City of York Council was today accused of wasting almost £1million through overpayment, mismanagement and lost Government grants after the publication of a damning report into its benefits service.

The Benefit Fraud Inspectorate (BFI), which visited the city earlier this year, reported that the council's benefit system was below standard in all seven functional areas - strategic management, customer services, processing of claims, working with landlords, internal security, counter-fraud and overpayments - and provided a poor benefits service.

A leading councillor, Quentin Macdonald, today apologised to anyone affected by the service's past poor performance, but said things had improved and denied the authority had wasted cash.

But York MP Hugh Bayley described the publication as the "most critical report I have ever seen" and said it made it extremely difficult for him to lobby the Government for a fairer cash settlement for York.

He was speaking before today's Government announcement of York's new finance settlement - the amount the council will be allowed to spend on services next year.

He said: "The waste of nearly £1million as a result of the council's own errors undermines the council's claim that it is short of money, especially when it received a ten per cent increase in grant from the Government last year.

"Urgent action is needed to restore a satisfactory service and re-establish public confidence."

The report highlighted that the council was unlikely to receive £280,000 of Government money because it will not achieve its targets by March 2005. A total of £480,000 was spent on hiring agency staff between April 2003 and June 2004 to clear a claims backlog - described by the BFI as an "expensive approach" that was "poorly managed" and "represented poor value for money". Overpayments of benefits in 2003/2004 totalled £190,000.

City of York Councillor Quentin Macdonald, executive member for resources apologised "unreservedly" to anyone who had suffered as a result of a delay in benefit payment.

But he said the council had not wasted the cash as overpayments would be recovered, agency staff had to be hired to see the council through the changeover of its computer system in 2003 and the council was expected to hit its targets in time for March 2005.

Coun Macdonald said: "The City of York Council benefits service is now achieving, month on month, the kinds of service we have always aspired to. It is already significantly better than it was before the changeover to the new computer system and we have plans for further improvement".

Updated: 16:54 Thursday, December 02, 2004