation from April 2009, a move which the government said would benefit 301,000 families in Scotland. The increase from £18.80 a week to £20 a week of the first child rate of child benefit will also be introduced in April 2009, one year earlier than planned, and ministers said the move would benefit 600,000 Scottish families.

Mr Darling said a family with two children with an annual income of up to £28,000 would be £130 better off after the Budget.

John Dickie, head of the Child Poverty Action Group in Scotland, said it was an "excellent" Budget which would go towards tackling the "moral disgrace" of child poverty.

"It is a serious investment in our poorest families and we have to welcome that," he said. "Whilst what we have heard today won't take us all the way, the intent is clear. It is a significant step forward and keeps the 2010 target to halve child poverty in our each.

"It is right that the government is focused on tackling child poverty and it is right that children were among the winners."

However, Mr Hamilton added that extra measures could be introduced to enable the government to achieve its target. He called for seasonal grants of £100 per child twice a year for the poorest families and an extra £100 winter payment for families, which he said would lift up to 440,000 children out of poverty.

"One in four children in Scotland are living in poverty and today's announcement will certainly make a difference," he said. "However, there is a long way to go. The government has made a life-changing promise to a generation of children. That promise must be kept."

Clare Tickell, chief executive of children's charity NCH, said: "If child poverty is to be eradicated by 2020 the government needs to invest. But it must also realise that simply to throw money at this issue is just not enough.

"To truly end child poverty and the widening social exclusion that it brings, the whole wellbeing of the child and their family needs to be addressed. Families need to be aspirational so their children are aspirational. Pledges need to be matched by actions and the Chancellor's cabinet colleagues now need to step up to the mark to really deliver the solutions that match the financial promises."

However, Liberal Democrat leader Nick Clegg said Mr Darling's "piecemeal" reforms to the tax credit system would not get him "anywhere near" meeting the 2010 target on child poverty. Mr Clegg said: "The reality is that the government's approach has failed. If we are to abolish child poverty for good we must not only increase income we must increase opportunity too.

"These are the people most in need in our society - yet after 10 years and yet another Budget, they are still no nearer being given the true support they need."