But the main opposition parties say it should have reacted faster. The Conservatives are now demanding extra compensation for the pensioners, widows and people with disabilities who have been affected.

Political Correspondent Nicholas Jones: "Computers failures have dogged several departments"

The problems were disclosed by a Public Accounts Committee report which came out on Saturday, just weeks after the government faced criticism for failing to solve technology problems in the Passport Office.

The report said more than 1,500 faults were found on the computer and 17 million National Insurance payments had not been entered.

A joint statement from the Inland Revenue and the Department of Social Security admitted a new computer system for recording National Insurance payments had been "dogged by problems".

But they insisted staff were clearing the backlog of National Insurance payments which had not been entered into the computer and the problems were being resolved.

'Sheer incompetence'

The committee said it has resulted in people due pensions, incapacity benefit and widows benefit facing "unreasonable delays" in payment and, in some cases, losing sums of up to £100 a week.

Shadow Social Security Secretary David Willetts said: "This all-party report is another terrible example of the government's sheer incompetence in managing computer projects.

"This time the victims are some of the most vulnerable people in society - pensioners, widows and disabled people."

Liberal Democrat social security spokesman David Rendel added: "This is not just another computer fault, it is a failure which is denying pensioners and benefit claimants the cash they need to live.

"It is now clear that people will be left without the money that they are owed for many months to come. The Tories created this problem but Labour's lack of action is totally unacceptable."

Social Security Minister Stephen Timms: "Nobody will be losing out"

A government spokesman said: "Things have moved on considerably since the Public Accounts Committee report was written.

"Of 17 million contributions not posted at the beginning of this year, only 350,000 are still outstanding. That means that over 99% of items for 97/98 have now been posted.

"The recovery programme to resolve outstanding problems is well under way. DSS and Inland Revenue are working very closely together. Considerable resources have been deployed and staff are clearing the backlog.

"The government is determined to learn the lessons of the past. If in the same position again, the contract for a computer system of this size would not be entered into in the same way."

Andersen Consulting was the firm hired to introduce the new system by February 1997 - a different company than the one responsible for the problems in the Passport Office.