Judges at the UK’s most senior court declared that the benefit cap, which restricts unemployed claimants to £500 a week in total welfare payments, breaches the government’s international obligations under the United Nations Convention on the Rights of the Child. Two of the five judges also found it to be unlawful discrimination against women.

However, the court ruled by a 3-2 majority verdict that the cap is not unlawful, leaving the issue to be settled “in the political, rather than the legal arena”.

The benefit cap, introduced in 2013, limits the benefits an out-of-work family can receive, including housing benefit and benefits for children, to £500 per week. It is applied regardless of family size or circumstances such as rental costs.

The appeal was brought by two lone mothers and their children who fled domestic violence and were threatened with homelessness as a result of the cap. The mothers argued that the cap was unfair and having an unjustifiably discriminatory impact on women.

The cap affects a higher number of women than men. That is because the majority of non-working households receiving the highest levels of benefits are single parent households, and most single parents are women.

The government’s justification for the scheme is that it is necessary (i) to set a reasonable limit on the extent to which the state will support non-working families from public funds; (ii) provide members of households of working age with a greater incentive to work and (iii) achieve savings in public expenditure.

The judgment calls for the government to address the implications of the finding of the majority of the Supreme Court, that the benefit cap scheme breaches the United Nations Convention on the Rights of the Child, in its review of the benefit cap.

Lady Hale, the deputy President of the Supreme Court, said in her judgment: “The prejudicial effect of the cap is obvious and stark. It breaks the link between benefit and need. Claimants affected by the cap will, by definition, not receive the sums of money which the State deems necessary for them adequately to house, feed, clothe and warm themselves and their children.”

She added: “It cannot possibly be in the best interests of the children affected by the cap to deprive them of the means to provide them with adequate food, clothing, warmth and housing, the basic necessities of life.”

Law firm Hopkin Murray Beskine, which represented the two families, said it was “disappointed” by the decision and welcomed the robust clarity of the remarks in the judgment.

It said: “The case did not secure an outright victory for our clients because of a legal technicality but this does not prevent the government taking action now to alleviate the poverty and deprivation that the benefit cap has produced. This judgement is relevant to the thousands of households throughout the UK whose children are living daily with the harsh effects of the benefit cap which is depriving them of adequate food, clothing, warmth and housing.

“Our clients call on this government to amend the benefit cap scheme so as to ensure that it complies with the internationally recognised standards for the welfare of children. The benefit cap cannot be seen as an economic measure without considering the impact: it is a system that has left children living a life of great deprivation and hardship, not experienced by other children in the UK.”

Alison Garnham, chief executive of the Child Poverty Action Group, which intervened in the case, added: “The women and children involved in this case were escaping horrific abuse. As three of the judges have said: ‘It cannot be in the best interests of the children affected by the cap to deprive them of the means of having adequate food, clothing, warmth and housing’. We hope the government will listen to the court and comply with international law on the protection of children.”