Social Security Secretary Alistair Darling has insisted the government is "turning the tide" on benefit fraud despite a Commons report revealing the system is losing at least �1.7bn a year to fraud and mistakes.

The Public Accounts Select Committee found that more than �36 for every adult in the UK is being wrongly claimed in income support, child benefit and jobseeker's allowance.

It described the level of fraud as "totally unacceptable" and demanded massive improvements at the Benefits Agency.

The committee said that in the seven years since the Benefits Agency was set up, mistakes in income support alone had cost the UK �5bn - a quarter of the annual NHS budget for patient care.

The agency has warned it can offer only "limited prospects" of improvement because the benefit is so complicated to administer. It predicted that 10% of payments would always be wrong.

'Difficult task'

But Mr Darling told the BBC that the level of losses were "simply not acceptable" and reform was underway.

"What we are determined to do is to ensure this system which spends nearly �100bn a year is far tighter than it was in the past," said Mr Darling.

"The measures we've taken, direct payment into bank accounts, improving computer systems, checking on people's identities, stepping up on prosecutions, will make a difference.

"The most recent figures, which won't be published for some time, do show that the tide is beginning to turn

"But it is a very difficult task simply because of the sheer scale of the problem we are dealing with.

"Remember we deal with 70% of the population nearly every day, it is difficult."

'Paper methods'

Mr Darling said: "Part of our problem is that we still pay a lot of benefits by order books and giros which are basically the same paper methods of payments as the ration books issued in the second world war.

"Paying benefits directly into bank accounts will save some �200m a year on fraud and administration.

"We are also replacing our computer systems which, when we came into office, we found were hopelessly outdated. They are being replaced but that will take time as it's a massive system."

Shadow social security secretary David Willetts said that the Public Accounts Committee report was devastating.

He said: "They are quite right: It is unacceptable that welfare fraud is running at over �1.7bn.

"The Labour government is failing to deliver its targets for reducing fraud. The Public Accounts Committee have put their figure on the crucial problem.

"The system is far too complex. We Conservatives want to make it simpler, but the government is making the system ever more complicated."