Some adult asylum-seekers were left on the streets or dependent on charity hand-outs after being refused state benefits because they applied for asylum too late.
The hardline policy was implemented by Mr Clarke's predecessor, David Blunkett, to deter bogus claims. Under Section 55 of the Nationality, Immigration and Asylum Act of 2002, applicants could be denied state help with food and shelter if they did not claim asylum as soon as possible after their arrival in the UK.
Protesters, led by the housing charity Shelter, denounced the policy as inhumane and began legal action. That was brought in the names of three asylum seekers, 24-year-old Wayoka Limbuela, from Angola, Binyam Tefera Tesema, 26, from Ethiopia, and Yusif Adam, 28, from Sudan. All had been on the streets without shelter or money.
The law lords ruled that their human rights had been breached because they had been subjected to "inhuman and degrading treatment".
Lord Bingham said ministers had a duty to prevent foreseeable destitution caused by the policy. He added: "I have no doubt that the threshold [of suffering] may be crossed if a late applicant with no means and no alternative sources of support, unable to support himself is, by deliberate action of the state, denied shelter, food or the most basic necessities of life."
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