Low-income families will be ‘thousands of pounds’ better off under Labour welfare plans, says think tank

Hundreds of thousands of families could benefit to the tune of thousands of pounds a year from £2.2bn of “emergency” welfare reforms promised by Jeremy Corbyn, an influential think tank has said.

The Institute for Fiscal Studies said that the abolition of the two-child limit for means-tested benefits would make 700,000 families better off by an average £3,000 a year, while scrapping the Conservatives’ benefits cap would put £2,000 a year into the pockets of around 100,000 households.

But the IFS warned that Labour’s longer-term plan to scrap Universal Credit altogether would involve “huge” upheaval and could be as complex and difficult as the process of introducing the system has been.

Mr Corbyn has announced that an incoming Labour government would immediately:

* End the benefit cap and two-child limit;

* Suspend sanctions on claimants;

* Cease the requirement to make claims via the internet; and

* Shorten from five to two weeks the wait for first payments and split payments between the accounts of adults in a household.

Speaking in the Chingford constituency of the architect of universal credit, Iain Duncan Smith, the Labour leader also made clear he would scrap the system altogether in the longer term.

“When a Labour government takes office we will introduce an emergency package of reforms to end the worst aspects of universal credit,” he said.

“And we will introduce a new system that will be based on the principles of dignity and respect and it will alleviate and end poverty, not drive people into it.”

The IFS said that the impact of the two-child limit’s removal would be felt gradually as eligible families had more offspring, but that it would eventually cost the government around £2bn a year.

Abolishing the benefit cap would cost around £200m annually, with the majority of winners being people with several children or high housing costs.

IFS research economist Tom Waters said: “The proposals announced by Labour today would, compared to current policy plans, top up the incomes of a significant number of low-income households – in some cases by thousands of pounds per year. They do not, however, amount to anything close to a scrapping of universal credit.

“If the longer term intention is really to scrap universal credit entirely, this would effectively be a commitment to re-design the entire working-age means-tested benefits system for the second time in a decade.

“There are so many ways to design a benefits system that it is impossible to appraise this idea properly until we know something about it.”