The UK Government's defeat in the courts over the future of the Independent Living Fund could be a landmark in troubled relationship between ministers and disabled people.

Many disabled people have felt under attack from the Coalition Government, with welfare reforms forcing crude medical tests on those unable to work, and the bedroom tax apparently penalising those who need extra room for carers or equipment such as wheelchairs or ventilators.

It appears the Government will not challenge its defeat at the Court of Appeal, which concluded ministers had not given enough consideration to the "very grave impact" closing the fund was likely to have on the severely disabled people who still receive it.

The ILF is less well-known than Employment Support Allowance, and its demise has received less attention than the bedroom tax. Even before the Coalition Government came to power, the previous Labour administration had closed the fund to new applicants and was reviewing its future.

However, although its profile is lower, the ILF's impact is huge for the 19,000 people who receive it. Targeted at those with severe or complex difficulties, it often makes the difference between being able to live an active life and complete dependence. The intention of the current Government had not been to close it, but to pass the funds on to local councils to distribute.

Yet while local government was to get to distribute the cash from the fund, it was guaranteed only until 2015 and arrangements for who would pay for support thereafter were vague.

The money previously spent in Scotland was to be handed not to councils but to the Scottish Government, which has only just closed its own consultation on what should be done with the money.

Scottish charities supporting disabled people with complex needs have defended the fund for its flexibility and efficiency.

Not everyone agrees. Some disability activists have accused the fund of being elitist, providing disproportionate support to a small number of very disabled people. It delivered a two-tier system, not fit for purpose, according to this argument.

Scottish groups have welcomed the Government's court defeat last week. Lothian Council on Independent Living points out that many people have had no access to support from the fund since new applications ceased in 2012. "We await eagerly to hear what next steps are announced" a spokeswoman said.

The Learning Disability Alliance Scotland sounded a note of caution. "The Government may yet carry out a quick consultation or another manoeuvre that allows them to meet their legal duties and then go ahead and close the fund anyway," its spokesman said.

The result is the fund is in even more in limbo than before, its future impenetrable as the Government rethinks and the Scotland Government presumably puts its own considerations on hold.

What is clear is that most of those affected have very little confidence that passing on the money to cash-strapped councils will see the fund continue in any meaninful sense at all.