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The Government has underpaid benefits to the tune of £1.7 billion over the last year, a new record according to financial watchdogs.

At the same time, overpayments have soared to a record £3.7 billion.

The chaotic payments have prompted the Department for Work and Pensions (DWP) to be compared to a pinball machine in the way it handles public money.

The National Audit Office (NAO) said overpayments, excluding state pensions, had climbed to an estimated 4.4% of related benefit spend from 4.1% in 2016-17.

Underpayments are at their highest estimated level at £1.7 billion, or 1% of total expenditure on benefits.

The report found that official error accounted for £470 million of the underpayments.

(Image: PA)

Chairman of the Commons Work and Pensions Committee, and former minister, Frank Field, told the Press Association: "It's like a pinball machine, the payments system - you might get an overpayment, you might get an underpayment.

"Lots of people are not being paid Universal Credit when they should be, causing hardship, and the same department is overpaying others - what is going on?"

Estimated rates of fraud and error overpayments have increased across all continuously measured benefits, the report stated.

Untimely or inaccurate reporting of incomes and earnings is responsible for £1.2 billion of overpayments due to fraud or error, according to the study.

(Image: Getty Images Europe)

Universal Credit has the highest estimated level of overpayments, at 7.2%, while Personal Independence Payment has the biggest amount of underpayments at 3.7%.

The DWP is relying on Universal Credit to "contribute to a significant reduction in overall levels of fraud and error" when it is fully rolled out, according to the NAO.

The Government estimates that £115 million of the £300 million increase in overpayments relates to changes in the maximum time that a person claiming pension credit or housing benefit can spend abroad, which has been reduced from 13 weeks to four weeks, the study said.

The NAO expressed significant concern about the DWP's accounts because of the level of fraud and error in benefit payments.

The DWP's total expenditure on benefits in 2017-18 was £177.5 billion, of which £155.1 billion was for benefits paid directly by the Government, and £22.4 billion was for housing benefit paid on its behalf by local authorities.