Thousands of Universal Credit claimants will be informed ahead of Christmas that their benefits are to be capped in the new year.
The cap could leave thousands of struggling families and individuals worse off by hundreds of pounds a month, and risks pushing some into destitution.
Many people who lost their jobs earlier this year and haven't been able to find work since will be informed next month by the Department for Work and Pensions that their payments will be cut unless they find work.
Average loss of £250 a month
If capped, the losses will average around £250 per month from January. For those in higher-cost areas like London, the losses will be even greater.
The anticipated surge in benefit caps comes after a nine month "grace period" in which some claimants were protected from a cap at the start of the pandemic.
For people who claimed in April, a further surge in benefits caps is expected at the end of January, when their "grace period" ends.
Figures published last week showed that 170,000 British households - most with children - had their benefits capped in April, with more than 40 per cent of these households including children under five.
Separate research suggested that the financial shock of this cap increased the risks of poor mental health among claimants.
Cap 'undermines wellbeing'
The study by the London School of Economics said: “[The cap] may actually push people further away from the labour market because it undermines their wellbeing.”
Housing charity Shelter has urged government minsters to scrap the planned cap. The charity's chief executive Polly Neate commented: “It limits families’ basic incomes to the point where parents have to choose between paying their rent or feeding their children. And too many get to the point where they have no choice, and homelessness becomes unavoidable."
Benefits caps - limiting the total amount of benefit people can receive - were first introduced in 2013 as an "incentive" for jobless people to find work. It has since been made even less generous, in spite of evidence that those who had their benefits capped were actually less likely to find work.