Benefit payments error will cost £1.7billion
A BENEFITS error means the Government will have to pay an additional £1.7 billion to tens of thousands of disabled and ill claimants who were underpaid.
An estimated 180,000 people are due £970million-worth of historic underpayments, nearly three times more than originally estimated earlier this year. And the Department for Work and Pensions (DWP) will have to pay a further £700 million over the next seven years, with those affected due to receive a total of £5,000 each.
The admission represents the latest damaging blow to the credibility of the DWP and the Government’s wider welfare reforms, coming just days after the roll-out of Universal Credit was further delayed.
Universal Credit was due to be up and running by April of last year but is now not expected to be fully operational until the end of 2023.
Ministers bowed to growing political pressure amid concerns families would
be left worse off when they switch to the new system, which combines six different benefit payments into one.
It also increases pressure on Philip Hammond, the Chancellor, who is already expected to find hundreds of millions of pounds extra in his Budget later this month to help people being moved on to Universal Credit.
Employment and Support Allowance (ESA) was introduced in October 2008 for people who have limited capability to work because they are disabled or ill.
In March 2011 the DWP started reassessing people on incapacity benefits to see if they were eligible for ESA.
ESA is split into two types, one based on National Insurance contributions and another which is income-related. The income-related benefit can be paid on its own or as a top-up to the contributory version.
Between January 2011 and October 2014 many people had existing incapacity benefit claims converted to contributory ESA, but their eligibility to also receive income-related ESA was not considered in every case, causing many to lose out.
The scale of the error has emerged slowly over time and the DWP initially thought, based on legal advice, it only had to make repayments from 2014.
However, a challenge by the Child Poverty Action Group prompted the DWP to change course and it will now pay arrears to all those claimants affected back to when they converted to ESA. The DWP is currently reviewing an estimated 570,000 ESA cases that could be affected, with approximately 180,000 people likely to be owed arrears payments.
The revelations are likely to lead to renewed scrutiny of Iain Duncan Smith, the former work and pensions secretary, who was in charge of the department from 2010 to 2016. Mr Duncan Smith is also the architect of Universal Credit.