Some Employment and Support Allowance (ESA) claimants were underpaid up to a total of £500 million between 2011/12 and 2014/15 due to DWP error, according to the BBC.
The BBC understands that assessors wrongly calculated the income of around 75,000 claimants.
Mistakes began in 2011 when the Government started moving incapacity benefit claimants onto the new ESA benefit.
The DWP said it only became aware of the problem in December 2016 after the Office for National Statistics published fraud and error figures for the social security system.
While it says it is still trying to understand the scale of the problems with ESA, which is paid to about 2.5 million people it will contact anyone affected.
Frank Field MP, Chair of the Commons Work and Pensions Select Committee said the ESA problem was on a scale of "historic proportions" and added:
"I'm still gobsmacked at the size and the nature and the extent and the coverage of people that have been wrongly impoverished by the department getting it wrong."
In March 2017, the National Association of Welfare Rights Advisers (NAWRA) wrote to the then Secretary of State for Work and Pensions,
Damian Green to raise concerns about the DWP’s failure to follow correct legal procedures on conversion of incapacity benefit claimants to ESA:
“Our members have identified many former Incapacity Benefit/Severe Disablement Allowance claimants who have been migrated to Employment and Support Allowance (ESA), and only been awarded contributory ESA as the DWP have failed to apply the regulations and their own guidance and undertake a financial assessment to check entitlement to any top up of Income Related ESA.
The migration process started in March 2011 and we are calling on the DWP to revisit all claimants nationally where they failed to adhere to the legal requirement and their own guidance and assess them any entitlement to an income related top up.
Many of our members have taken up cases in respect of individual claimants and found that they have been underpaid by thousands of pounds.
This is only the claimants that have been in a position to obtain advice. There are likely thousands more who have had their benefit incorrectly calculated due to DWP failing to follow the law. NAWRA believes that the DWP is obliged to correct those cases and seeks to ensure that the DWP trawl all cases to pick up any outstanding errors of law.”
NAWRA then sent a similar follow-up letter to the current Secretary of State David Gauke in July 2017.
Last month NAWRA received a response from David Gauke confirming DWP officials are currently investigating this matter and will be in contact once they have completed this work.
A DWP spokesperson said:
“We’re aware of this issue and are currently reviewing the historical benefit payments of claimants.
We’ve already contacted some of the people affected and are making repayments. Anyone potentially affected will be contacted by the department.”
The BBC understands that the DWP has contacted about 1,000 people so far.
For further information see http://www.bbc.co.uk/news/uk-42012116
Please also see http://www.nawra.org.uk/index.php/ib-and-esa-conversion-letter-to-damien-green-mp/ and http://www.nawra.org.uk/index.php/letter-to-secretary-of-state-for-work-and-pensions-about-income-related-esa/