Budget 2014: The welfare cap explained

In his Budget speech, George Osborne announced that the welfare cap would be set at £119.5 billion in 2015. He said that this mechanism would ensure that we will: "never again allow costs to spiral out of control" or allow perverse incentives to bring about a situation in which it pays not to work.

But what does this cap actually do?%VIRTUAL-SkimlinksPromo%