One in five benefit decisions were made in error during 2001/2002, which could have led to losses for some people.

Edward Leigh MP, chairman of the Public Accounts Committee, which published the report said the level of errors was "astounding".

Most affected were decisions for the Disability Living Allowance (DLA) with almost half containing errors.

Yet more than half of all claims for the DLA - which later went to appeal - were overturned in the claimant's favour.

The level of errors not only means that some people will be wrongly denied benefit, but that others may be getting more than they should.

Mr Leigh said: "This performance is simply unacceptable given the uncertainty and hardship it can cause for society's disadvantaged and often vulnerable groups, and does little for the credibility of the social security system."

Disability benefits

The report is especially critical of the processing of claims for Disability Living Allowance (DLA).

Claimants are currently required to complete a 47-page form, although the department is now working on reducing the form size.

With such a high incidence of error and only 8% of cases ending up with an appeal, disability campaigners are concerned that many people with a good case for help may simply give up.

"Unless they have been to an advice centre and then they go back to the advice centre for further help, lots of people will just accept that they were wrong [not the department]," Lorna Reith, chief executive of the Disability Alliance told BBC News Online.

The main worry is that there are literally thousands of people who are not getting the right money that parliament intended them to get Lorna Reith, Disability Alliance

DLA is a complex benefit to administer because eligibility is based not on the person's illness or disability, but on the effect that it has on their life.

This means two people with the same medical condition can correctly receive different decisions if the effect on them is different.

Ms Reith said the department relied too much on medical evidence, such as GP statements, in its assessments and said it should "start talking to the client."

"The main worry is that there are literally thousands of people who are not getting the right money that parliament intended them to get," said Ms Reith.

"As a result, their lives are much harder than they need to be. It could mean people will go without proper heating, without decent food and may cut down on social contacts they might have."

Government response

In a statement, the Department for Work and Pensions said it made millions of decisions a year, of which less than 1% were reversed by an independent tribunal.

"The errors described in the report are often technical and have no impact on the actual benefit payments which matter to our customers."