Four working single mothers have won a High Court challenge over the government’s universal credit scheme.
They argued a “fundamental problem” with the system meant their monthly payments varied “enormously”, leaving them out of pocket and struggling financially.
Lawyers for the women said the problem was likely to affect “tens of thousands of people” claiming the benefit.
A DWP spokesman said: “We are carefully considering the court’s judgment.”
It comes as Work and Pensions Secretary Amber Rudd announced a raft of changes to the government’s flagship scheme, including a U-turn on plans to extend a benefits cap on families with more than two children.
Universal credit is a means-tested benefit, rolling six separate benefits into one payment.
It has proved controversial almost from its inception, with reports of IT issues, massive overspends, administrative problems and delays to the scheme’s roll-out.
On Friday, it was announced that Danielle Johnson, Claire Woods, Erin Barrett and Katie Stewart had succeeded in a judicial review action against the government over the method used to calculate payments.
It followed a hearing in November when the court was told the women were struggling financially, with some falling into debt or relying on food banks.
Tessa Gregory, a solicitor from law firm Leigh Day, who represented part-time dinner lady Danielle Johnson from Keighley, West Yorkshire, said her client was “a hard-working single mum” and “precisely the kind of person universal credit was supposed to help”.
But Ms Gregory said the “rigid income assessment system” had left her £500 out of pocket over the year and spiralling into debt.
Solicitor Carla Clarke, of the Child Poverty Action Group, which also brought the case on behalf of the mothers, said the universal credit system was “out of step with both actual reality and the law”, and had caused them “untold hardship, stress and misery”.
When calculating universal credit, the Department for Work and Pensions (DWP) sets assessment periods for each person to look at how much they earn – from the 1st of the month to the end of the month, for example.
But lawyers for the mothers said a problem arises when claimants are paid by employers on a date which “clashes” with their assessment period.
For example, they pointed out that if a claimant is paid early because of a weekend or bank holiday, the system counts them as having been paid twice in one month and they receive a “vastly reduced” universal credit payment.
Two judges in London concluded the work and pensions secretary had “wrongly interpreted” the relevant regulations.
Ms Gregory called for Ms Rudd to take “immediate steps to ensure that no other claimants are adversely affected” and “ensure all those who have suffered because of this unlawful conduct are swiftly and fairly compensated”.
On Friday Ms Rudd promised to make the universal credit system more “individual” and tailor it to claimants needs, for example by making payments more regular.
She also confirmed she would delay asking Parliament to authorise the transfer of three million people on to universal credit until next year, after a pilot of the transfer from existing benefits has been completed.