Reform UK would restore the two-child benefit cap in full, Robert Jenrick has announced, in a major U-turn for the party that critics said would plunge hundreds of thousands of children into poverty.

In his first speech as Reform’s Treasury spokesperson, Jenrick said the party had changed tack since Nigel Farage last year said he would scrap the two-child limit and suggested his party wanted to go “much further to encourage people to have children”.

As part of a full-frontal attack on benefits, Jenrick also said the Motability scheme, which enables disabled people to lease a new car, scooter or powered wheelchair to help them be independent, would be reformed to “end abuse” where “expensive cars are handed out for conditions like tennis elbow and paid for by working people who can’t afford those cars themselves”.

Jenrick also said only British nationals would be able to claim benefits under a Reform UK government, and people claiming benefits for “mild anxiety, depression, and similar conditions” would be stopped. Those with mental health issues would have to have a clinical diagnosis “to weed out those who are choosing a life on benefits”.

During his speech in the City of London, Jenrick appeared to indicate he had played a part in the shift in policy, stating: “We want to help working families have more children. But right now, we just cannot afford to do so with welfare. So it has to go.

“And as Reform’s shadow chancellor, I’m ending it. A Reform government will restore the [two-child benefit] cap in full.”

Asked what a Reform government would do to help the 4.5 million children living in poverty, Jenrick said the party wanted to ensure “that people can have kids”, but “we can’t just do that by spending more and more on benefits”. He added: “Someone has to instil some realism into this business.”

Responding to the announcement, Keir Starmer called the move “shameful”. Writing on social media, the prime minister said: “I’m incredibly proud that this government has scrapped the cruel two-child limit. Reform wants to push hundreds of thousands of children into poverty.”

Asked about the U-turn after the press conference, Farage, the Reform UK leader, said he had only wanted to lift the two-child cap for working British families, but his attempts at being “pro-family” had “failed” and resulted in his being labelled a socialist.

However, in a move to allay market fears, Jenrick appeared to soften the party’s stance on its major financial institutions. He said the independence of the Bank of England would remain and the Office for Budget Responsibility (OBR) would not be abolished.

Jenrick’s stance appeared at odds with previous statements from Farage, who has been calling for politicians to have greater influence on the central bank, which was made independent in 1997 by the then chancellor, Gordon Brown. Farage has also suggested he would replace its governor, Andrew Bailey, and impose his own choice if he were to become prime minister, and said he was giving “serious thought” to scrapping the OBR.

At the World Economic Forum in Davos last month, Farage said he “didn’t like banks” and would scrap the interest payments lenders receive through the BoE’s quantitative easing programme. In November, he and his deputy, Richard Tice, made a U-turn on a plan to dole out £90bn in tax cuts, which the party had promised in its 2024 election manifesto.

Jenrick said the party was promising “fiscal stability” combined with “radical reform”, and under a Reform government the Bank of England would be stripped of any role in moving the UK towards a sustainable future and “distractions which have been loaded on to it”.

Efforts to move towards net zero had become a “distraction” for the Bank, he said, and he would change the body by paying high wages to “super forecasters” who “most accurately model the impact of Treasury decisions”.

But while Jenrick – who only left the Conservative frontbench last month – accused the OBR of overestimating the benefits of low-skilled migration, he said Reform UK was “happy to have its homework marked”.

“The OBR is far from perfect, but the impetus for its creation was a desire to instil fiscal discipline and that is something we wholeheartedly endorse,” he said.

The Treasury minister, Dan Tomlinson, accused Jenrick of “trying to pull the wool over people’s eyes” and said Reform had made billions of pounds in unfunded spending commitments.

The shadow chancellor, Mel Stride, said Reform UK was “not serious” on the economy. “Jenrick claims Reform are happy to have their homework marked, yet they still haven’t explained the £10.5bn black hole in their pubs plan, and when challenged on it, they said they were ‘not interested in the numbers’,” he said.