A cross-party group of MPs has criticised the Department for Work and Pensions’ “culture of indifference” after it took six years to correct a major error which left chronically-ill and disabled benefit claimants thousands of pounds out of pocket.

An estimated 70,000 claimants were underpaid by between £5,000 and £20,000 between 2011 and 2016 because the DWP failed to ensure they received the correct amounts when moving them from incapacity benefit on to the employment and support allowance (ESA).

The cost of fixing the error, which a public accounts committee’s (PAC) report said stemmed from a string of avoidable management failures, will cost the DWP at least £340m in back payments to claimants and £14m in administrative costs.

As well as losing out on thousands of pounds through underpayments, the DWP’s failure to check claimants’ entitlements meant some were also denied their rights to help with dentistry costs, as well as free school meals and free medical prescriptions.

The report criticised the DWP for rushing into the transfer without taking legal advice or making basic checks, brushing aside evidence that people were being underpaid, and ignoring warnings from its own policy advisors that it should pause and fix the process before proceeding.

Even after it became formally aware of its error in 2014, the department failed to act, initially attempting to pass the mistake off as being the fault of claimants. After years of “inertia” it began to put in place a repayment plan in 2017, and then only after receiving advice that it had a legal responsibility to act.



The report concluded the DWP’s lack of urgency in taking six years to start to address the error indicated “a culture of indifference” towards people being underpaid.

The Labour MP Meg Hillier says thousands of people have not received money essential for living costs because of government’s ‘blinkered and wholly inept handling’ of claims. Photograph: PA

Meg Hillier MP, the chair of the PAC, said the episode pointed to “weakness at the highest levels” of DWP management: “Thousands of people have not received money essential for living costs because of government’s blinkered and wholly inept handling of ESA.”



The ESA failure was overseen by the Tory former secretary of state for work and pensions Iain Duncan Smith, who was in post for all but the last few months of the period covered by the report. The current secretary of state, Esther McVey, was a DWP minister between 2013 and 2015.



Although it accepted it had got the process wrong and apologised, the DWP has insisted it will not pay compensation to affected claimants, and will limit back payments to 2014, a cut-off point which would deny claimants up to £150m in lost benefits. That decision is being challenged through the courts.



The report argued the DWP should pay compensation to claimants, as well as back payments. “There is clearly much more to be done to right this wrong,” it stated.

The department told MPs it accepted it should better understand its legal obligations. The report drily noted: “Our view is that this continues to underplay its moral obligation to act promptly and comprehensively to make good its mistakes when they occur.”

The report said the DWP must learn from the mistakes it made during the ESA transfer in order to not repeat them when its starts a major programme of transferring 3 million claimants from existing benefits onto universal credit from July 2019.

Quick Guide What is universal credit and what are the problems? Show What is universal credit? Universal credit (UC) is the supposed flagship reform of the benefits system, rolling together six benefits into one, online-only system. The theoretical aim, for which there was general support across the political spectrum, was to simplify the system and increase the incentives for people to move off benefits into work. About 2 million people are currently in receipt of UC. More than 6 million will be on the benefit by the time it is fully rolled out. How long has it been around? The project was legislated for in 2011 under the auspices of its most vocal champion, Conservative MP Iain Duncan Smith. The plan was to roll it out by 2017. However, a series of management failures, expensive IT blunders and design faults mean it is now seven years behind schedule, and rollout will not be complete until 2024. The government admitted that the delay was caused in part by claimants being too scared to sign up to the new benefit. What is the biggest problem? The original design set out a minimum 42-day wait for a first payment to claimants when they moved to UC (in practice this is often up to 60 days). After sustained pressure, the government announced in the autumn 2017 budget that the wait would be reduced to 35 days from February 2018. This will partially mitigate the impact on many claimants of having no income for six weeks. The wait has led to rent arrears and evictions, hunger (food banks in UC areas report notable increases in referrals), use of expensive credit and mental distress. Ministers have expanded the availability of hardship loans (now repayable over a year) to help new claimants while they wait for payment. Housing benefit will now continue for an extra two weeks after the start of a UC claim. However, critics say the five-week wait is still too long and want it reduced to two or three weeks. Are there other problems? Plenty. Multibillion-pound cuts to work allowances imposed by the former chancellor George Osborne mean UC is far less generous than originally envisaged. According to the Resolution Foundation thinktank, about 2.5m low-income working households will be more than £1,000 a year worse off when they move to UC, reducing work incentives.

Landlords are worried that the level of rent arrears accrued by tenants on UC could lead to a rise in evictions. It's also not very user-friendly: claimants complain the system is complex, unreliable and difficult to manage, particularly if you have no internet access.

And there is concern that UC cannot deliver key promises: a critical study found it does not deliver savings, cannot prove it gets more people into work, and has plunged vulnerable claimants into hardship.

It added the department must act urgently to “address a management culture which does not proactively and systematically act on intelligence from its frontline and fully address mistakes when they first occurred”.

The national association of welfare rights advisers wrote to the the DWP in 2014 to alert them to what its frontline advisors had realised was a “systematic” error. It told MPs the DWP could be “unconstructive” when confronted with legitimate concerns by outside organisations.

The DWPs “abysmal” communications with claimants exacerbated the scale and impact of the error, the report noted. Letters to claimants were often “incomprehensible,” and the department’s most senior official, Peter Schofield, admitted to MPs that even he did not understand some of the letters that went out.

The DWP error related to claimants who were awarded contributions-based 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.



ESA is an unemployment benefit paid to people with limited capability to work because of disability or illness. About 2.4 million Britons receive ESA, and in 2016-17 the total expenditure was £15bn.

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 recruited 400 extra staff and have already started making payments – over £40m so far. We have continued to provide regular updates to both PAC and the House in regards to the progress of these repayments, and will continue in this stead.”