The government is planning to save £90m by 2006 through an overhaul of the benefits systems at the Department of Work and Pensions (DWP).
This amounts to a third of the DWP's targeted cost savings in reducing fraud and errors, Sir Richard Mottram, permanent secretary to the DWP, recently told the Public Accounts Committee.
It is envisaged that enhancements to IT systems will improve the accuracy of records, and cut losses on unwarranted and incorrect payments.
The current system of using separate records for different claims has a greater chance of incorrect payments being made, according to a DWP spokeswoman.
The DWP is also looking at methods of modernising payment methods. So-called 'instrument payment fraud', where giro cheques, pension books and the like are stolen or forged, costs the government £80m a year.
Finding a way to make payments electronically would have "a major impact" on reducing this figure, said the DWP spokeswoman.
The government is currently examining ways of making payments to citizens who do not have bank accounts.
Last year the DWP was criticised for taking so long to improve its antiquated legacy systems.
A report from the Public Accounts Committee said it was "disappointing" that improvements would not be made until 2006.
But the DWP spokeswoman argued that it would begin to see cost savings when the system is brought online from "next spring".
The three-year modernisation programme will build a system that gives common access to benefit claimant data held in more than 20 separate systems.
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