Disability claimants owed £340m after DWP blunder, say MPs courtesy of the Patrick Butler social policy Guardian

‘Indifferent’ department tried to shift the blame and took six years to correct error

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.

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.