Tens of thousands of disabled people denied welfare benefits due to Government error are to receive additional back-payments totalling as much as £150 million.
The payout results from a decision by Work and Pensions Secretary Esther McVey to ditch a policy of refusing to reimburse missed payments dating back before October 2014.
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.
The Department for Work and Pensions (DWP) has already accepted that it wrongly underpaid disabled people switching from Incapacity Benefit to Employment and Support Allowance, and has begun the process of reimbursing an estimated £340 million relating to claims after October 2014.
But a scathing report by the House of Commons Public Accounts Committee 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, Ms 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,” Ms 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 £40 million 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 Ms Hillier.
“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.”
Ms 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 Mr 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.”