Campaigners have called on the Government to lift the 'two child limit' for payment of benefits to families.
The Child Poverty Action Group (CPAG) says it is causing conflict between siblings and forcing families to cut down on essentials including food, medication, heating, clothing and after-school clubs.
It says 592,000 children in 161,000 families have been affected by the policy since it took effect two years ago.
Under the policy, the child allowance in universal credit and tax credits, worth £2,780 a year, is only paid for the first two children in a family.
CPAG says 1.8m children are likely to be affected by it by 2023.
The group's chief executive Alison Garnham said: 'Today’s figures are a grim reminder of the human cost of this nasty policy, which says that some children are more deserving than others purely on the basis of their birth order and mostly affects working families.
'In the UK we would never turn a third-born child away from school or hospital.
'How can it be right to deny the same young children the support they need to enjoy a childhood free from poverty when their family falls on hard times?'
