The independent watchdog of state spending said that imposing a financial penalty on a claimant for failing to meet a number of conditions caused them greater hardship and cost the UK government almost twice what it gained.

Sanctions are not rare: 24 per cent of Jobseeker’s Allowance claimants received at least one between 2010 and 2015.

The NAO said use of sanctions “varies substantially” between the different providers that are in charge of running the government’s welfare-to-work programme.

Some providers make more than twice as many sanction referrals as other providers supporting similar people in the same area, it said.

According to the report, the monthly sanction referral rate for Jobseeker’s Allowance claimants rose to 11 per cent in March 2011 then fell to 3 per cent in December 2015. There are many reasons for this variation but it cannot be fully explained by changes in claimant behaviour. The NAO concludes it is likely that management focus and local work coach discretion have had a substantial influence on whether or not people are sanctioned.

The report recommends that the Department for Work & Pensions (DWP) carries out a wide-ranging review of benefit sanctions, particularly as it introduces further changes to labour market support such as Universal Credit. The DWP has commissioned independent reviews and taken steps to improve processes but rejected previous calls for a wider review. The NAO said that the previous government increased the scope and severity of sanctions in 2012, and recognised that these changes would affect claimants’ behaviour in ways that were difficult to predict.

Sanctions, which have been used in their current form since 1996, vary in length, the NAO said, adding that they “reduce support to people, sometimes leading to hardship, hunger and depression”.

For example, a jobless recipient can lose £300 of benefits if they get a four-week sanction.

It said the government did not track the costs and benefits of sanctions, but spent an estimated £30-£50m a year applying them and about £200m monitoring conditions attached to benefits.

Last year it estimated it withheld £132m in benefits.

It said the DWP had taken steps to reduce the number of errors, but said the department “needs to do more than react to problems” and that it “cannot conclude that the department is achieving value for money”.

Amyas Morse, head of the National Audit Office, said: “Sanctions on benefits have a high opportunity cost, not only for those who are dependent on those benefits if sanctions are applied, but for the efficient use of public resources.

“We acknowledge the department’s effort to reduce its error rate on sanctions, but we think there is more to do in terms of reducing them further, and in reducing the notable differences in sanctions applications between comparable localities.”

A DWP spokesman 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.”