Value for money? Watchdog turns focus on Atos - the firm that tests people claiming sickness and disability benefits

Atos Healthcare has been paid £754m for the tests since 2005

Labour have accused Iain Duncan Smith of letting Atos spin out of control (Getty)

Public spending watchdogs are to launch a new investigation into Atos Healthcare, the company that carries out controversial medical tests for people claiming sickness and disability benefits.

The National Audit Office (NAO) move emerged as the Government disclosed that Atos has been paid £754m for the tests since 2005. It has also landed other government contracts, including IT work for the Home Office and Highways Agency.

Lord Freud, the Welfare Reform Minister, revealed that annual spending on the medical services contract had risen from £73.3m in 2005-06 to £114.3m in the year to March. He said the increase in the budget is due to a rise in the number of tests.

He was replying to a written House of Lords question this week by Lord Alton of Liverpool, a crossbench peer who asked the NAO to intervene. The NAO has told Lord Alton the extension of the Atos contract to a new benefits regime for the disabled is “an area of interest” to it and it has begun discussions with the Department for Work and Pensions (DWP).

Lord Alton said: “The Atos contract with the Government has become like a licence to print money. Astronomical sums are involved. Worrying questions have arisen about whether the terms of the company's tender have been met; whether performance matches promise; and whether a project undertaken on the pretext of giving value for money has done so. When millions of pounds of public money is being diverted to private companies, it is crucial that there is accountability, transparency, and public confidence. I welcome the NAO's decision to scrutinise the Atos contract and think the Public Accounts Committee should ask Atos and the DWP to appear before them."

Stephen Timms, Labour’s employment spokesman, said: “This Government has been warned time and again to get a grip of this contract, but the truth is Iain Duncan Smith [the Work and Pensions Secretary] has let Atos spin out of control and the taxpayer and vulnerable people are picking up the pieces. Anyone taking the Work Capacity Assessment today is now eight times more likely to end up in a tribunal than a job and the cost of those appeals has soared by 40 per cent in the last year alone. Ministers have got to fix this mess – fast.”

The multinational firm, which sponsored last year’s Paralympic Games in London, has been criticised by employment rights groups for the allegedly harsh way it assesses the sick and disabled. Some 40 per cent of people claiming incapacity benefit appealed against its rulings and 38 per cent of them were successful. Despite that, the company won a further contract to assess the new personal independence payments for the disabled. The Government has been criticised by MPs for allowing a virtual monopoly to develop. But ministers insist that Atos only makes recommendations about claims, with final decisions taken by the DWP.

Atos has said that it has met its obligations in delivering a “complex and challenging contract” and implemented all the changes recommended by the independent reviews the DWP ordered into the assessment process.