The government made significant errors in benefits payments affecting up to 70,000 ill and disabled people, an investigation by official auditors has revealed.

The Department for Work and Pensions (DWP) miscalculated payments of Employment and Support Allowance (ESA) since 2011, the National Audit Office found.

The error related to people who may have been entitled to income-related ESA but were instead only awarded contribution-based ESA, and therefore may have missed out on premium payments.

The average underpayment is likely to be around £5,000 but some people will be owed significantly more.

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

But some claimants could be owed as much as £20,000.

The DWP, led by Work and Pensions Secretary Esther McVey, has now been forced to commit to correcting the error, with a promise to pay arrears by April 2019.

Ministers will spend £14m on another review of up to 300,000 cases where the wrong payments we issued.

The revelation has been branded a “searing indictment” of the system by disability charities.

Mark Atkinson, Chief Executive at disability charity Scope, said: “This report is a searing indictment of a system that is short-changing disabled people.

“On top of poor administration, the fitness for work test itself isn’t fit for purpose. Appeals against poor decisions have a staggering 69 per cent success rate.

“It’s vital disabled people get the financial support they need to live independently.

“A complete overhaul of the fitness for work test is long overdue.”

While Genevieve Edwards, Director of External Affairs at the MS Society, said: “It’s inexcusable that so many people have been denied so much of what they are rightly entitled to, and that this has been allowed to go on for so long.

“Around a quarter of all people with MS access ESA as they can no longer work due to ill health. Many have told us the support they receive isn’t enough to pay for the basics and so any underpayment would obviously have a huge impact on their lives.”

What is Employment and Support Allowance?

Employment and Support Allowance (ESA) provides financial and other support for the ill and disabled. For many, it replaced Income Support or Incapacity Benefit.

It’s for people who may be too ill to work but who don’t get statutory sick pay.

Current rates are up to £57.90 a week if you’re aged under 25 and up to £73.10 a week if you’re aged 25 or over.

ESA is available for all types of claimant, including the self-employed.

The government sees ESA as a “top up” on people’s employment – meaning they get support for working fewer hours.

As a result applications for ESA require people to go through tests called work capability assessments.

These tests, which are often run by private companies, have prompted criticism from MPs who say they are “cruel and demeaning”.

A DWP spokesperson responded: “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.”

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.”