The Court of Appeal last week upheld a legal challenge against the government’s decision to close the Independent Living Fund (ILF) in 2015.
Five disabled people brought the challenge.
The government has since told claimants that it does not intend to appeal and has halted all processes related to the closure, according to Disabled People Against Cuts.
ILF gives 19,000 severely disabled people the support they need to lead independent and fulfilling lives.
The appeal judges unanimously overturned an earlier decision. They ruled that the government did not take its duty to equality for disabled people into account when it decided on the closure in December 2012.
Lord Justice McCombe said that the 2010 Equality Act established that requirements to remove or minimise disadvantages suffered by disabled people are not optional during austerity.
He said, "they are now to be placed at the centre of formulation of policy by all public authorities, side by side with all other pressing circumstances of whatever magnitude.”
The government must now decide whether to keep the ILF or try to draw up a new closure plan that can fulfil its legal obligations.