The DWP will be given new powers to take money directly from the pockets of benefit fraudsters including access to bank accounts
09:03, 20 Sep 2025Updated 07:05, 22 Sep 2025
Secretary of State Liz Kendall has said pensioners will be excluded from the DWP bank account crackdown(Image: Getty Images)
The Department for Work and Pensions (DWP) has said that one benefit is safe from bank account checks. The DWP will be granted new powers by the incoming Labour Party government, allowing it to directly deduct money from payslips and accounts.
However, state pensioners can breathe a sigh of relief as former DWP minister Liz Kendall has previously confirmed they are safe. Benefit fraud investigators will soon have the power to recover debts from those who have overclaimed, directly from their bank accounts, thanks to new powers bestowed by the Labour government.
An ‘increasing propensity’ for dishonesty across British society has been cited by officials as the reason for the continued rise in scams since the Covid pandemic. Ms Kendall has committed to updating her department’s 20-year-old powers, describing their current investigatory capabilities as ‘absurd’.
These new powers are due to be introduced starting from April 2026 under the Public Authorities (Fraud Error and Recovery) Bill, with a full rollout expected to be completed between 2029 and 2031. This legislation will enhance the DWP’s ability to combat social security fraud and errors by granting the department increased authority to investigate, prevent, and reclaim funds owed to taxpayers.
This could prompt DWP investigations and potential fraud recovery actions. These inspections aim to tackle fraud and mistakes by identifying potential overpayments before they happen. They’re also meant to reduce fraud and guarantee precise payments.
The DWP will be given fresh powers to take money straight from the pockets of benefit fraudsters, as the government pledges to crack down on welfare scams. It has been disclosed that DWP officials expect a 5 per cent increase in fraud each year.
Ms Kendall has said: “People who are genuinely entitled to claim benefits have nothing to worry about from this Bill, but we do believe that £7.4 billion wasted every year on benefit fraud must be cracked down on.” Ms Kendall replied: “I think that the measures introduced in this Bill will actually help us spot and then prevent those errors in the first place because people make genuine mistakes and we do not want them build up errors and debt that they have to repay.”
Ms Kendall also said: “The DWP will not be able to access people’s bank accounts or look at what they are spending, we will not share any personal information with banks. Once an alert has been issued, any final decision about someone’s benefits will always be taken by a human being and the state pension will be excluded from the measure.
“There will also be independent oversight of this power on the face of the Bill, with a requirement to produce reports and lay them before Parliament.”
During 2023-24, £9.7 billion of taxpayers’ money was overpaid in benefits due to fraud and error, accounting for 3.7 per cent of total benefit expenditure. This is compared to £8.3 billion and 3.6 per cent in 2022-23, as the rate of benefit overpayments continues to remain significantly above pre-Covid levels.
In a letter to the Telegraph, Ms Kendall voiced her concerns about outdated practices in the Department for Work and Pensions (DWP), stating: “We’re in an absurd situation where DWP’s powers have not been updated for 20 years, meaning fraudsters have new ways of taking public money, and we need to keep pace with them.”
She further underscored the inefficiency in her comments to the national newspaper over the weekend, saying: “My team are still, in 2024, sending letters to gather evidence for those suspected of welfare fraud, slowing them down to snail’s pace when they could be shutting down serious fraud cases.”
How will the new DWP powers operate?
The DWP has said it won’t be snooping into everyone’s daily purchases. Instead, banks will be asked to flag accounts suggesting a person may no longer be entitled to benefits. Only minimal information will be shared unless a warning signal is triggered. Should an account be marked, the DWP might then launch a more comprehensive inquiry.
The DWP will send banks Eligibility Verification Notices, setting out particular “eligibility indicators” they must check against accounts receiving DWP benefits. Banks will need to examine the information they possess on these accounts and compare it with the outlined indicators.
Who might be affected?
This change is likely to impact those on means-tested benefits, which depend on income and savings. If anyone receiving these benefits exhibits financial activity that appears inconsistent with the eligibility criteria, their account could be flagged.
- Universal Credit: A payment intended for individuals with low income or those out of work.
- Housing Benefit: Aid with rent payments for households with low income.
- Income Support: Financial help for those on a low income.
- Income-based Jobseeker’s Allowance (JSA): Aimed at people looking for work.
- Income-related Employment and Support Allowance (ESA): For those unable to work due to illness or disability.
- Council Tax Support (or Reduction): Help with local council tax payments for low-income earners.
- Tax Credits (Working Tax Credit and Child Tax Credit): Financial assistance for working families and those with children, although Universal Credit is now replacing this for most people.
- Pension Credit: Available for individuals over the State Pension age to supplement their income if they have limited savings and earnings.