The project was set to save more than £60m for the DWP by 2008

The IT project, key to streamlining payments by the Department for Work and Pensions (DWP), was quietly axed at an internal meeting last month.

The project had been central to delivering savings of more than £60m for the DWP by 2008.

It is the latest in a long series of computer problems for the government.

DWP pays out around £100bn a year in benefits through a variety of computer systems.

'Refocused'

It decided three years ago to combine them into one new system - known as the Benefits Processing Repayment Programme.

But the ambitious project ran into trouble, leading in February this year with a "review" of its progress - effectively a suspension.

It is pretty disgraceful that after 2.5years of spending public money on this project, the government has walked away from it

Phillip Hammond

Shadow work and pensions secretary

The BBC has learned that the department's investment committee of senior civil servants decided about two weeks ago to cancel the programme - which had by then absorbed more than £140m.

The civil servant in charge of the project is believed to have left the department.

A DWP spokesman said the department acted of its own accord to close the programme after realising the scale of the problems.

It has now "refocused" on developing a new system for a single benefit, the planned employment support allowance.

'No-one sacked'

Phillip Hammond, the Conservatives' shadow work and pensions secretary, told BBC News 24: "It is pretty disgraceful that after two and half years of spending public money on this project, the government has walked away from it.

"We never hear of somebody actually losing their job because they have failed to implement a project they were responsible for."

Mr Hammond said if this had happened in the private sector, that person "would be heading for the door".