The Independent Living Fund currently helps 21,000 people to live independently rather than in residential care.
Due to coalition welfare cuts, it is now closed to new applicants and is due to be phased out completely by 2015.
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Hide AdMr Lazarowicz, MP for Edinburgh North & Leith, said: "Many may now lose their independence and have no option but to return to residential care. Any savings that result will soon be lost as an increasing number of disabled people become reliant upon the state."