BENEFITS: THE LOST BILLIONS; Taxpayers' money squandered on fraud and errors.

Byline: ROSA PRINCE Political Correspondent

AN astonishing pounds 3billion of taxpayers' money was lost to benefit fraud and error last year.

It is the third year in a row that pounds 3billion has gone missing.

Around pounds 610million was lost because of fiddles and mistakes with Income Support, and pounds 230million from the Jobseekers' Allowance.

An estimated pounds 650million of Housing Benefit was also overpaid by local authorities.

The pounds 3billion loss represents almost three per cent of the Department for Work and Pensions' pounds 109billion budget.

The problem is so bad that spending watchdog the National Audit Office has refused to sign off the department's accounts for the 15th consecutive year.

NAO chief Sir John Bourn said yesterday losses would have to be cut to one per cent of total expenditure for him to endorse the books. He added: "The challenges the department faces in reducing the scale of fraud and error across the benefit system to an acceptable level remain very large indeed."

Tory MP Edward Leigh, who chairs the Commons Public Accounts Committee to which the NAO reports, said: "The flood of benefit money being lost as a result of fraud and error is just not abating.

"The DWP lost the unimaginable sum of pounds 3billion from the benefit payment in 2003-4 - the same amount as in each of the two previous years.

"An annual pounds 3billion loss is a grievous waste of public resources."

Shadow Work and Pensions Secretary David Willetts said the pounds 3billion lost represented pounds 120 for every family in the country. He said: "Despite all No10's promised crackdowns, the amount of money lost in the system is still out of control.

"The NAO says the DWP would have to cut fraud and error by two-thirds to get their accounts approved. This shows just how far the Government is from delivering value for money in the benefits system."

The DWP said: "While the losses are still too high, the figures show the clearest evidence yet that our strategies are working.

"The figures for fraud and error loss in Income Support and Jobseekers' Allowance are the lowest yet - saving more than pounds 1billion since 1998.

"Much is being done to tackle error by officials with improvement targets set and new information technology. We're continuously looking at ways to simplify the system."

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