The Labour government has already agreed to the bill and it is now awaiting Royal Assent, with new powers to be introduced next year
The Department for Work and Pensions ( DWP ) has confirmed that one benefit will be safe from bank account inspections. This week, it was announced that the Labour government has cleared the final obstacles to the bill in the House of Lords, paving the way for the DWP to gain new powers to directly deduct money from wages and accounts.
State pensioners can breathe a sigh of relief as former DWP minister Liz Kendall has previously guaranteed their safety. Benefit fraud sleuths will soon have the power to recover debts from those who have claimed too much, straight from their bank accounts, thanks to new powers bestowed by the Labour government.
Officials have pointed to an ‘increasing propensity’ for dishonesty across British society as the reason for the continued surge in scams since the Covid pandemic. Ms Kendall has committed to updating her department’s two-decade-old powers, branding their current investigatory capabilities as ‘absurd’.
These new powers are scheduled to come into effect 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 strengthen 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.
The measures are intended to detect potential overpayments before they happen, combating fraud and errors while ensuring accurate payments are made. The Department for Work and Pensions (DWP) will have the power to directly reclaim money from benefit fraudsters under these new powers, as part of the government’s pledge to crack down on welfare scams, reports Wales Online.
Officials predict a 5 per cent annual increase in fraud. The Public Authorities (Fraud, Error and Recovery) Bill will grant new powers to the Public Sector Fraud Authority (PSFA) to investigate public sector fraud outside of the tax and social security systems.
This will also boost the DWP’s capacity to address fraud and error within the social security system.
The Bill has been undergoing the ‘ping-pong’ process, where legislation is passed back and forth between the two Houses of Parliament until an agreement is reached. On Tuesday, peers accepted several Government compromises and assurances, and the legislation was approved by the upper chamber.
Cabinet Office minister Baroness Anderson of Stoke-on-Trent told peers: “I believe that the Bill as agreed by the House of Commons makes a significant step in delivering this Government’s manifesto commitment to safeguard public money and ensure that every single pound is wisely spent.”
She added: “At the same time, the Bill now contains further significant safeguards on the use of the new powers for the DWP and the PSFA, strengthened by the scrutiny and insight of the Lords.”
Shadow Cabinet Office minister Baroness Finn declared the Government “has listened to many of the concerns raised” and described the Bill as now “stronger, fairer and more workable”.
She particularly praised the Government’s decision to permit the PSFA to conduct “proactive investigations where credible evidence of fraud arises”, which she claimed will “strengthen deterrents, support whistleblowers and potentially prevent major losses to the public purse before they occur”.
Lady Finn also backed a Government U-turn on human decision-making, which she argued guarantees human judgements stay central to DWP procedures to guard against “the risks of mechanistic or AI-driven decision-making”.
The shadow minister commended the Government for accepting limits on authorised fraud investigators’ use of reasonable force to property alone, whilst preserving police powers to use reasonable force when required against both property and individuals. She described this as fixing a “serious drafting flaw” in the Bill.
Lady Finn declared that “real progress” has been achieved on this Bill to ensure it achieves “the right balance” between robust fraud prevention whilst remaining fair, proportionate and considerate of its effects on vulnerable individuals.
Nevertheless, she argued there remained shortcomings in the draft legislation, which she claimed neglects to address the problem of “sickfluencers” – individuals who urge others online to fraudulently claim benefits. Liberal Democrat work and pensions spokesperson Lord Palmer of Childs Hill expressed that he believed a “middle ground” had been achieved across several amendments.
Independent crossbench peer Lord Vaux of Harrowden, who had secured support from fellow peers for numerous amendments, welcomed Government assurances regarding eligibility verification notices.
He declared the Bill now offers a “better balance between achieving what is intended to reduce fraud and error while being fairer and better protecting vulnerable people”.
Work and pensions minister Baroness Sherlock wrapped up proceedings by stating: “I hope the house can now unite behind the fact that it is in all of our interests to make sure that fraud and error are tackled in our social security system and in our public services.”
She added: “Public money is tight enough, we need to make sure it goes to the places that’s needed and to the people that’s needed”.
The Public Authorities (Fraud, Error and Recovery) Bill is now prepared for Royal assent.
Throughout the 2023-24 financial year, an eye-watering £9.7 billion of taxpayers’ cash was overpaid in benefits through fraud and error, representing 3.7% of overall benefit spending.
This represents a rise from the preceding year’s £8.3 billion and 3.6%, with benefit overpayment rates continuing to surpass pre-pandemic thresholds.
How will these fresh DWP powers operate?
The DWP has given assurances that it won’t be snooping on everyone’s daily spending habits. Rather, banks will be requested to highlight accounts that suggest someone might no longer qualify for benefits.
Only basic information will be disclosed unless an alert is activated. Should an account be highlighted, the DWP could then launch a more comprehensive inquiry.
The DWP will distribute Eligibility Verification Notices to banks, outlining particular “eligibility indicators” that must be examined against accounts receiving DWP benefits. Banks will be obliged to examine the information they possess on these accounts and match it against the designated indicators.
Who might this impact?
This change is anticipated to affect those claiming means-tested benefits, which depend on earnings and savings. If anyone receiving these benefits displays financial behaviour that appears incompatible with the qualifying requirements, their account could be highlighted.