Parents claiming benefits and working as little as one day a week could see significant financial gains next year, potentially receiving pay equivalent to £140,000, due in part to Labour’s ‘Benefit Street Budget’.

A recent analysis by the Daily Mail highlights the effects of the government’s decision to remove the two-child benefit cap.

The calculations indicate that a couple with three young children, earning a combined annual income of just £10,152, might be able to supplement their earnings by nearly £76,000. This increase is approximately £12,000 more than they would receive if the cap was still in place.

This adjustment would allow them to take home £86,000 in total, as neither parent would incur any tax or National Insurance liabilities.

According to the Daily Mail’s analysis, their total take-home pay would be akin to a pre-tax income of £140,000 for an individual or £56,000 each for two earners.

For a single parent in a similar situation, income could rise to £83,000, equating to the pre-tax earnings of someone making £135,000 annually.

For context, the UK median pre-tax full time salary is around £39,000. That rises to £49,000 in London.

Shadow Work and Pensions Secretary Helen Whately told the Daily Mail: ‘Thanks to Rachel Reeves’ Budget for Benefits Street, the system rewards those who do less and claim more.’

She added: ‘Under Labour, people on modest pay can top up their income with tens of thousands in benefits – the equivalent of a six-figure salary.

‘Our welfare system only works if it’s fair to people who’re paying in. You don’t need a degree in ethics to see this is unfair.

‘The welfare system is broken, and only the Conservatives, with our proposed £23billion in savings, have the backbone to fix it and get Britain working again.’

Reeves’ decision to lift the cap will benefit 470,000 bigger families on benefits, costing the taxpayer £3.2billion a year.

The Conservatives have already pledged to restore the two-child cap if they win power.

This analysis comes after think-tank the Centre for Social Justice warned how generous benefit payments mean ‘the incentives to work, or progress within work, have been further eroded’.

The CSJ – chaired by former Tory Work and Pensions Secretary Iain Duncan Smith – said in a report last month that the system that delivers a higher standard of living for those out of work than those who do.

Chancellor Rachel Reeves (pictured) decided to lift the two-child benefit cap in her Budget

Shadow Work and Pensions Secretary Helen Whately (pictured) said the benefits system ‘rewards those who do less and claim more’

In her November Budget, Reeves announced a £30billion tax raid paid for, in part, by freezing income tax thresholds for another three years.

Although not a direct hike, the ‘stealth tax’ will drag millions more earners into paying higher rates.

About a quarter of the working population will be paying higher or top rate tax by then, up from 15 per cent when it was imposed in 2021.

The higher rate threshold would have been £70,370 by 2030 instead of £50,270 had it risen in line with inflation.

The tax burden is due to reach a new peak as a proportion of GDP in records that go back more than 300 years.

The OBR said economic growth under Labour would be even lower than forecast last year – and warned none of the 88 measures unveiled by Ms Reeves would have a ‘material impact’ on boosting GDP.

The decision to spend £3billion a year axing the two-child cap was cheered by Labour MPs – but it will involve the taxpayer funding handouts worth thousands of pounds to bigger families on benefits.

In her response to Ms Reeves’ plan to scrap the two-child benefit cap while raising taxes on working people, Conservatives leader Kemi Badenoch branded the announcement a ‘Benefits Street Budget’.

A government spokesman said: ‘This is an extreme hypothetical example that doesn’t reflect how the benefit system works in practice for the vast majority of families on Universal Credit. 

‘In reality, very few families would ever be in these circumstances.’