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Housing benefit payments are to be limited to £280 a week for a flat and £400 a week for a house.

The chancellor said the new caps were needed because the cost of the payments had risen 50% to £21bn in 10 years.

He said some families were receiving £104,000 a year in housing benefit and that certain awards would be reduced.

Other reforms planned included re-setting and restricting local housing allowances and re-adjusting support for mortgage interest payments.

One area is to see payouts increased - the discretionary housing payments' budget for hardship cases will be increased by £40m.

The cost of an additional room for those claimants with a disability who need a carer will also be covered in future.

Chancellor George Osborne said that as country we now spent more on housing benefit than on the police and universities combined and that this package would cut the cost of housing benefit by £1.8bn a year.

Campbell Robb, the chief executive of Shelter, said most housing benefit claimants had little choice over where or how they lived: "The vast majority of housing benefit claimants are either pensioners, those with disabilities, people caring for a relative or hardworking people on low incomes, and only one in eight people who receive housing benefit is unemployed."

Mr Robb added that many claimants were already contributing to the cost of housing: "We are really concerned that, even at current levels, nearly half of Local Housing Allowance claimants are already making up a shortfall of almost £100 a month to meet their rent."