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Around 70,000 sick and disabled people have been underpaid vital benefits by the Department for Work and Pensions (DWP), with some people owed up to £20,000 each in back-payments, according to a damning new report from the National Audit Office (NAO).

An NAO investigation into underpayments of Employment and Support Allowance (ESA) found the DWP will need to pay a total of between £570 million to £830 million more than it previously expected by the end of the 2022-23.

It comes after the Department admitted errors in payments when migrating claimants from Incapacity Benefit to ESA following a legal tribunal.

The NAO estimates the average underpayment will be around £5,000, but some people will be owed significantly more.

A review of a sample of 1,000 cases by the NAO estimates that 45,000 claimants entitled to the enhanced disability premium of ESA only may be owed around £2,500, while around 20,000 claimants who are entitled to the severe disability premium may be owed around £11,500 each.

But a small number of people caught up in the embarrassing DWP blunder – some would say incompetence – could be owed as much as £20,000 each, say auditors.

However, affected claimants will only be paid arrears as far back as 21 October 2014, the date of the Tribunal’s ruling, meaning they will miss out on any benefits that may have been underpaid prior to this date.

The DWP believes there were approximately £100 million to £150 million of underpayments accrued before 21 October 2014 that will not be paid, leaving the Department liable to repay £340 million in underpayments made after 21 October 2014.

In total, the DWP face a bill that will be up to £830 million more than it had expected and has already hired an additional 400 staff to help review around 300,000 cases, at a cost of around £14 million.

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.”

Frank Field MP, Chair of the Work and Pensions Committee, said: “This is a damning report. The Department is quick to act in cases of overpayment, quick to sanction claimants for any breach of its rules – but when the shoe is on the other foot, has shown it will take years to recognise and get to grips with its own mistakes.

“This must have caused even more hardship for people many of whom have struggled through an assessment process that we heard from thousands of accounts is, for some, gruelling and humiliating, and riddled with errors and wrong decisions.

“It is welcome that the Department is finally moving to right its mistakes, if slowly, but this is a shocking story of a group of people serially failed by DWP over a period of years.”

Ken Butler, welfare benefits advisor at Disability Rights UK said, “The National Audit Office report makes for sorry reading.

“It shows a shambolic catalogue of mistakes which have had a massive impact on tens of thousands of disabled people who qualified for benefits they were denied.

“The report highlights the £340 million owed to disabled people, all of whom would be on a very low income.

“We welcome any efforts made to identify those affected and pay them money that is rightfully theirs. But disabled people should not be expected to pay for the DWP’s mistakes.

“The government’s unwillingness to backdate payments beyond 2014, citing legal restrictions, means that disabled people could still be underpaid arrears of up to £150 million.

“It’s also inconsistent – we know of cases where backdated payments have been made to 2011.

“We would encourage anyone affected to seek advice from benefit specialists to challenge the government’s position through the appeals system.

“Overall, this report is the latest in a series of examples of the poor administration and implementation of welfare reform. From inadequate assessments through to poor policy making, disabled people continue to hit by changes to a system which is supposed to help them become more independent and fails to do so.”

A DWP spokesperson said: “We’re well under way 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.”

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