Universal Credit would be scrapped under Labour plans to replace the Tories’ flagship welfare reforms with a social security system to support jobseekers with “dignity and respect”.
Jeremy Corbyn called the much-criticised reforms an “unmitigated disaster” as he outlined proposals to depart from a system designed to “punish and police”.
The benefit cap and two-child limit would be immediately ditched, which Labour says would bring 300,000 children out of poverty.
The punitive sanctions regime criticised for forcing people to use food banks would also be scrapped if Labour won a general election.
Charities welcomed significant reform but warned against “further upheaval”, as the Tories rejected the proposals outright.
Announcing the reforms on Saturday, Mr Corbyn told a crowd of supporters that the welfare state had been “sliced apart, cut apart and destroyed”.
“Universal Credit drives people into debt by a five week wait,” the Labour leader told reporters following his speech.
“The two-child policy means that the largest families often have the poorest children, who achieve the least at school.
“And the stress involved in Universal Credit, and the cost of its administration, is massive. What we’re saying is end the two-child policy, end the capability for work assessment test.”
Mr Corbyn claimed that Universal Credit had led to an “explosion in food banks, rough sleeping and terrible levels of debt”.
The Labour leader announced the plans during a rally in the Chingford and Woodford Green constituency held by Universal Credit architect and former Tory leader Iain Duncan Smith.
The plans also include ending the system’s “digital-only” requirement, which Labour says excludes people who cannot access the internet or lack computer literacy, by recruiting an additional 5,000 advisers.
The five-week wait, described by Mr Corbyn as causing “so much misery and suffering”, would also go, with an automatic interim payment and a switch to fortnightly payments.
Gingerbread backed the announcement and highlighted research suggesting Universal Credit causes housing insecurity and debt for most single-parent households, like the ones the charity supports.
Chief executive Victoria Benson said: “It will be essential for any future government to take steps like these if we are to loosen poverty’s grip on huge numbers of single parents and their children.”
The Joseph Rowntree Foundation called for change but warned against creating further problems.
Helen Barnard, a deputy director at the charity, said: “We welcome significant reform to Universal Credit so that it is the anchor people need in hard times, but any changes need to avoid further upheaval for those who depend on it.
“Reducing waiting times, making payments when people need them and ending the two child limit are all important in creating a system with dignity and compassion at its heart.
“Universal Credit has the potential to be a tool for fighting poverty, but it urgently needs reform to build on the changes which have already been made by the Government.
“People on low incomes want to see politicians deliver changes that allow them to build a better life, listening to people with experience of the system to fix Universal Credit is a good place to start.”
Food bank charity the Trussell Trust welcomed the end of the five-week wait but also warned Labour’s plans could create further problems.
“Any sign of our country’s politicians addressing problems that push people to food banks are welcome,” chief executive Emma Revie said.
“Scrapping Universal Credit may only result in further upheaval, we urgently require reforms which put the needs of those using our benefits system at the heart of its redesign.”
The Conservatives branded Labour’s plans as “totally irresponsible”.
Work and Pensions Secretary Therese Coffey said: “It’s reckless, political point scoring from a party that spent years trapping people on benefits and holding them back from the opportunities that would help them build a better future for them and their families.”
She said the Tories acknowledge “there is more to do to make the system work better”, pointing towards the recent increase to the amount people can earn before their benefits are reduced.
Shelter chief executive Polly Neate said she backs proposals “to slash the five-week wait”, but added they “need to see politicians address the elephant in the room – working families simply can’t afford their rent”.
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