TAXPAYERS will have to pay almost £700,000 to sort out problems with housing benefit in the borough.

Capita, the company which has the contract to handle Bexley's financial services, is currently paid £800,000 a year to do the work.

But the company has been struggling to cope with housing benefits and Bexley Council's policy committee went into secret session to agree a package which will cost an extra £658,000 a year.

A secret report leaked to the News Shopper revealed Capita was “under severe financial pressure in sustaining services” and was “struggling to keep up with the workload”.

Capita won the contract in 1996 after putting in the lowest bid. Under the contract, Capita agreed to process Bexley's housing benefits for less than half what other London councils pay the company.

The company admitted there were problems in maintaining the quality of the service and that Bexley's service had “become resource-hungry”.

Bexley has already agreed to give the company up to £100,000 to help improve the service until the end of March.

New services the cash will help provide include

*A full-time officer to visit claimants who cannot get to Capita's offices in Erith town hall;

*A fast track assessment;

*A direct phone link to the civic offices in Bexleyheath;

*Extra staff to cut queues at Erith

*Faster claims processing;

*A complaints officer.

Bexley says the aim is to cut the number of claims currently waiting to be processed, cut the time to process new and renewal claims and cut benefit fraud.

Councillors took the advice of consultants, who said the best way to improve the service from Capita was to renegotiate the existing contract, which runs out in 2006.

Bexley blames government changes in regulations and its pressure to control fraud for many of Capita's problems.

The extra payment to Capita is expected to be confirmed at the council meeting on February 21.