Treasury restrictions on State handouts to the wives of terrorist suspects are illegal, European judges ruled today.
The decision may force the Government to change anti-terrorism rules following a legal case brought by three women whose husbands appear on a list of people said to have links with al Qaida, the Taliban and Osama bin Laden.
People on the list, drawn up by a UN sanctions committee, have their funds and other assets frozen, in a bid to cut off terrorist funding.
The EU enforces the measure via rules stating that no funds "shall be made available, directly or indirectly, to, or for the benefit of" people named on the list, unless authorised to cover "basic expenses".
But the spouses of three suspects on the list went to court to challenge the Treasury's decision to impose tough restrictions on access to social security payments worth several hundred pounds a week, including income support, child benefit and housing assistance.
Under the Treasury rules, such benefits must be paid into a bank account, and the spouse can draw only up to £10 in cash for each member of her household. All other payments from the account must be made by debit card.
The spouses, all living in the UK with their husbands and children, must also submit a monthly account to the Treasury detailing all spending, with receipts for any goods bought and copies of bank statements allowing Treasury officials to check that the purchases do not exceed "basic expenses."
A UK legal challenge that the payments should not be subject to such conditions was thrown out by the High Court, but the European Court of Justice today declared:
"The freezing of funds of persons with suspected links to bin Laden, al Qaida or the Taliban does not apply to certain social security benefits paid to their spouses
"The regulation ordering funds to be frozen applies only to assets that can be used to support terrorist activities."
The judges said the Treasury took the view that social security and assistance benefits such as income support, disability living allowance, child benefit, housing benefit and council tax benefit granted to the wives of people on the list was banned by the rules drawn up by the EU, "as those sums might be used to cover basic household expenses, such as buying food for communal meals.
"If so, they would be made indirectly available for the benefit of the husband whose name appeared on the list."
But the Treasury did make exceptions for wives who could receive the benefits under certain conditions.
The judgment said: "The Court considers that the interpretation used by the Treasury, to the effect that by receiving State benefits the wives indirectly make funds available for the benefit of their husbands, is not based on any danger whatsoever that the funds in question may be diverted in order to support terrorist activities."
The judges said no-one had argued that the wives involved handed over their state benefits to their husbands instead of using them for household expenses: "It is hard to imagine how those funds could be turned into means that could be used to support terrorist activities, for the benefits are fixed at a level intended to meet only the strictly vital needs of the persons concerned.
"The court concludes, therefore, that the benefit that a person included in the list might indirectly derive from the social allowances paid to his spouse does not compromise the objective pursued by the regulation."