The National Audit Office has revealed that the Department for Work and Pensions has had to redeploy 400 civil servants to check around 300,000 benefit claims after an estimated 70,000 people were paid less than they were entitled to.
Auditors today revealed the scale of the underpayments, estimated to total almost £500m of which the department will have to pay £340m, after an investigation sparked by a legal tribunal ruling found some recipients had been underpaid after being assessed incorrectly.
The error was made when people were assessed for employment and support allowance (ESA), which is the benefit paid to people who have limited capability to work because they are disabled or ill.
There are two main types of ESA. One is a contribution-based payment, calculated on National Insurance contributions, while there is also a means tested income-based element. Income-related ESA can be paid on its own, or as a top up to contribution-based ESA. The error related to people who may have been entitled to income-related ESA but were instead only awarded contribution-based ESA due to a national insurance error in 2011. Although the DWP spotted a number of cases they failed to realise it was a wider issue.
Only in 2016, after two tribunal cases, was the problem escalated by the department’s fraud and error team to senior managers, who initiated a formal exercise to identify the people affected and provide redress.
Setting out the NAO’s findings, auditor general Amyas Morse said: “The facts of this case are that tens of thousands of people, most of whom have severely limiting disabilities and illnesses, have been underpaid by thousands of pounds each, while the department for several years failed to get a proper grip on the problem.”
Based on a sample of 1,000 cases, the NAO estimates that the average underpayment is likely to be around £5,000 but some people could be owed as much as £20,000.
DWP undertook two internal reviews in late 2017, one of which concluded that the officials involved in 2014 had lacked a strong “grasp of the department’s legal obligations and risks”. It recommended that decisions involving risk be made by sufficiently senior managers.
The DWP has committed to correcting its error and paying arrears by April 2019, and the review revealed that it has hired around almost 250 staff to cover for those redeployed to check 300,000 claims.
Eligible claimants will only be paid arrears as far back as 21 October 2014, the date of a legal tribunal ruling. The department estimates that there may be approximately £100m to £150m of underpayments accrued before 21 October 2014, which it cannot pay, in addition to the £340m it will pay for the period after 21 October 2014.
Responding to the NAO report, a DWP spokesperson said: “We’re well under way with our plan to identify and repay people affected by this issue, and payments have already started. We’re committed to ensuring people get what they are entitled to as quickly as possible.”