The government's strategy to abolish child poverty will be left stranded in "no man's land" after George Osborne blocked Iain Duncan Smith's personal project to introduce a new set of child poverty targets focused on the root causes of poverty, and not just income.

Duncan Smith, the work and pensions secretary, has repeatedly said the existing child poverty target set by the Labour government is discredited but the Treasury, in a series of difficult meetings, refused to adopt his chosen targets. Treasury officials feared the targets could be too expensive to meet and difficult to measure and the scale of the policy boosters necessary to meet the targets impossible to determine in advance.

Duncan Smith had wanted to supplement the existing Labour devised target, set in 1999, that defined cutting child poverty as reducing the number of households with an income less than 60% of the median UK earnings.

He believes the target incentivises government to focus on those closest to the 60% threshold, so ignoring those in the deepest poverty. He claims nearly £170bn has been spent on tax credits to meet the target, rather than looking at the deeper causes of poverty. He is keen to focus on the minority of children that are persistently poor.

With the support of the Liberal Democrats, he had decided to focus on two new targets – reducing the educational attainment gap, and reducing the number of households that both had an income below the 60% threshold for more than a year, and at least one other problem such as entrenched worklessness, family breakdown, problem debt or drug dependency.

The omission of the targets when ministers produce the coalition child poverty strategy will be perceived as a personal blow to Duncan Smith since he had launched a consultation on adding new targets.

In a joint article for the Guardian's Comment is free, Osborne and Duncan Smith try to paper over the disagreement, saying: "We need to develop a better understanding of the dynamics that drive these deep causes of poverty.

"We need to start collecting much better data so we are measuring what we really want to target instead of targeting what we happen to measure."

The chancellor and Duncan Smith point out, for instance, that "no proper data has been collected on the number of children being raised by drug- or alcohol-addicted parents".

They warn the "wrong measures based on inadequate data and simplistic analysis drive misguided and ineffective policy".Duncan Smith will put a brave face on his setback , saying he still hopes the new targets can be agreed before the next election.

But the government-appointed child poverty tsar, Alan Milburn, is expected to criticise the government. He will say the fight against child poverty has been left in a political no man's land, with the existing child poverty target in effect disowned and discredited by ministers but no new additional measures agreed.

In the detailed discussions between the Department of Work and Pensions and the Treasury the two sides had got as far as agreeing what would happen to poverty on its new measures if no additional action was taken, but could not agree on how ambitious the new targets should be, or what would be required to meet them.

Liberal Democrats believe Osborne was nervous of adopting reworked child poverty targets that the Conservative Party owned, and instead preferred to retain the discredited target set by Labour. Osborne also feared that any new targets would be attacked by Labour as a sign that he was trying to move the goalposts, and evade responsibility for meeting the existing target.

The coalition claims it has cut child poverty on Labour's main measure by 300,000 households since 2010.

The opposition, however, pointed to forecasts from the independent Institute for Fiscal Studies suggesting that child poverty will rise by 400,000 during this parliament and 900,000 by the end of the decade, from 2.3 million in 2011/12 to 3.2 million in 2020/21 – almost exactly reversing a fall of one million under the Labour government.Shadow work and pensions secretary Rachel Reeves said: "Child poverty is set to rise by 400,000 under David Cameron's Government, and for the first time since records began, there are more people in poverty who are working than who are out of work.

The child poverty strategy due to be publised today is a legal requirement under the 2010 Child Poverty Act, and will not itself contain new policy measures, but instead argue the root causes of poverty lie in worklessness and disparities in educational achievement.

The strategy is likely to cite research by the Sutton Trust suggesting that reducing the attainment gap between children from poorly educated and highly educated families to Finnish evels would add £56 bn to UK GDP by 2050.