The controversial plan to cap benefits has been defeated in the House of Lords but the government has vowed to fight on in attempting to get the legislation approved.

A bishops amendment that child benefits should not be included in the £26,000 per year cap was supported by crossbench, Labour and Liberal Democrat peers by 252 votes to 237.

Gillian Guy, chief executive at national charity Citizens Advice, warned that if the bill passes it will have a “disproportionate impact” on some of the countrys most vulnerable families.

If such a comment is justified, it may particularly impact on those struggling with debt.

Children, breadwinners who have lost their jobs and people who cannot work due to illness are among those who would be hit by the proposed cap, she said.

Ms Guy acknowledged the coalition is right to attempt to simplify the “complex” benefits system, but stressed certain safeguards must be put in place.

Without these, she warned: “The combined impact of these sweeping welfare reforms and huge cuts will be catastrophic for a lot of families already stretched to the limit.”