DWP update on new bank monitoring powers to tackle benefit fraud

The DWP will soon be able to force banks to hand over private financial details in what ministers have called the “biggest fraud crackdown in a generation”

Millions of benefit claimants could have their bank accounts scrutinised by the Government under contentious new “snooping” powers being introduced by Labour. The Department for Work and Pensions (DWP) will soon have the authority to demand banks disclose private financial details as part of what ministers are dubbing the “biggest fraud crackdown in a generation”.

The plans are in the spotlight as a minister gave an update on the looming powers. The extensive measures are included in the Fraud, Error and Debt Bill, which is currently progressing through Parliament. Ministers maintain that these changes will assist in identifying those falsely claiming benefits, such as people with savings exceeding £16,000 who are not eligible for Universal Credit.

However, critics argue that the Government is establishing a “system of mass financial surveillance” that could inadvertently ensnare innocent people. Baroness Maeve Sherlock, a DWP minister in the House of Lords, disclosed new aspects of the policy this week – including the crucial provision known as the Eligibility Verification Measure, which will compel banks to comply with official data requests.

This will enable DWP agents to request personal details from financial institutions, including a claimant’s name, date of birth, sort code, account number – and importantly, whether the account appears to violate benefit eligibility rules. Baroness Sherlock said: “The information that can be requested under an Eligibility Verification Notice will include basic information about the account holder, such as name and date of birth, and the sort code and account number. Agents may also request information about whether the account meets eligibility requirements.”

The powers are set to be rolled out in stages over the next 12 months, starting with a small group of banks. Officials say the crackdown is designed to recover an estimated £1.5 billion over five years by tackling fraud and correcting errors early – before they spiral into large amounts of unmanageable debt.

A DWP spokesperson said: “Our Fraud, Error and Recovery Bill includes an Eligibility Verification Measure which will require banks to share limited data on claimants who may wrongly be receiving benefits – such as those on Universal Credit with savings over £16,000.

“As well as tackling fraud, the new powers will also help us find genuine claim errors sooner, stopping people building up unmanageable debt. This measure does not give DWP access to any benefit claimants’ bank accounts.”

However, the proposals have already triggered fierce opposition from privacy advocates, who argue the fresh powers extend well beyond what is required. Civil liberties organisation Big Brother Watch told The Independent: “It threatens to usher in an unprecedented system of mass financial surveillance.”

Baroness Sherlock also confirmed that the DWP will also gain powers to directly seize money from individuals using Direct Deduction Orders – similar to those used by HMRC and the Child Maintenance Service. She stated that the department anticipates making between 5,000 and 20,000 deduction orders annually.

The DWP argues that these measures are an essential tool for swiftly recovering money where overpayments have occurred. However, critics worry they could result in hardship for families already grappling with the cost-of-living crisis.

Work and Pensions Secretary Liz Kendall has maintained that the powers are necessary to “restore trust in the welfare system” – but opposition voices are expected to intensify as the bill approaches the statute books.