£14,000 handouts to 18,000 families: Rachel Reeves’s Budget will raise taxes to fund benefits windfall – costing the average earner £2,000

Rachel Reeves will raise taxes today to provide thousands of pounds worth of help to Britain’s biggest unemployed families.

The Chancellor’s flagship Budget plan to scrap the two-child benefit limit would be worth £14,000 a year to 18,000 low-income families with six or more children, official figures show.

The move comes after a study by the Adam Smith Institute found that almost £2,000 of average income earners’ taxes will be diverted towards Britain’s spiraling benefits bill this year.

Ms Reeves, who has blamed the Tories, Brexit and Donald Trump’s taxes for throwing the economy off course, is expected to increase taxes by around £25bn today.

But it will also introduce a raft of measures to boost the bloated welfare bill, including scrapping the two-child limit, which costs £3.5bn a year.

The benefit cap limits means-tested benefits, such as universal credit and child tax credit payments for the first two children, and costs affected families typically £3,455 in lost benefits for each additional child.

Figures produced by the Department for Work and Pensions (DWP) show 470,000 families are currently affected by the policy.

About 59 percent have at least one adult working, leaving almost 200,000 people with no one working.

Critics of the two-child cap say it unfairly penalizes children and the Chancellor will scrap the cap in the budget

Almost two-thirds (297,000) have three children, while a quarter (117,000) have four children. Another 37,000 affected families have five children, while 18,260 have ‘six or more’ families.

Those with six or more children face a windfall of more than £14,000 a year, Conservative Party policy chief Neil O’Brien said.

He added: ‘Last year the Chancellor said the cost of lifting the cap was low but Labor MPs realized he could be pushed around.

‘This means you will see some families receiving huge sums of money from taxpayers, while the Chancellor says taxes must be increased for everyone else.

‘Brexit blows a hole in the Conservatives’ claim that they have no choice but to raise taxes because of the Battle of Hastings. In fact, it shows that he’s quite happy to raise taxes to spend billions more on welfare.’

Critics of the cap claim it worsens child poverty and eliminating it has become an article of faith for many Labor MPs. But the potential increase in benefits is so large that some may have little incentive to work.

Prime Minister and Chancellor chat outside cabinet room ahead of budget meeting

Conservative welfare chief Helen Whately said lifting the cap could give some large families ‘another incentive to sign up for sickness benefits’

Currently, a single parent with three children is entitled to a total of £20,978. This figure could rise to £24,491 when the cap is removed; This is well above the £21,807 take-home pay of someone working 40 hours a week on minimum wage.

Meanwhile, analysis by the Adam Smith Institute found that workers earning the average wage will spend more on benefits (£1,970) than on other public spending, as the number of workers receiving sickness benefits under Labor increases. Employees on £39,039 will also contribute more than £1,000 to running the NHS this year.

The think tank estimates that £659 of the average income earner’s income tax and National Insurance contributions will go towards debt interest payments.