People with disabilities and severe illnesses are being made to wait for more than six months to find out if they are eligible for financial support from the Government under a controversial new benefits system.

In a highly critical report, a committee of MPs described delays in processing the Personal Independence Payments (PIPs) as “unacceptable”. They called for ministers to invoke penalty clauses for the delays on the two private companies, Atos Healthcare and Capital Business Services, which provide the assessments.

Under reforms to the welfare system, PIPs are replacing the Disability Living Allowance (DLA) as the benefit paid to help towards the extra costs of disability for people of working age. Most people applying for PIP undergo a face-to-face assessment to determine eligibility, which is carried out by the private contractors.

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But the Department of Work and Pension Select Committee said some claims were taking six months or more to process and there were even delays in cases where people had a terminal illness. The committee cited figures from the department showing that of 229,700 claims made up until December 2013 decisions had been made in fewer than 20 per cent of cases.

Research by the National Audit Office found that some claimants were waiting 107 days to receive a decision, against an expectation of 74 days.

The MPs said the backlog should be cleared and the average time taken to process new cases reduced to 74 days, and seven days for terminally ill people. “It is completely unacceptable [that] many disabled or sick people face waits of six months or more for a decision on their PIP eligibility,” said the Committee’s chair Dame Anne Begg.

“This not only leaves people facing financial difficulties while they await a decision, but causes severe stress and uncertainty. It is vital that all disabled people, but especially the terminally ill, experience as little delay and stress as possible in making a claim.”

A DWP spokesman said: “PIP is a new benefit with a new face-to-face assessment and regular reviews. We are working to ensure that all the steps in the process are as smooth as they can be and the benefit is backdated, so no one is left out of pocket.”