THERESA May has been called on to halt the “disastrous” roll-out of her Government’s flagship Universal Credit policy after a new report claimed it would leave 3.2 million people across the UK £2,500 a year worse off than the previous tax credits system.

The SNP, which made the call, claimed UC - which replaces six benefits - was "not fit for purpose" and demanded urgent changes, including reinstating the work allowance and lifting the benefit freeze.

Philip Hammond is being called on to use the Autumn Budget later this month to forego income tax cuts for the better off and to put an extra £2 billion back into UC to boost the living standards of almost 10 million parents and children in working families.

Political pressure is now mounting daily on the Chancellor to act. On Monday, MPs will question Esther McVey, the Work and Pensions Secretary, about UC and on Wednesday Labour has a Commons debate on the subject.

The Joseph Rowntree Foundation, a social research charity, said its new analysis showed that almost 3m children were now locked in poverty despite living in a working family and despite Britain’s record high employment rate.

It pointed out that cuts announced in the 2015 July Budget meant 3.2m households would typically be around £50 a week worse off on UC compared with tax credits.

Campbell Robb, the Foundation’s Chief Executive, said: “Action in the Budget this month would mean working families keep more of their earnings and feel the benefit in their pockets just one week after Brexit[when the new financial year begins in April].

“Almost 10m people in families with children would see this boost; a big step towards tackling the burning injustice of in-work poverty,” he declared.

The Foundation pointed out how the OBR, the Government’s independent economic forecaster, had estimated it would cost £1.4bn to raise the tax-free personal allowance to £12,500 and the higher rate threshold to £50,000 in 2020. “This money,” it said, “would be better spent helping to pay the lion’s share of increased work allowances.”

Neil Gray for the SNP said: "The Tories must call an immediate halt to the disastrous roll-out of Universal Credit, which has pushed families into poverty and left millions of people poorer and worse off.

"In its current form UC is simply not fit for purpose. It requires urgent and radical changes, including the reinstatement of the work allowance and an end to the benefit freeze.”

The party’s social justice spokesman added: “After a decade of failed Tory cuts it is vital the UK Government uses the forthcoming Budget to end austerity, reverse the cuts to social security, and deliver meaningful investment to boost household incomes."

Earlier this week, two prime ministers intervened in the row.

Sir John Major demanded cuts to UC be reversed and cautioned how the Government could trigger "the sort of problems that the Conservative Party ran into with the poll tax" if it did not urgently address the problems.

Gordon Brown delivered a similar warning, calling for the roll-out to be halted, a review undertaken and emergency help given to families in need. He said the Government’s approach was “chaotic, cruel and vindictive,” and went far beyond austerity.

However, Damian Green, the former Work and Pensions Secretary, defended it, arguing UC was a "huge improvement" on the previous system, having helped thousands of people into work, and insisted the policy’s roll-out must continue.

He defended his successor, Ms McVey, claiming she had not misspoken when she said on Thursday that UC would leave some recipients less well off.

"What Esther was saying was that people would be receiving less benefit but they will do that if they are earning more because their working hours have gone up or they have had a pay rise or so on.

"The whole point of UC is that extra work always pays and that is the great advantage of the system."

The Kent MP added that, while the system would undergo "tweaking" throughout its roll-out, it was “very important we keep with it".