New surveillance powers grant DWP access to benefit claimants' bank accounts

New legislation has come into force granting the Department for Work and Pensions sweeping powers to examine bank accounts of benefit claimants, marking one of the most significant expansions of state financial surveillance in recent years. The Public Authorities Fraud, Error and Recovery Act 2025 enables officials to issue verification notices to financial institutions to check eligibility for Universal Credit, Pension Credit, and Employment Support Allowance — a measure the government claims could save taxpayers £500 million annually by identifying undisclosed capital and overseas residence.

Background and Context

The measures represent the government's latest attempt to tackle persistent fraud and error within the welfare system, which has cost the public purse billions in recent years. According to National Audit Office reports, overpayments due to fraud and error exceeded £8 billion in 2023-24, with Universal Credit accounting for a substantial portion. The new powers follow a series of pilot programmes and consultation exercises conducted throughout 2024 and early 2025, which the Department for Work and Pensions says demonstrated the effectiveness of automated data matching in identifying discrepancies in benefit claims.

Key Figures and Entities

The DWP will serve as the primary authority exercising these new powers, with oversight provided by an appointed independent reporting body accountable to Parliament. Financial institutions across the UK — including major banks and building societies — are now legally obligated to respond to Eligibility Verification Notices within specified timeframes. According to government guidance, the system initially targets three benefits where error rates are highest: Universal Credit, Pension Credit, and income-related Employment Support Allowance, though officials have indicated the programme may expand to include other benefits in future phases. Notably, State Pension payments are explicitly excluded from these verification requirements and cannot be added under subsequent amendments.

Legal and Financial Mechanisms

The verification system operates through a carefully controlled information-sharing protocol. When the DWP issues a notice, banks must check their customer data against specific eligibility criteria — primarily focusing on capital limits and indicators of overseas residency — but are strictly prohibited from sharing transaction histories or spending patterns. Legislation specifies that only limited information, such as account holder names and how they meet specified criteria, may be disclosed. Crucially, safeguards outlined in the Code of Practice require that no automated decisions about benefit entitlement can be made based solely on this data. Human officials must review all information and conduct further inquiries before any changes to claims are implemented. Financial institutions face significant penalties for non-compliance or for oversharing protected personal information.

International Implications and Policy Response

The introduction of these powers has drawn attention from privacy advocates and civil liberties organisations, who warn that normalising routine financial surveillance could set concerning precedents for data protection standards. The Information Commissioner's Office has emphasized that the implementation must comply with UK data protection legislation, including requirements for necessity and proportionality. Meanwhile, welfare rights groups have expressed concerns about potential chilling effects on legitimate benefit claims, particularly among vulnerable populations who may fear intrusive scrutiny of their finances. The government has responded by emphasizing the oversight mechanisms and the requirement for human decision-making, though civil society organisations continue to monitor the rollout closely for potential abuses of the system.

Sources

This report draws on the Public Authorities Fraud, Error and Recovery Act 2025, government guidance documents published by the Department for Work and Pensions, and parliamentary proceedings recorded between 2024 and 2026. Additional context comes from National Audit Office investigations into benefit fraud and error rates, and Information Commissioner's Office statements on data protection compliance.