Benefit victims of computer faults to get ?10 payments

As many as 400,000 people will receive a special ?10 payment as compensation for delays and disruption caused by the new national insurance computer.

The payment will go to pensioners and other benefit recipients who would not qualify for compensation under normal rules because they are owed less than ?100 in arrears. Alistair Darling, Social Security Secretary, said yesterday he "determined that any inconvenience suffered by those who would otherwise not get anything should be properly recognised".

Ministers' hands were forced by the prospect of defeat last night in the House of Lords, where peers had been threatening to highlight the issue by blocking the government bill to transfer the Contributions Agency (CA) to the Inland Revenue.

Introduction of the ?170 million computer system has run into serious difficulties. Last week MPs were told that by the end of last year it had developed more than 1,900 faults, fewer than a fifth of which had been fixed.

The most serious problem is that the system is currently rejecting attempts to update 14 million national insurance records, making it impossible accurately to calculate people's entitlements.

According to official estimates, 178,000 people may have been underpaid their retirement pension, 163,000 a Serps earnings-related pension, 27,000 a widow's benefit and 20,000 invalidity benefit.