Campaigners vowed to keep on fighting yesterday after the Court of Appeal upheld the legality of the government's vicious benefits cuts.

Dismayed activists rallied outside the Royal Courts of Justice as judges decided that the hated bedroom tax and benefit cap were not unlawful.

Opponents of the draconian cuts have said they are pushing people to "breaking point," while Christian leaders warned that they were forcing thousands of people to use food banks.

But Master of the Rolls Lord Dyson rejected a two-pronged legal challenge yesterday, saying the court could only intervene if the measures "were manifestly without reasonable foundation."

That test was not satisfied, he said, and therefore both challenges must fail.

The bedroom tax, introduced in April last year, slashes housing benefits to tenants in social housing for "under-occupancy."

Those deemed to have one bedroom spare see payments cut by 14 per cent while those with two or more spare rooms have 25 per cent of their housing benefit cut.

Campaigners say the regulations have had a "devastating" impact on many people by imposing an "excessive and unfair burden" and fail to reflect the requirements of disabled people.

In the benefit cap case, it was argued that the policy is having a particularly harsh impact on women fleeing domestic violence - and their children - threatening to trap them in abusive relationships.

The case was brought by two lone parents forced into temporary accommodation in London, and one each of their children.

Lawyers for disabled people affected by the spare bedroom policy said they were "baffled" by yesterday's ruling as it fails to provide legal protection for people with disabilities.

National Housing Federation policy head Kevin Williamson said: "Disabled people across the country are being forced to cut back on food and heating to pay the bedroom tax.

"The government said discretionary housing payments would protect them but one in three disabled people who applied for it were turned down.

"This judgement does not change the fact that the bedroom tax is a flawed and unfair policy that won't achieve what the government hopes it will.

"The only fair solution is to scrap the bedroom tax now."

Lawyers for the lone parents warned that the cap not only has "devastating consequences for individual children but serious financial costs as the fallout impacts on other public services" including education and the justice system.