70,000 disabled people owed thousands in benefits due to government error – and some will never be paid back

Tens of thousands of sick and disabled people have missed out on large sums of government money that they were legally entitled to due to “shoddy administration”, a report has found.

An investigation by the National Audit Office (NAO) reveals the Department for Work and Pensions (DWP) has underpaid an estimated 70,000 people who transferred to employment and support allowance (ESA) from other benefits over the past seven years.

The average underpayment for each claimant is estimated to be around £5,000, but some people will be owed significantly more, with approximately 20,000 having been underpaid around £11,500 and a small number owed as much as £20,000.

The DWP will pay £340m back in underpayments, but estimates there may be up to £150m more which cannot be paid back because arrears will only be accounted for as far back as 21 October 2014, the date of a legal tribunal ruling.

The Government has been accused of being “unacceptably slow” to act on the error, which saw people who may have been entitled to income-related ESA instead only awarded contribution-based ESA, causing them to miss out on premium payments.

The mistake means people who are unable to work due to their disability will have lose out on up to £75 a week on the payments, which are designed to help them pay for basic living costs.

Senior politicians and campaigners have deemed the findings “damning“, saying that while the DWP was quick to act in cases of overpayments and sanction claimants for any breach of its rules, it has taken “years to recognise and get to grips with its own mistakes”.

The DWP identified that errors were being made as early as 2013, but despite two key Upper Tribunal cases which helped clarify the law on ESA claims from June 2014 and throughout 2015, the department did not begin identifying the people affected until July last year, the NAO found.

The Government has now committed to correcting its error and paying arrears by April 2019, and is reviewing around 300,000 cases, at a cost of around £14m, to identify people affected and pay arrears where due. The team undertaking the work will grow from 50 to 400 members of staff from April.

The DWP estimates it will need to pay a total of between £570m and £830m more ESA than it previously expected by the end of the 2022-23 financial year.

A spokesperson said the department had already reviewed 4,000 cases, of which 1,500 were found to have been incorrect leading to repayments of £9m so far, the first payment being in September 2017.

Amyas Morse, head of the NAO, 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.

“The department has now committed to fixing this error by April 2019, but not everyone will be repaid all the money they have missed out on.”

Meg Hillier MP, chair of the Committee of Public Accounts, said the Government’s “shoddy administration” of ESA had resulted in “vulnerable people being deprived of thousands of pounds they were legally entitled to”.

She added: “The NAO’s report shows the Department for Work and Pensions was unacceptably slow to act on early signs something was wrong. The committee said in 2015 that the department needed to do far more to tackle the neglected issue of underpayments. This sorry episode demonstrates why it is so important.”

Frank Field MP, chair of the Work and Pensions Committee, meanwhile said: “This is a damning report. The department is quick to act in cases of overpayment, quick to sanction claimants for any breach of its rules – but when the shoe is on the other foot, has shown it will take years to recognise and get to grips with its own mistakes.

“This must have caused even more hardship for people many of whom have struggled through an assessment process that we heard from thousands of accounts is, for some, gruelling and humiliating, and riddled with errors and wrong decisions.

“It is welcome that the department is finally moving to right its mistakes, if slowly, but this is a shocking story of a group of people serially failed by DWP over a period of years.”

ESA was introduced by the Labour government in 2008 to replace incapacity benefit, and is available to people whose ability to work is limited by ill health or disability. A single recipient or lone parent over the age of 25 eligible for the benefit receives £73.10 a week.

Mark Atkinson, chief executive at disability charity Scope, said the report was a “searing indictment” of a system he accused of ”short-changing” disabled people.

“On top of poor administration, the fitness for work test itself isn’t fit for purpose. Appeals against poor decisions have a staggering 69 per cent success rate. It is vital disabled people get the financial support they need to live independently. A complete overhaul of the fitness for work test is long overdue,” he said.

Alison Taylor, director of operations at the national poverty charity Turn2us, said: “It is disappointing to see so many sick or disabled people fall through the crack and fail to get the support they have been entitled to. It is important that anyone that may have missed out on their full ESA entitlement is paid back promptly and efficiently by DWP.

“Welfare benefits exist to provide a safety net for people in need. Anyone struggling with money should use our free and confidential online tools to check what support could be available.”

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 receive as quickly as possible.

“Everyone who could be affected will be contacted directly by the department.”