The Commons Public Accounts Committee says the level of fraud is increasing, despite a series of government crackdowns.

Social Security minister John Denham: 'We are all welfare reform ministers'

In a report on the 1996-97 financial year, MPs accept that the Benefits Agency faces a difficult task in administering a wide range of complex payments, handing out £36bn per annum.

But the committee blames "management failures" for allowing the fraud bill to rise - £1.7bn is lost on income support alone.

In addition, £479m was lost through bureaucratic errors, in some instances in one in five cases.

Partly because of this, the Head of the National Audit Office, Sir John Bourne, has once again refused to give the accounts a clean bill of health.

'Benefits must be simpler'

Shadow Social Security minister Iain Duncan Smith: Government must act quickly

The committee Chairman David Davis said: "There are long-standing problems for which the Social Security Department and their agencies are responsible.

"There is also a need to improve the robustness of the estimates of benefit fraud.

"This would ensure that anti-fraud measure were appropriately targeted on the areas of highest risk, where they will save most taxpayers' money."

The MPs say the figures are totally unacceptable, part of the problem being an old computer system.

They want benefits to be made simpler to understand, improved administration and extra incentives to reduce the risk of fraud and error.