The Manitoba government said Thursday it will not appeal a court ruling that found the province was wrong to claw back hundreds of millions of dollars in federal benefit payments to kids in child welfare.

The government also appeared open to calls for it to return the money, which Indigenous leaders have said totalled more than $300 million.

"That is certainly on the table for discussion," Families Minister Rochelle Squires said.

"We certainly respect the ruling and we also respect and acknowledge that amends need to be made."

The former NDP government started to claw back the federal benefit called the Children’s Special Allowance in 2006. The money goes to agencies that care for children and mirrors the Canada Child Benefit given to parents who are raising their kids.

The province had argued it was right to keep the federal money since it was paying for children in care. The Progressive Conservative government ended the practice in 2019, but also passed a law to retroactively formalize it and try to prevent any legal action.

In May, Court of Queen's Bench Justice James Edmond said the clawback was wrong and struck down the law that barred legal action. 

He said the clawback undermined federal law governing the child benefit and violated the rights of Indigenous children under the Charter of Rights and Freedoms. About 90 per cent of children in care in Manitoba are Indigenous.

The Manitoba Métis Federation welcomed the government's decision.

"While there are still outstanding decisions to be made about how the money will be returned to (children in care), we are seeing that the provincial government is acting in good faith, which gives us hope that the matter will be resolved soon," Mona Buors, the federation's minister for Métis child and family services, said in a news release.

Squires also announced Thursday the government will establish a working group with representatives from Indigenous organizations that will examine all future policies and legislation concerning Indigenous children in care.

"That is what this (group) will be dedicated to — not only addressing past wrongs but moving forward with Indigenous-led solutions in the child welfare system."

This report by The Canadian Press was first published Aug. 4, 2022