Josie's lawyer, and campaigners, attacked the amount of compensation as "derisory" and an official appeal has been lodged.
Jack Straw, the Home Secretary, said he could intervene, but added that he hoped the family would appeal.
The Home Office is currently re-examining the amounts being paid to victims of crime, but under cost-cutting changes introduced by the last Government there is little discretion involved in calculating the total payouts. A new fixed tariffmeans that the amounts being awarded have dropped significantly in the past two years.
Josie suffered severe head injuries and was left for dead in the attack in which her mother Lin, 45, and sister Megan, 6, were battered to death on a country path in Chillenden, Kent, in July 1996.
The pounds 18,500 award was given to Josie for the loss of her mother, at a maximum of pounds 2,000 a year up to the age of 18, plus any care costs. A second package of compensation is awarded for the actual injuries Josie suffered, which include speech problems, head injuries and post traumatic stress. Her lawyer believes these will total about pounds 20,000.
The maximum award for either compensation package is pounds 500,000, but this is intended for exceptional circumstances, such as when a high earner is para-lysed for life.
A spokesman for the Criminal Injuries Compensation Authority admitted yesterday that part of the reason for the tariffs was to save money.
He added: "We are tied to the terms of the scheme, there are set amounts. We can't change the rules as we go along."
The family's lawyer, Sarah Harman, said: "This is a derisory settlement and it's a very graphic example of the inadequacy of the scheme. The criminal injury compensation authority had the possibility here of exercising their discretion generously and compensating Josie for the terrible loss of her mother and younger sister. They didn't take the opportunity, and gave the lowest possible level award."
Jack Straw said: "There is a right of appeal which Josie's father can exercise in this case. If he has not already done so, I hope that he will do so."
Under the fixed tariff, the loss of an eye is set at pounds 20,000, the loss of hearing in one ear is pounds 11,500 and the most severe mental and physical injury could result in pounds 250,000 compensation for the victim. On top of those figures are discretionary awards for care costs which could bring the total up to a maximum pounds 500,000.
The loss of a parent, as in Josie's case, is dealt with as a separate claim. Under that, a child is entitled to pounds 2,000 a year until the age of 18 and a spouse to pounds 5,000.
Michael Stone, 37, is awaiting trial accused of Lin and Megan's murder.Reuse content