Workforce, Pensions and Training

22.03.18

Error means DWP ESA payments could be paying out £830m more than expected by 2022-23

An error in payments from the Department for Work and Pensions (DWP) means that it will need to pay between £570m to £830m more than expected by the end of 2022-23, according to the National Audit Office (NAO).

Since 2011, the department has underpaid an estimated 70,000 people who transferred to the Employment and Support Allowance (ESA) from other benefits.

The error related to people who may have been entitled to income-related ESA but only received contribution-based ESA, and therefore may have missed out on premium payments.

The average underpayment is estimated to be around £5,000, but some people will be owed significantly more.

Around 20,000 claimants are expected to be owed £11,500 each, and a small number could be owed as much as £20,000.

Arrears will only be paid as far back as 21 October 2014, the date of a legal tribunal ruling.

However, the department estimates that there could be £100m to £150m of underpayments accrued before that date, in addition to the £340m it will pay for the period since then.

It has made a commitment to correcting its error and paying arrears by April 2019, and has redeployed staff to review around 300,000 cases, at a cost of £14m, to identify those affected and pay arrears due.

The error was reportedly due to the department’s process for converting people’s benefits to ESA not reflecting its own legislation, which from 2010 obliged the department to assess people’s entitled to both income-related and contribution-based ESA - in practice this was not always done.

The significance of the error was not recognised for several years, when staff were preparing the 2013-14 fraud and error statistics in 2014, although individual cases were picked up as early as 2013.

Later in 2014 the department issued guidance designed to prevent further errors, but did not take steps to assess existing cases.

Last year two departmental internal reviews concluded that a stronger grans of the legal obligations and risks would have led to more informed discussions in 2014 and recommended that decisions involving legal risks should be made by appropriately senior managers.

They also found that the department’s finance staff could have been notified more quickly so that they could understand the implications of the department’s financial reporting and budgeting.

Amyas Morse, head of the National Audit Office, said: “The facts of this case are that tens of thousands of people, most of whom have severely limiting disabilities and illnesses, have been underpaid by thousands of pounds each, while the department for several years failed to get a proper grip on the problem.

“The Department has now committed to fixing this error by April 2019, but not everyone will be repaid all the money they have missed out on.”

The DWP has already reviewed 4,000 cases to date, 1,500 of which were found to have received incorrect payments.

The first payments were made last year, and over £9m has been paid back to date.

A spokesperson for the department said: “We’re well underway with our plan to identify and repay people affected by this issue, and payments have already started.

“We’re committed to ensuring people get what they are entitled to receive as quickly as possible. Everyone who could be affected will be contacted directly by the department.”

Top image: Gregory Lee

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