The official compensation scheme was so far applicable only to victims of terror attacks that occurred within the UK, such as the London bombings in July 2005.
After Justice Secretary Kenneth Clarke announced the change of policy in the House of Commons last night, over 300 British victims of terror attacks abroad are now likely to receive compensation, including British victims of the Mumbai attacks of 2008.
Clarke said that all those affected by terrorist attacks since 2002 will be eligible for support from April 2013, as part of changes in help for victims of crime. The Labour party welcomed the move but said it was "shameful" that the change of policy had taken so long.
There were reportedly eight British victims in the Mumbai terror attacks, including Will Pike, who fell 50 feet while escaping from his room in the Taj Hotel. Millionnaire Andreas Liveras suffered gunshot wounds in the Taj and later died in hospital.
Pike's spinal cord was injured when he fell from his room window, and since then has only limited sensation and functionality below the waist. Pike is unlikely to be able to walk again.
Pike family and friends led a sustained campaign to change policy to allow British victims of terror attacks abroad to seek compensation from the government. The move to change the policy had all-party support.
Pike launched a 'Will Pike Mumbai Appeal' online to raise 2 million pounds to meet "a myriad of lifetime needs and costs associated with spinal injuries". Expenses include housing needs, adapted bathroom facilities, access issues, loss of earnings, loss of quality of life, on-going care cover when necessary, mobility aids and transport.
In future, Clarke said British victims abroad would have "exactly the same" access to compensation than those involved in domestic incidents through the Criminal Injuries Compensation Scheme.
From next year, those affected by incidents abroad in the past ten years could apply for retrospective financial support.
Clarke said: "I believe it is important that victims of terrorist attacks abroad should, in future, be able to qualify for compensation on a similar basis to victims of domestic terrorism. We are still imposing some limitations on claims but this is an enormous advance on a situation where previously nothing was being done."
Other victims of the Mumbai attacks include Sajjad Karim, Member of the European Parliament (MEP), and Roger Hunt, who spent a traumatic 43 hours in a room in the Oberoi Hotel.
Hunt, who was rescued by Indian commandos, wrote a graphic account of his ordeal in a book titled 'Be Silent Or Be Killed'.