The Department for Work and Pensions could save up to £8 million per year on administering two key benefits if it was better at correcting its mistakes, the National Audit Office has found.

In a report published on Friday, parliament's spending watchdog said more could be done to ensure that decisions on Jobcentre Plus benefits and Disability Living Allowance are correct.

Where mistakes are made, the department should move to put them right without the need for costly appeals, said the NAO.

However, following reforms introduced in 1999 the number of appeals against decisions has fallen overall by around 15 per cent and waiting times for appeal hearings have been cut.

With tens of millions of decisions taken each year on eligibility for a benefits, mistakes are almost inevitable.

Results for 2000/01 and 2001/02 indicate that more than 90 per cent of payments checked were correct but there were errors in around a fifth of all decisions.

In around 230,000 cases a year - around one per cent of decisions - customers' disputes end in an independent tribunal and some 40 per cent of these cases are changed in favour of the customer.

For Disability Living Allowance, claimed by some 2.4 million people, decision-making accuracy has fallen in the first two years since the changes.

The NAO reported that eight per cent of decisions lead to an appeal and the proportion of appeals decided in favour of the customer (currently more than half of the 90,000 appeals each year) is increasing.

Delivery of Jobseeker's Allowance has been complicated in the past by being administered through a network of over 1,400 offices around the country.

However, the new Jobcentre Plus is planning efficiency initiatives which the NAO says could save £3 million a year.

The watchdog concluded that across the two benefits, the department should work towards saving a total of £8 million per year.

"Indirect savings from increasing the credibility of the social security system could also result, although these are more difficult to estimate," the NAO added.

"The department could not only reduce the number of cases where customers have to go through stressful appeals but also save money for the taxpayer, if they got more decisions right first time and put right errors effectively," said Sir John Bourne, head of the NAO.

"The department should make improving decision-making a priority in their ongoing programme of organisational change.

"By focusing more on good quality evidence and effective communication, and setting minimum service standards, they can help to ensure that customers across the country know what to expect from the system and have increased confidence in it."

Responding to the report, Help the Aged said that errors and delays could cause "so much stress and anxiety to vulnerable pensioners".

"However, the only real answer is to reduce the complexity of the pensions and benefits system. If the administrators don't even understand the system what chance do ordinary pensioners have?" noted policy officer Richard Wilson.

"Our experience is that many pensioners are lucky to get to the stage of having a decision made about their entitlements, as errors often occur at earlier stages.

"Some of the least well trained staff work in the call centres and local offices - the first port-of-call for pensioners seeking information and advice. However all to often this advice is wrong and pensioners are incorrectly turned away."