The government estimates that this decision will benefit around 15,000 families.

Universal credit was introduced in 2013 to simplify the social security system by combining six benefits into one. It is a means-tested benefit, which has replaced Child Tax Credit, Housing Benefit, Income Support, Jobseeker’s Allowance, Employment and Support Allowance and Working Tax Credit.

Work and Pensions Secretary Amber Rudd also announced changes, which she said were designed to make Universal Credit fairer. These include pilot schemes to provide more frequent payments for new claimants, a new online system for private landlords and a more flexible approach to childcare provisions.

This follows a £4.5 billion boost to the system, announced in last year’s Budget.

Rudd said: “I want Universal Credit to gain further support as we roll it out in practice. This means delivering it in a way that meets the needs of claimants, who come from every conceivable background and who have incredible potential to achieve their ambitions.”

High court blow

The government’s U-turn on the two-child cap was made ahead of a successful High Court challenge by four single mothers – Danielle Johnson, Claire Woods, Erin Barrett and Katie Stewart.

Sky News reported that they were successful in their claim against the Department for Work and Pensions after it was found that their payments varied and there were instances where they had unfairly ended up out of pocket.

It was claimed that problems emerged if claimants were paid by their employers on a date that clashed with their assessment for Universal Credit.