The government is proposing that the maximum amount of money a family can receive in benefits each year is capped at £26,000.
The measure is part of the Welfare Reform Bill: a piece of legislation that is intended to reorganise the way benefits are claimed and paid across the UK.
Ministers have insisted families would not be "plunged into poverty" as a result of the limit.
But some members of the House of Lords have been attempting to defeat the government over the proposal, and on Monday evening voted in favour of an amendment that excluded child benefit from the cap.
Here's a guide to what has been happening and why.
How does the government want to cap benefits?
By imposing a £26,000-a-year limit - the equivalent of £35,000 before tax.
How much does that mean a family would get a week?
Around £500, which is equivalent to the average wage earned by working households after tax.
When and where would this cap come into force?
The cap would apply to families living in England, Scotland and Wales from 2013.
What about Northern Ireland?
It has its own social security legislation, but it is expected that what is approved at Westminster will ultimately be introduced there too.
Should the amount a family receives in benefits a year be capped at £26,000?
Which specific benefits would be included in the cap?
It would apply to the combined income from the main out-of-work benefits - jobseeker's allowance, income support, and employment support allowance - plus other benefits such as housing benefit, child benefit and the child tax credit, and industrial injuries disablement benefit.
How many people would be affected?
The government estimates that limiting benefits at £26,000 a year would affect about 67,000 households.
Are there any exemptions?
Yes. Households receiving the working tax credit, the disability living allowance or its successor the personal independence payment or the constant attendance allowance, and all war widows and widowers.
What is the government's thinking behind such a policy?
To make sure that households on out-of-work benefits do not receive more than the average weekly wage earned by working households.
Iain Duncan Smith, the work and pensions secretary, has defended the proposal, saying that most of those affected would be people who had never worked and who had no incentive to do so, because they live in expensive properties which they would have to move out of were they to lose their current benefits' entitlement.
He told the BBC Radio 4 Today programme:
"Our department does not believe that you can directly apportion poverty to this particular measure. At £26,000 a year, it's very difficult to believe that families will be plunged into poverty."
Asked whether he believed the £500-a-week cap would lead to an increase in child poverty, he said: "We just don't believe that that's going to happen."
However the employment minister Chris Grayling has conceded that the change would force some families to leave their homes. He told BBC Radio 5 Live:
"There certainly will be people who have to move house as a result of this, who have to move to a part of town they can afford to live in, but surely that is right."
Why is the plan considered controversial?
Because the cap includes child benefit, which is currently paid to all families with children, working or non-working, who want it. There is a concern that a cap applied regardless of the number of children in a family is unfair and might lead to an increase in child poverty. There is also an argument that the government's quoted figure for an average household salary - £26,000 - isn't based just on earnings but actually includes child benefit.
Who is against the changes?
Senior Liberal Democrats and a number of Church of England bishops are spearheading opposition to the legislation in the House of Lords. The Bishop of Ripon and Leeds, the Rt Rev John Packer, has put down an amendment to the bill that would exclude child benefit from the overall cap. "Child benefit is a universal benefit," he told the BBC. "I believe that it's wrong to see it as being a welfare benefit." He continued:
"[Child] benefit is there for all children, for the bringing up of all children and to say that the only people who cannot have child benefit are those whose welfare benefits have been capped seems to me to be a quite extraordinary argument."
The former leader of the Liberal Democrats Lord Ashdown voted against the proposals in the House of Lords, saying that extra measures needed to be introduced to ease the impact on those most likely to be affected.
However the Liberal Democrat leader and deputy prime minister, Nick Clegg, has said he fully supports the changes.
What is the Labour party's view?
The party supports the idea of a benefits cap, but believes those at risk of losing their homes should be exempt.
Shadow employment minister Stephen Timms explained: "We think that the cap is a good idea [and] we think the principle is right." But he added:
"We are very worried about the way the government is going to introduce [the cap], which we think is going to lead to a large number of people losing their homes and having to be rehoused by their local council, ending up costing more."
What happens next?
Despite being defeated in the House of Lords, Iain Duncan Smith has stated that he is determined the proposals become law, and will overturn any changes the Lords propose to the bill. If the House of Lords continue to oppose the measures, the legislation could end up shuttling between both chambers of the UK parliament for the next few weeks.
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