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A Government error has left tens of thousands of disabled people owed additional back-payments totalling as much as £150 million.

The decision has been made by Work and Pensions Secretary Esther McVey to ditch a policy of refusing to reimburse missed payments dating back before October 2014, Birmingham Live reports.

Campaigners said the move could increase the number of claimants receiving payments from 70,000 to 250,000, with some in line for an additional £10,000.

The Department for Work and Pensions (DWP) has already accepted that it wrongly underpaid disabled people switching from Incapacity Benefit to Employment and Support Allowance, and has begun the process of reimbursing an estimated £340 million relating to claims after October 2014.

(Image: Photo by Chris Furlong/Getty Images)

But a scathing report by the House of Commons Public Accounts Committee denounced the DWP's "appalling" handling of the problem and said it should rethink the decision not to reimburse earlier underpayments dating back to 2011.

In a written statement to the Commons released hours after the committee's report, Ms McVey said her department had reassessed its responsibilities under the Social Security Act and was now ready to repay all arrears.

"Where we have already corrected cases and paid arrears from October 21 2014 we will review the case again and pay any additional arrears that are due prior to that date," Ms McVey said.

"I hope this will help members to provide reassurance to their constituents who think they may have been affected that they will receive all the money they are entitled to."

Some 400 workers have been taken on by the DWP to review cases and £40 million has already been paid out.

Public Accounts Committee chair Meg Hillier welcomed the move.

"I was appalled by the department's apparent indifference to correcting its mistakes," said Ms Hillier, speaking on Thursday (July 19).

"Over several years the department failed to act on information and intelligence from its own front line that the ESA transfer process was not working correctly.

"Even when the department agreed that it would pay arrears, it only intended to pay claimants some of the benefit they missed out on.

"Today's statement, coming so soon after publication of our report, indicates DWP finally intends to treat this problem with the seriousness it deserves."

Ms Hillier said that the DWP must also take action to improve its "appalling" standard of communications with claimants, after its most senior civil servant admitted that even he could not understand some of the letters it sent out.

A quarter of a million people

The Child Poverty Action Group took judicial review proceedings on behalf of one claimant who had missed out on payments.

CPAG solicitor Carla Clarke said: "Justice required that the DWP error was corrected in its entirety for the people affected, many of whom are owed arrears from 2011.

"We are pleased that the DWP agreed that this was correct following our legal action. However, it shouldn't be necessary to take a government department to court to achieve justice for people who have been failed by officials making avoidable errors."

Some 1.5 million people were transferred from older incapacity benefits to ESA between 2011 and 2014. Underpayments resulted from the DWP's failure to assess whether they qualified for income-related ESA rather than just the less generous contribution-based ESA.

The chair of the Commons Work and Pensions Committee Frank Field welcomed the DWP's "change of heart".

But he said his committee would now press the DWP to pay compensation in relation to other benefits, such as free school meals, dentists' bills and NHS prescriptions, to which claimants lost access as a result of the ESA errors.

"The numbers who may be eligible for back pay will increase from 70,000 to up to a quarter of a million," said Mr Field.

What is the Universal Credit? The Universal Credit is a monthly payment to help with your living costs. You may be able to get it if you’re on a low income or out of work. Universal Credit will encompass all of the following benefits: Child Tax Credit

Housing Benefit

Income Support

income-based Jobseeker’s Allowance (JSA)

income-related Employment and Support Allowance (ESA)

Working Tax Credit

And he added: "The department failed to listen to claimants, charities and even its own staff when they sounded the alarm.

"Their warnings fell on deaf ears, and tens of thousands of people lost out as a result. The Government must now learn the lessons from this catastrophic failure as it faces the challenges of migration onto Universal Credit."

Labour's shadow minister for disabled people Marsha de Cordova said: "This is another climbdown from a department in chaos.

"The Department for Work and Pensions had claimed that it was legally prevented from paying arrears to the tens of thousands of ill and disabled people who had been wrongly underpaid Employment and Support Allowance before 2014. Today's announcement shows that this claim was false.

"Today the Public Accounts Committee published a report describing a 'culture of indifference' at the DWP which led to this error. Repeated failures by DWP shows that this damning judgment is right."

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A DWP spokesperson said: "We take the issue of underpayments very seriously and have actively taken steps to put this right as quickly as possible, to ensure people get the support they are entitled to.

"We have 400 staff working on this and have already started making payments - over £40 million so far.

"The department has done further work on this issue, and as a result today has announced we will be paying people arrears back to the date of conversion to ESA."

Chief executive of disability charity Scope, Mark Atkinson, said: "We are pleased that Government is addressing the issue of backpay to ESA claimants.

"But it should not have reached this stage - some disabled ESA claimants have been underpaid for up to six years.

"On top of this, the Department for Work and Pensions must begin to build trust in the system, and reform the failing fitness for work test."