Parliament's spending watchdog has said the government is reducing benefit fraud but is still losing £2 billion a year.

Ministers have moved to close down loopholes in Jobseeker's Allowance and Income Support in a bid to cut the benefit bill.

New mechanisms have been designed to ensure that benefit payments are correct from the outset and reflect the changing circumstances of the claimant.

However, the National Audit Office report has warned that continued progress in detecting false claims will require further reform and significant improvement in some regions.

Edward Leigh, the chairman of the Public Accounts Committee, said: "While the levels of loss in income support and jobseeker's allowance have gone down, what causes me concern is that in some respects the department may be losing ground.

"The amount of fraud investigation activity and the value of overall fraud detected are actually going down. And the number of higher risk benefit claims subject to extra checks has fallen by no less than a fifth in a year."

The report finds there is a significant regional variation, with the NAO noting that a uniform national success rate would reduce false claims by a further 22 per cent.

NAO statistics show that despite a 24 per cent reduction in fraudulent and incorrect claims, benefit fraud still costs £2 billion pounds a year.

The report also reveals that progress has slowed, with the number of cases investigated down by 12 per cent from 2001.

Attempts to widen the scope of investigations in order to reduce fraudulent housing benefit claims by 25 per cent have stumbled as the scale of the problem has not been fully assessed.

Leigh added that the government was only addressing one aspect of the £2 billion benefit fraud bill.

"Tackling fraud and error in the most vulnerable areas, income support and jobseeker's allowance, is essential," he said.

"But that is only part of the picture. The department does not have up-to-date measurements of the amount of fraud being carried out against a whole range of other benefits.

"Some benefits have not been looked at for nearly six years."

Tory spokesman David Willetts argued that "the government must do better and this report shows that they can do so".