The “historic error” at the Department for Work and Pensions means 180,000 people claimants have been underpaid.
The government could pay out more than £1bn in back payments after finding out that tens of thousands of people claiming sickness and disability benefits have been underpaid.
Due to a “historic error” at the Department for Work and Pensions (DWP), 180,000 people claiming Employment and Support Allowance (ESA) have been underpaid and may be owed an average of £5,000 each.
The blunders date back to between 2011 and 2014, when claimants were switched over from incapacity benefit.
ESA underpayments worth £970m will be paid back over the next two years, but a larger bill for ongoing payments means the total cost to the DWP could be £1.67bn by 2024-2025.
The Department for Work and Pensions, as ministers have announced an overhaul of disability benefits, that they say will give around 10,000 people an extra £70 to £90 a week.
The DWP could end up paying out well over £1bn to those who wrongly missed out on benefit payments
“Anyone affected by this historic error will receive all of the money they are entitled to,” said a DWP spokesman.
“That is why we have created a dedicated team of over 400 staff to examine cases, and have paid back around £120m so far.
“We have worked with charities and other disability organisations to make sure that we are providing the right support to all affected claimants and are hiring and allocating more staff to do that.”
Theresa May and Philip Hammond are under pressure over the univesal credit system.
Conservative backbenchers urge Philip Hammond to use this month’s budget to increase the amount of cash available.
More than two million people were receiving incapacity benefits at the time the DWP began to switch people over to ESA in 2011, and 1.5 million have been reassessed since then.
There are two main types of ESA – a contribution-based model based on national insurance contributions, and an income-based model that allows claimants to receive extra payments.
Known as premiums, these extra payments can be made available to those who are severely disabled, require a carer, or are a pensioner.
But for many of those who were switched over from incapacity benefits, the DWP did not consider whether they may have been entitled to an income-related ESA and they have therefore missed out on their premiums.
Marsha de Cordova MP, Labour’s shadow minister for disabled people, said the DWP was a ‘shambles’
The government has already paid back £120m, at an average of £7,000 per person, but the time-frame given for the remainder of the repayments means some will be waiting almost a decade to receive their benefits.
Marsha de Cordova MP, Labour’s shadow minister for disabled people, said: “The shambles at the heart of the DWP becomes more and more obvious every day.
“Disabled people have been short-changed and denied the social security they were entitled to. This mess is another example of how the Conservatives have created a hostile environment for sick and disabled people.
“The government must ensure that disabled people who have been so unfairly treated are properly compensated. A government that forces disabled people into debt and even makes some destitute is a disgrace.”
The DWP has said it is in the process of reviewing around 570,000 ESA cases, with claimants known to be terminally ill set to be given priority.