The government has made a U-turn by announcing it will pay back thousands of disability benefit claimants in full after about 70,000 people were underpaid.
On Wednesday the Department for Work and Pensions announced that payments for disabled people who lost out when they were transferred to employment and support allowance (ESA) would be backdated to the date they moved onto the benefit.
At first, the government said up to £150m would never be paid back because the arrears would only stretch back to October 2014, meaning some people would never have been repaid.
The Work and Pensions secretary, Esther McVey, announced the Government would be ditching the policy, and would now repay claimants back to 2011.
Campaigners said the move could increase the number of claimants receiving payments from 70,000 to 250,000, with some in line for an additional £10,000.
A scathing report by the House of Commons Public Accounts Committee on Wednesday denounced the DWP’s “appalling” handling of the problem and said it should rethink the decision not to reimburse earlier underpayments dating back to 2011.
In a written statement to the Commons released hours after the committee’s report, McVey said her department had reassessed its responsibilities under the Social Security Act and was now ready to repay all arrears.
“Where we have already corrected cases and paid arrears from October 21 2014 we will review the case again and pay any additional arrears that are due prior to that date,” McVey said.
“I hope this will help members to provide reassurance to their constituents who think they may have been affected that they will receive all the money they are entitled to.”
Some 400 workers have been taken on by the DWP to review cases and £40m has already been paid out.
Public Accounts Committee chair Meg Hillier welcomed the move.
“I was appalled by the department’s apparent indifference to correcting its mistakes,” said Hillier.
Hillier continued: “Over several years the department failed to act on information and intelligence from its own front line that the ESA transfer process was not working correctly.
“Even when the department agreed that it would pay arrears, it only intended to pay claimants some of the benefit they missed out on.
“Today’s statement, coming so soon after publication of our report, indicates DWP finally intends to treat this problem with the seriousness it deserves.”
Hillier said that the DWP must also take action to improve its “appalling” standard of communications with claimants, after its most senior civil servant admitted that even he could not understand some of the letters it sent out.
The Child Poverty Action Group took judicial review proceedings on behalf of one claimant who had missed out on payments.
CPAG solicitor Carla Clarke said: “Justice required that the DWP error was corrected in its entirety for the people affected, many of whom are owed arrears from 2011.
“We are pleased that the DWP agreed that this was correct following our legal action. However, it shouldn’t be necessary to take a government department to court to achieve justice for people who have been failed by officials making avoidable errors.”
Some 1.5 million people were transferred from older incapacity benefits to ESA between 2011 and 2014. Underpayments resulted from the DWP’s failure to assess whether they qualified for income-related ESA rather than just the less generous contribution-based ESA.
The chair of the Commons Work and Pensions Committee Frank Field welcomed the DWP’s “change of heart”.
But he said his committee would now press the DWP to pay compensation in relation to other benefits, such as free school meals, dentists’ bills and NHS prescriptions, to which claimants lost access as a result of the ESA errors.
“The numbers who may be eligible for back pay will increase from 70,000 to up to a quarter of a million,” said Field.
And he added: “The department failed to listen to claimants, charities and even its own staff when they sounded the alarm.
“Their warnings fell on deaf ears, and tens of thousands of people lost out as a result. The Government must now learn the lessons from this catastrophic failure as it faces the challenges of migration onto Universal Credit.”
A DWP spokesperson said: “We take the issue of underpayments very seriously and have actively taken steps to put this right as quickly as possible, to ensure people get the support they are entitled to.
“We have 400 staff working on this and have already started making payments – over £40m so far.
“The department has done further work on this issue, and as a result today has announced we will be paying people arrears back to the date of conversion to ESA.”