The National Audit Office (NAO), the independent watchdog of state spending, said that fining claimants for failing to meet certain conditions caused them greater hardship, and cost the Government almost twice what it gained.
The analysis found the Department of Work and Pensions (DWP) spent £30-50 million a year applying sanctions, and around £200 million monitoring the terms it set for job seekers.
But in 2015, it said, the measures saved just £132 million.
Opposition politicians blasted a “discredited system” where ministers have “no idea about the true cost of the sanctions regime”.
Elsewhere in the hard-hitting report, the watchdog said the department had not endeavoured to track costs and benefits of the sanctions - either to the Government or to claimants themselves.
It said the DWP had not known what the effects would be on claimants when it increased benefits sanctions in 2012. Sanctions, the report said, “can lead to lower wages and increase the number of people moving off benefits into inactivity”.
In further attacks on the Government the NAO claimed sanctions were paid inconsistently across the country, blaming “management focus” and “local work coach discretion”.
It also revealed large and growing delays in the system. In August 2016, it said, 42% of decisions about Universal Credit sanctions had taken longer than 28 working days.
Shadow Work and Pensions Secretary Debbie Abrahams said the report was “further evidence” of the damaging effects of a “punitive sanctions regime”.
“The NAO makes clear that sanctions have costs, for claimants and the government and reveals that the Government has no idea about the true cost of the sanctions regime.
“Labour has repeatedly called on the Government to have an independent review of benefit sanctions and the NAO also makes this recommendation.
“The huge scale of delays in Universal Credit sanction decisions is not only more evidence of the Government’s chaotic roll-out of their failing flagship programme, but also a real concern as more benefits migrate to UC.
“It’s time the Government looks again at their sanctions regimes and ensures fairness and financial sustainability for both claimants and the Government.”
Labour MP Frank Field also voiced concerns over the findings, calling on the Government to improve the system.
“Sanctions are being applied at a scale unknown since the Second World War, and the operation of sanctions on this scale has made for the most significant change in the post-war social security system.
“Yet the Government is unable to say for sure how much money it has withdrawn in this way. Likewise it holds no information on what has happened to large numbers of people who have had their money withdrawn.
“We do not know how many people are being pushed permanently outside the benefits system, for example, leading to some being totally disconnected from both work and welfare, and left destitute.
“The Government needs forthwith to initiate two actions: a follow-up survey to see what happens to those claimants losing benefit; and an extension of its Yellow Card warning system, so far piloted only in Scotland, to job-centres across Britain so that as few claimants as possible are exposed to hunger and homelessness.”
Elsewhere the Public and Commercial Services Union’s Mark Serwotka said it was “shocking” that the Government has “no real clue about the effects of its policy”. He said:
“Ministers turned job centres from places to go for help into places of suspicion and conflict, and it is about time the regime was scrapped in favour of proper investment in staff to provide genuine support to those who need it.”
Liberal Democrat leader Tim Farron called the report a “character assassination” which showed a failing department” propping up “a discredited system”. He said:
“The DWP have turned this system in a postcode lottery and means that someone could be sanctioned in one place and not in another for the same thing.
”What is worse is that the government are not assessing the impact of sanctions, using their own data to see what is going on and they are not even tracking the benefits. Ministers need to get a grip.”
The report recommended the DWP carry out a “wider-ranging review” of benefits sanctions, especially where it concerned Universal Credit.
A DWP spokesman has said: “Sanctions are an important part of our benefits system and it is right that there is a system in place for tackling those few who do not fulfil their commitment to find work.
“This report fails to recognise the improvements we have made to sanctions, particularly to help those who are vulnerable. The number of sanctions has fallen, and they are only ever used as a last resort after people fail to do what is asked of them in return for benefits.”
Author: Martha Gill