Clause eight of the Asylum and Immigration Bill, currently going through parliament, could force councils to take the children of failed asylum seekers into care if their parents could not afford to look after them.
But Court of Appeal judges have ruled that councils must consider their human rights before splitting up families. The case involved a woman from Guyana whose three-year-old daughter had citizenship rights but she did not.
BASW director Ian Johnston said: "This is a very welcome judgment but everything depends on how local authorities interpret it."
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