THE number of households expected to be hit by the new £500 a week benefits cap has fallen by one-quarter, the UK Government has revealed.

Initial estimates had suggested 56,000 people would be affected by the controversial limit, losing an average of around £90 per week. However, the forecast has now been cut to 40,000.

Officials suggested that 8000 people had found jobs while others had moved to cheaper properties.

"The benefits cap sets a clear limit for how much support the welfare state will provide: the average wage for working households," said Iain Duncan Smith, the Work and Pensions Secretary. "But it's also a strong incentive for people to move into work and, even before the cap comes in, we are seeing thousands of people seeking help and moving off benefits."

He added: "We have a very clear message: we will provide support to those who need it but the days of outrageous claims giving people incomes far above those of working families are over."

The benefits cap is due to be introduced in four London boroughs from Monday; just under half of all the households expected to be affected are in the UK capital. Nationwide implementation will begin in July with the policy fully in force by the end of September.

The cap was originally expected to save £275 million a year from the welfare bill but it is now estimated to save only £110m.

Total welfare payments will be limited to £500 per week for couples and single parents and £350 per week for single people without children.

This means that workless households will not receive more in benefits than the average earnings of working households.

The Government has made clear the rise in the amount spent on working age benefits has to be slowed; in 2009/10 some £90 billion was paid out in benefit payments to people of working age and their families.