Welfare and work benefits are to increase by just 1% in the coming years, the Chancellor George Osborne announced today.
Although the cap will come as good news to those who were expecting a benefits freeze, for many it will amount to a further squeeze on spending.
The driving force behind plans to cut the welfare bill has been the Work and Pensions Secretary Iain Duncan Smith.
ITV News' Social Affairs Editor Penny Marshall spoke to his constituents in Chingford, Essex:
The move means that upratings are likely to be below inflation in future years, gradually reducing the real value of benefits over time.
But the Chancellor said he would protect the vulnerable by continuing to increase carer benefits and disability benefits in line with inflation.
The announcement comes on top of £18 billion in welfare cuts that had previously been announced.
Mr Osborne told MPs that the move will save £3.7 billion in 2015/16 and deliver "permanent savings each and every year from our country's welfare bill".
He added that it was "fair" that welfare recipients should receive similar increases in income to those enjoyed by public sector workers, who are getting a 1% rise as a lengthy pay freeze comes to an end.