The National Audit Office confirmed that hundreds of thousands of pensioners, widows and jobseeker's allowance claimants have been underpaid because of defects in the national insurance records system.
A scathing report presented to the Commons Public Accounts Committee yesterday said private pension providers had been paid nearly pounds 40m compensation to cover the blunders.
The brand new computer system, devised for the Contributions Agency by Andersen Consulting, was supposed to log every single national insurance contribution and calculate benefits owed to employees. It went online last July, but crashed within days, leaving more than 17 million contributions unprocessed and forcing civil servants to guess the level of pensions and other benefits owed to the public.
The report concluded there were "serious doubts" that the pounds 170m computer would be running by the Government's new target date of 1 March.
More than 1.2 million claims for jobseeker's allowance had been cleared without the benefit of up-to-date information, and 160,000 claims for state earnings-related pensions had been underpaid by up to pounds 100 a week. About 25,000 claims for widow's benefit are being made on an emergency basis and more than 350,000 claims for incapacity benefit have also gone ahead without full information.
David Davis, chairman of the committee, said there had been "a clear failure" to deliver a crucial service to some of the most vulnerable in society.
Alistair Darling, the Secretary of State for Social Security, wrote to all MPs last September, claiming the system would be operational "within a couple of weeks".
Iain Duncan Smith, the Tory social security spokesman, said Mr Darling's stance highlighted a lack of concern and urgency about the problem. "The complacency of the Government comes close to deceit," he said.
George Bertram, chief executive of the Contributions Agency, faced sharp criticism from MPs when he appeared before the Public Accounts Committee yesterday. Alan Williams, Labour MP for Swansea West, told him the "shambles" suggested Andersen Consulting had used the benefits system as part of its learning curve.
Stephen Timms, the Pensions minister, said yesterday on BBC Radio that compensation, including interest, would be paid as soon as the system was operating properly.
The Post Office will stop redirecting housing benefit cheques from next month in a new attempt to stamp out fraud, Mr Darling said yesterday.Reuse content