A Devon pensioner came within a whisker of being made a billionaire after an extraordinary catalogue of errors at the Pension Service led to her being offered a £160,000-a-week rise backdated for more than two centuries - when she was only entitled to three pence a week.

Pensions Minister Maria Eagle was yesterday forced to make a public apology to 82-year-old Kathleen Lonsdale, of Kingsbridge, after an "appalling" series of errors by the Pension Service led to Mrs Lonsdale having her Income Support book "impounded" at the local post office.

The apology came after Mrs Lonsdale's case was raised in the Commons by Anthony Steen, the Conservative MP for Totnes.

Mr Steen said that while many might find the case amusing, it had been a distressing experience for those involved. He added: "This is an appalling example of the arrogance of bureaucracy, out-of-control computers and the insulation of officialdom from the public. Until I became involved the Pension Service refused to take the matter seriously and even then it has been a bureaucratic nightmare to get things resolved."

Mr Steen said that Mrs Lonsdale, who lives in a residential home in the South Devon town, had applied for the Government's means-tested Minimum Income Guarantee in March.

In July she was astonished to receive a letter from the Pension Service informing her that she would be eligible for payments of £162,497.94 a week, backdated to July 14, 1800 - a figure which would translate into a lump sum payment of around £1.7 billion.

Mr Steen said that although Mrs Lonsdale was gratified by the award she harboured a "lurking suspicion" that it might have been an error. She therefore asked her daughter Patricia Millington, who lives nearby, to investigate for her.

Mrs Millington began receiving letters from the Plymouth Pension Office saying she had not returned her mother's Income Support book - which did not surprise her as she had never received it. Unable to contact the Plymouth office, Mrs Millington inquired at Kingsbridge Post Office to see if the book had been delivered there by mistake.

Mr Steen said: "There she was told, in a crowded shop, that her mother's Income Support book had been impounded and that no more cash orders would be allowed.

"Mrs Millington felt deeply embarrassed, as if her mother was being branded a criminal, and avoided eye contact with the other customers, many of whom she knew, who looked at her with incredulity as she scuttled out of the shop."

Five weeks later Mrs Lonsdale received a "reassessment" from the Pension Service, saying that a mistake had been made and she was only entitled to receive £42,107.52 a week, backdated to October 21, 1880.

Mr Steen said Mrs Lonsdale was "philosophical" about the reduction, but still suspicious about whether she was really entitled to a lump sum of around £275 million. Mrs Millington attempted to make further inquiries but was unable to get through to the Plymouth office.

In October, Mrs Lonsdale was told further errors had been made and she would be entitled to just three pence a week in Income Support. A cheque for 45p - issued at a cost of £1.47 - was sent to her to cover payments for 13 weeks.

Last night Mrs Millington described the Pension Service as "bureaucracy gone mad".

She said: "The lack of accountability and the fact that no one has taken responsibility has been terrible.

"The scene in the post office was embarrassing, but I know the people who run it and they did not make a big scene. It would have been mortifying for my mother.

"The whole thing suggests that bureaucracy has gone mad - it all seems to have been taken out of the hands of people and passed on to computers, without anyone knowing what is going on. My worry is that this could be happening to other people - I can't believe it is a one-off case."

Mr Steen took up the case in September, only to face further bureaucratic errors.

"The Pension Service computers appear to be completely out of control, churning out thousands of letters and causing widespread confusion," he said.

"Can you imagine how confusing and distressing this situation must be for Mrs Lonsdale and her daughter?

"And what about the waste of public funds incurred in trying to resolve the matter, with so many letters flying back and forth, an 82-year-old lady at the centre of it all and her daughter and MP quite besides themselves with anger over the whole debacle."

Mr Steen was then told that it would take a three-month investigation before the Pension Service could rule on whether compensation was payable to Mrs Lonsdale.

Ms Eagle apologised for the "appalling level of service" received by Mrs Lonsdale and her daughter, which she said was as a result of "badly corrupted" computer data.

She said the cause was still being investigated, but that corrupted data only affected about 0.007 per cent of the 3.5 million Minimum Income Guarantee claims handled by the service.

Western Morning News

-- Anonymous, December 20, 2002