Overpayments to jobseekers were 50% lower than eight years ago

The figures are similar to those published by the National Audit Office in November last year.

The DWP also estimates that �900m was underpaid to claimants who were paid less than they were entitled to.

Ministers said fraud and error in income support payments and jobseeker's allowances had halved since 1997/98.

The DWP figures were based on a random sample of benefit claims in that financial year.

The amount of underpaid benefits would have been higher had it included claimants who did not apply or whose claims were incorrectly rejected.

Missed targets

The overall loss of �2.6bn amounted to 2.2% of all benefits paid out.

Within that total, the major overpayments comprised:

• �550m of income support and jobseeker's allowance
• �770m of housing benefit
• �327m of pension credit

Despite the high figures, the DWP said that fraud and error affecting income support payments and jobseeker's allowance had fallen by 50% since 1997/98, in line with the department's target.

However, housing benefit overpayments have risen by 13% since 2002/03, against a target of a 25% cut.

The DWP also missed its target of achieving a 20% reduction in overpayment of pension credit since 2001/02, although the amount did fall by an estimated 11%.

The government now has a new target of reducing benefit losses due to fraud and mistakes by 15% between 2005 and 2010.

The report does not cover losses due to fraud and mistakes in the tax credit system, which were estimated last year to have totalled �1.8bn in 2004/05.