Their income was meant to be protected by 'transitional arrangements' when income support replaced supplementary benefit in the massive shake-up of the welfare system resulting from the 1988 Social Security Act.
New criteria for calculating the level of income support would have left 1.4 million people worse off than they were under the old system, so 'transitional additions' were introduced to ensure that cash values did not fall.
The idea was that the transitional addition would be eroded as the income support element rose each year to reach the former supplementary benefit level. However, 10,000 people are still waiting for an annual cost-of-living increase in their benefit payments to be restored, and some will not receive an inflation rise until 1997, the Child Poverty Action Group (CPAG) has established.
The organisation took legal advice on the highly complex battery of regulations that stemmed from the 1988 Act, in the belief that what it saw as a glaring anomaly might have been unlawful. CPAG officers had hoped that they might have been able to bring a test case through the European Court of Justice. They have now learned that there are no grounds for such a challenge.
Vicki Chapman, the CPAG's legal officer, said: 'The lack of a legal remedy means that many people are finding it really hard to live on their benefits. After the 1988 Act was passed, the fine detail of the transitional arrangements was left to subsequent regulation, and I do not think that MPs fully understood the implications of what was being proposed, in the case of those whose income support worked out lower than the supplementary benefit they had previously received.
'It seemed that their position would be protected and it was in cash terms, but not in real terms.'
Government ministers accepted there were losers as well as gainers from the 1988 changes, but justified them by insisting it was necessary to give more to those most in need.
Campaigners countered that there were losers in all categories of claimants.
With the toughest public spending round for years expected in the autumn, they are pessimistic about the chances of any improvements in the financial circumstances of those who lost out.
'We believe that many of the 10,000 people affected by this particular trap are elderly or disabled,' Ms Chapman said.
'This is because they are claimants whose previous supplementary benefit included elements to cover special dietary needs, or something relating to the individual's physical condition.
'There doesn't seem to be any way in which they can be helped under the present system.'