Ministers have caved in to pressure from anti-poverty campaigners and agreed to fully backdate benefit payments to ill and disabled claimants who were left thousands of pounds out of pocket as a result of a series of bureaucratic errors.

A parliamentary statement by the work and pensions secretary, Esther McVey, on Wednesday said that after taking legal advice her department would pay arrears to all claimants whose benefits were underpaid as a result of the error, dating back to 2011.

It had previously insisted that it would only backdate underpayments to October 2014, the date of a tribunal ruling which clarified that claimants had lost out financially as a result of Department for Work and Pensions (DWP) mistakes when they were moved from incapacity benefit on to employment and support allowance (ESA).

The decision swiftly followed the publication on Wednesday morning of a highly critical report by cross-party MPs that said the DWP’s “culture of indifference” meant it took six years to correct an error in which at least 70,000 claimants missed out on up to £20,000 of entitlements.

The charity Child Poverty Action Group (CPAG) had challenged the DWP’s decision to limit repayments in a judicial review. The DWP has now accepted that it was wrong and will not contest the case. The U-turn will add an estimated £150m to a repayments bill already estimated at £340m.

“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 the DWP agreed that this was correct following our legal action,” said CPAG’s solicitor Carla Clarke.



She added: “However, it shouldn’t be necessary to take a government department to court to achieve justice for people who been failed by officials making avoidable errors.”

Wednesday’s report by the public accounts committee outlined how the department failed to take legal advice when transferring claimants to ESA, failed to make basic checks and ignored evidence and complaints that the process was flawed.

The committee chair, Meg Hillier MP, welcomed the U-turn, saying she had been appalled by the DWP’s failure to correct its errors.

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The benefits change could mean tens of thousands more ESA claimants could be now be eligible for payments, or additional payments.

However, the DWP is resisting calls for it to pay compensation to claimants who were wrongly denied related benefits such free prescriptions as a result of the error.

The DWP’s error related to claimants who were awarded contributions-related ESA, when they may also have been entitled to income-related ESA. The forms sent to claimants did not make it clear they could be better off if they were eligible for the latter award. As a result they may have missed out on premium payments.

• This article was amended on 19 July 2018 to correct a word in a quote from Carla Clarke, who referred to officials making avoidable, not available, errors.