What DWP bank account check powers mean for millions claiming benefits

As individuals tighten their belts due to increased benefit scrutiny, HMRC will soon have the authority to inspect millions of UK bank accounts and potentially confiscate funds.

The forthcoming Public Authorities (Fraud, Error and Recovery) Bill mandates financial institutions to watch for balances exceeding the limits for claiming income-related benefits. This legislation is at its committee stage, with a third reading set for March 20.

Should anyone be discovered receiving income-related benefits when ineligible, the proposed legislation empowers enforcement measures to withdraw assets and levy fines from that individual's bank account.

Under the Finance Act 2011, HMRC can already obtain bank details to ensure correct tax payments. Richard Las, HMRC's head investigation officer and director of the Fraud Investigation Service, specified that these rights are exercised primarily for "bulk data gathering" on select, larger "interest-bearing" accounts.

He underscored the stringent safeguards in place regarding this data: "We have a huge amount of controls over how we manage that information and how we use it and protect it; they are our normal requirements as with any other taxpayer data.", reports Chronicle Live.

This means that expanding these monitoring capabilities would not require significant changes.

If you have savings and investments over £6,000, your benefit will be reduced by £4.35 for every £250 between £6,000 and £16,000. Even if your savings exceed the lower threshold by less than £250, an additional £4.35 is still deducted.

For example, with £6,300 in savings, no deductions are made on the first £6,000, but the remaining £300 would mean a deduction of £8.70 from your benefits. This applies to both individual and joint accounts.

Under new regulations, officials are required to request at least three months of bank statements before they can directly take funds from people's accounts, ensuring that individuals have enough money to cover the costs. If there are insufficient funds, banks must notify the government.

In cases where it's difficult to recover debts, officials now have the power to go to court to seize assets owned by the debtor. Cabinet Secretary Georgina Gould explained when these measures would be used.

She stated: "While the bill will provide the powers to seek recovery directly through bank accounts and PAYE earnings, these might not always be the most appropriate or effective recovery route. For instance, the liable person might hold significant other property assets or keep assets or money abroad. In those cases, it would be unfair for us not to seek recovery.

"We therefore wish to work through established legal procedures to ensure that we can seek to pursue recovery through the most appropriate and effective mechanisms - for example, liability orders."

DWP minister Andrew Western has highlighted the importance of these steps in tackling benefit fraud. "More than 50% of the fraud and error that we see in Pension Credit comes from two principal sources, which the eligibility verification measure specifically seeks to address. One is the issue of capital fraud, where there is a relatively easy indicator."

He further explained: "The provision also has the benefit of helping us to establish when somebody has been out of the country for longer than their benefit entitles them to be. For instance, it would provide a flag on an account when somebody's bank account suggested they had been making purchases abroad and so on."

Moreover, he stated: "We would not receive the transactional data or know specifically where the purchases were made but it would give us specifically the date that somebody left the country, and thereby show whether they were in breach of the length of time they are allowed to be away."

Mr Western highlighted a concerning issue regarding pension credit, stating: "In 2023-24, £520 million in pension credit was overpaid, and pension credit has one of the highest rates of capital fraud and error, with £198 million lost in 2023-24 alone. The rate of fraud in pension credit increased by more than 50% in 2023-24, as against the previous year, so we have a clear problem. The under-declaration of financial assets and claimants staying abroad for a longer period than is allowed remain the two main causes of pension credit overpayments in '23-24. As I said previously, they accounted for more than 50% of all overpayments," he explained.