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Dad-of-three Mark Smith, 36, received the extra cash after his disability allowance was increased due to the emotional trauma he endured while fighting in Iraq, Bosnia and Northern Ireland.

Mark made two suicide attempts after leaving the army in 1996 and was diagnosed with severe forms of PTSD and depression after failing to adjust to civilian life.

The house-fitter, who joined the Army at the age of 16, later received an increase in his War Disablement Pension – but almost all of his back pay was taken by the Benefits Agency.

Mark received just £531.34 after more than £7,000 was taken to cover jobseekers allowance and income support payments.

He said: "I want answers as to why the loophole in the benefits system takes away money from soldiers who serve this country.

"The Government is giving us money with one hand and taking it away with the other.

"The disablement allowance is a form of compensation for what soldiers have gone through. It's a personal award.

"But according to the law, it counts as income. But if that's income, then my illness is my job.

"It's forcing us to go to charities like the Royal British Legion. Some of these soldiers are living in poverty.

"There's 60,000 ex-soldiers out there with the same problem as me and that's what they're doing to us."

After leaving the army in 1996, Mark was involved in a series of violent scrapes and was even arrested in front of his two sons from his first marriage, Anthony, 15, and Matthew, 12.

He has since turned his life around with the help of his fiancée Danielle and youngest son Ethan, two, and spends his time campaigning for better financial and emotional support for ex-soldiers.

A DWP spokesman said: "The War Disablement Pension rightly provides a regular income to ex-service men and women who have become disabled through service in the armed forces.

"Of course, this income has to be taken into account when assessing entitlement to other income-related benefits, such as income support or income-based jobseeker's allowance that covers someone's day to day living expenses."