Sir John Bourn, Comptroller and Auditor General and head of the NAO, the Government finances watchdog, blames the 'next steps' Benefits Agency for the 'widespread but mistaken' belief that because self- employed people do not qualify for dole, they cannot receive benefits.
The report claims the poor information and publicity provided by the agency is likely to have increased the benefits bill while ensuring yet more people exchange work for welfare dependency.
Almost 60 per cent of respondents to an NAO/MORI survey said that had they been better informed they would have continued in part-time self-employment. Under social security rules, Britain's 3 million self-employed can work for up to 16 hours a week without losing entitlement to means- tested income support. But three-quarters of the respondents were not informed of the option by agency staff.
The report accepts that claims from self-employed people are often complicated to process, but no appropriate training was given to staff.
The Child Poverty Action Group has also urged the Government to improve take-up of all benefits and standards of service. The charity says one in five people now rely on means-tested benefits.
Beth Lakhani, CPAG spokeswoman, said thousands were experiencing 'appalling delays' in receiving benefits. The introduction of council tax benefit and new child support and community care arrangements this month would further complicate matters.
'As unemployment continues to mount, ever-larger numbers of benefit claimants face the maze of social security regulations for the first time,' she warned. 'The need for accurate and up-to-date guidance has never been greater.'
The CPAG claims that the Government's own figures reveal at least pounds 1.5bn a year in means-tested benefits goes unclaimed.
The CPAG said claimants are faced with 40-page forms to complete, and complex and ever-changing regulations. Yesterday it launched two handbooks to 'help people through the maze'.
Quality of Service: Income Support for Self-Employed and Formerly Self-Employed People; HMSO; pounds 6.70.
National Welfare Benefits Handbook; pounds 6.95 ( pounds 2.65 to claimants). Rights Guide to Non-Means-tested Benefits; pounds 6.50 ( pounds 2.45 to claimants); CPAG, London.Reuse content