rongly convicted people will no longer face having living costs covering their time in prison docked from compensation payments after ministers issued fresh guidance.
Justice Secretary Alex Chalk KC made the reform with immediate effect on Sunday after the outrage sparked by the miscarriage of justice case centring on Andrew Malkinson.
Mr Malkinson, who spent 17 years in prison for a rape he did not commit, welcomed the scrapping of the “unjust rule”.
But he said it is the “first of many changes we need in our justice system to protect the innocent”.
Last week, appeal judges quashed his conviction after DNA linking another man to the crime was produced.
The 57-year-old quickly expressed concern that the rules meant expenses could be deducted from any compensation payment he may be awarded to cover the costs of his jail term.
Downing Street indicated that Prime Minister Rishi Sunak believed the deductions were unfair amid demands to drop the charges.
Mr Chalk has now updated the guidance dating back to 2006 to remove them from future payments made under the miscarriage of justice compensation scheme.
Mr Malkinson demanded wider reform, raising concerns about the police’s handling of evidence and the ability of juries to convict on a 10-2 majority.
He also said the miscarriage of justice watchdog “does not investigate and is not accountable” and warned it could take him years to get compensation because “the state now requires me to prove my innocence all over again”.
“No one should have to suffer what I’ve been through,” he said.
“I hope Alex Chalk won’t stop here in bringing in the changes we need to make our justice system safer for the innocent, and more accountable for its mistakes.”
The reform to eligible cases was broadly welcomed, but there were calls to pay back the money already deducted from wrongly convicted individuals.
The Justice Secretary said: “Fairness is a core pillar of our justice system and it is not right that victims of devastating miscarriages of justice can have deductions made for saved living expenses.
“This common sense change will ensure victims do not face paying twice for crimes they did not commit.”
Sir Bob Neill, the Tory MP who chairs the Commons Justice Committee, said he was “delighted” that Mr Chalk has “moved so swiftly on this”.
“Big credit to Andrew Malkinson, his family and supporters,” Sir Bob told the PA news agency.
But he suggested ministers should go further and make payments to miscarriage of justice victims who have already had their compensation docked.
“I wonder if the Government could consider ex-gratia payments on a case-by-case basis to make up for that if people can demonstrate they fulfil all the criteria,” the MP said.
Liberal Democrat justice spokesman Alistair Carmichael echoed the sentiment.
“To take someone’s liberty wrongfully and then charge them for prison living costs reads like some kind of sick joke,” he said.
“The Government must now review past cases where people have been forced to pay for saved living expenses after being wrongfully convicted with the view to compensate these individuals fully.”
In order to be eligible for a payment, people must apply for compensation within two years of being pardoned or having their convictions reversed.
The reversal must be on the basis of a new fact that demonstrates “beyond reasonable doubt” they did not commit the offence and they must not be responsible for the non-disclosure of the evidence.
The maximum payments under the miscarriage of justice compensation scheme is £1 million for more than 10 years’ imprisonment.
Independent assessors could make deductions based on “saved living expenses” such as rent or mortgage payments.
But the Ministry of Justice said the independent assessor has not done this in the last 10 years.
Emily Bolton, the director of the Appeal charity and Mr Malkinson’s solicitor, said: “Andy has succeeded in getting this insulting compensation rule scrapped.
“But too many wrongly convicted people are denied compensation altogether because of a restrictive test which flies in the face of the presumption of innocence.
“The state robbed Andy of the best years of his life.
“Changing this one rule is not an adequate response.
“We need a complete overhaul of the appeals system, which took two decades to acknowledge this obvious miscarriage of justice.”