UK lawmakers warn DWP over new powers to access bank accounts in benefit fraud crackdown

UK lawmakers have issued a stark warning to the Department for Work and Pensions over its expanded powers to scrutinise citizens' bank accounts, as the government's flagship benefits system continues to be plagued by errors worth billions of pounds annually. The Public Authorities (Fraud, Error and Recovery) Act 2025, which received Royal Assent on 2 December 2024, grants the DWP unprecedented authority to compel financial institutions to share data about benefit claimants and recover overpayments directly from accounts without court intervention.

Background and Context

The DWP's financial accounts have been qualified by auditors for 37 consecutive years due to material levels of fraud and error—an "unacceptable" situation according to the House of Commons Public Accounts Committee (PAC). In its report published on 11 February, the committee notes that while benefit overpayments decreased slightly to £9.5 billion (3.3% of total expenditure) in 2024-25, underpayments rose to £4.9 billion, with official error accounting for £1.2 billion of overpayments. The PAC described the four-decade qualification of DWP's accounts as evidence of systemic failure in the UK's social security administration.

Key Figures and Entities

The inquiry featured testimony from senior DWP officials, including permanent secretary Sir Peter Schofield KCB, director-general for fraud, disability and health Neil Couling CBE, and director of fraud, error and debt strategy Vikki Knight. PAC chair Sir Geoffrey Clifton-Brown cautioned that "the DWP's new powers to reach further into citizens' lives are significant" and warned that with accounts now qualified for 37 years, "we are just three years away from what would be a sad and embarrassing milestone." The committee also noted the DWP has yet to clarify how it will spend £3.5 billion of dedicated funding to tackle fraud and error from 2026-27.

Legal and Financial Mechanisms

Under the new legislation, the DWP can compel banks and financial institutions to provide "limited" data on claimants who may wrongly be receiving benefits, such as those on Universal Credit with savings exceeding £16,000. The powers also allow direct recovery of funds from accounts without court orders, subject to what the department describes as "affordability and vulnerability checks." Meanwhile, the DWP is pursuing open banking technology to verify claimants' financial circumstances, having engaged fintech company Ecospend for a proof-of-concept trial. A procurement process for a strategic supplier of open banking technology for Universal Credit has faced delays, running at least six months behind schedule according to official procurement notices.

International Implications and Policy Response

Civil liberties organisation Big Brother Watch coordinated opposition from dozens of disability rights organisations, older people's advocacy groups, and anti-poverty charities against what it describes as "mass 'bank spying' powers." While noting that some of the most privacy-invasive measures were rolled back, the group maintains the legislation represents "an unprecedented expansion of suspicionless mass surveillance" that "deputises private banks as an arm of the state." The PAC has called on the DWP to report annually on its use of the new powers and their impact, while also urging the department to address its own internal errors rather than focusing solely on claimant fraud. The committee specifically recommends enhanced data sharing with other departments, including the Department for Education, to verify household composition for Universal Credit claims.

Sources

This report draws on the House of Commons Public Accounts Committee report published in February 2025, the Public Authorities (Fraud, Error and Recovery) Act 2025, National Audit Office assessments, DWP procurement documentation, and statements from civil society organisations including Big Brother Watch.