The scale of fraud and error in these two benefits remains substantial

Sir John Bourn NAO chief

The audit report published on Friday says this is a fall from the �1.37bn overpayment, or 8.9%, recorded in the previous year.

The NAO said it was unclear whether this represented a downward trend or a statistical blip.

Officials also made errors which saw claimants underpaid by a total of �144m, again less than the �223m recorded in 1998-1999.

The DSS has a target for reducing the level of fraud and errors from the 9% seen in 1998 to 8.1% by March 2002 and 4.5% by March 2006.

NAO chief Sir John Bourn said: "Despite the encouraging progress that has been made by the department against the targets they have been set to reduce losses, the scale of fraud and error in these two benefits remains substantial."