Ministers attacked over £1bn benefits paid out by mistake

The Benefits Agency has paid out nearly £1bn in benefits by mistake, MPs said yesterday in a fresh attack on the Government's handling of the welfare budget.

The Benefits Agency has paid out nearly £1bn in benefits by mistake, MPs said yesterday in a fresh attack on the Government's handling of the welfare budget.

In a highly critical report, the influential Commons Public Accounts Committee said the amount of outstanding debt due to overpayments had soared from £597m in 1998 to £890m by the end of March.

The MPs said the agency's "failure" to manage the growing backlog of uncollected debts was hampering the operation of the whole £90bn social security system. The report is the second time in a week that the committee has attacked the Government's management of the welfare system - it previously condemned the failure to curb the £4bn-a-year cost of benefit fraud.

In its latest report, to be published today, the committee said it acknowledged that the increase was due in part to the agency's improved record in identifying debt.

But it stressed that it also proved the extent of the problem was now a matter of real concern, together with a catalogue of computer failures within the agency.

"This level of debt also illustrates vividly the level of error and fraud on the part of claimants and its impact on the taxpayer, and the need to get benefits right first time," the report said. "Given this huge amount of outstanding debt, it is essential that the agency has effective and reliable debt-management systems to monitor recovery."

The committee chairman, the Tory MP David Davis, said the failure of the Benefits Agency's accounting system was "very disappointing. When set alongside other failures in social security IT systems, these failures must have a detrimental impact on the management of the social security system as a whole."

The committee said the level of errors in benefits payments remained "unacceptable", with mistakes totalling £458m in income support and £174m in jobseeker's allowance.

The MPs also complained that the agency's failure to recruit and train staff quickly enough for its anti-fraud programme meant that over four years it had achieved savings of only £3.6bn, compared with a target of £6bn.

The agency's target now, to cut fraud and error in income support and jobseeker's allowance by 30 per cent by 2007, still meant losses to the taxpayer on those two benefits alone were likely to be close to £1bn at the end of the target period. There were no targets to reduce fraud in other benefits.

The committee said reducing fraud and error in the Benefits Agency required "a wide range of sustained actions", including making benefits simpler and investing in the correct technology. It also urged the agency to make greater use of investigative techniques such as data matching and to apply tougher sanctions to deter fraudsters.

The committee also found "significant and unacceptable" variations in error rates between different parts of the country, with mistakes much more likely to occur in London and the South-east.