Benefits claimants face having to 'open their bank accounts to the government' as part of fraud crackdown

21 February 2025, 09:21

Benefits claimants could be asked to open their bank accounts to the government as part of a bid to crack down on fraud in the welfare system.

Ministers are exploring the plans in an attempt to mirror the "open banking" system used by lenders and landlords.

It is intended to understand the true state of an applicant’s finances.

The move comes amid concerns of over the scale of fraud in the benefits system since the pandemic.

The amount lost to fraud and error last year was estimated to be almost £10 billion.

Since the pandemic, a total of £35 billion has been incorrectly paid to those not entitled to the money. It marks a huge jump from before Covid, with the figure being £3.9 billion in 2018-19.

The Department for Work and Pensions (DWP) has predicted the amount lost to fraud will increase by five per cent every year for the next five years.

Labour has revived Tory plans for the crackdown with the Public Authorities (Fraud, Error & Recovery) Bill, which was introduced to parliament last month.

One of the measures outlined in the bill will see banks required to look through their data and hand over account details of any claimants who do not fit the benefits criteria.

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The DWP told the Times: "The government is bringing forward the biggest fraud crackdown in a generation, saving the taxpayer £1.5 billion over the next five years, part of wider plans that will save £8.6 billion by 2030.

"Our fraud, error and recovery bill includes an eligibility verification measure, which will require banks to share limited data on claimants who may wrongly be receiving benefits — such as those on universal credit with savings over £16,000.

"This will not give DWP access to benefit claimants’ bank accounts."

However, a government source told the paper that the bill still left a "huge, gaping hole in the system", which fraudsters can use to their advantage.

For example, only the bank account into which the benefits are paid can be reviewed.

The source said: "The sheer scale, time frame and effort to get these reforms across the legal line was one thing.

"But the idea that you have to give up your right to data protection for subsistence benefits, that you have to give up data privacy or you starve, seems implausible."

Jasleen Chaggar, the legal and policy officer for privacy campaign group Big Brother Watch, said: "These chilling plans for unprecedented financial intrusion would require benefits claimants to lay their lives bare to the state in order to access support to which they are entitled.

"Mandatory open banking would give DWP civil servants constant access to the bank statements of welfare recipients, revealing deeply private information about their movements, associations, political donations, sexual preferences and religious beliefs.

"This government appears hellbent on creating a two-tier society in which those who dare to seek help from the state are treated as suspects-by-default and required to sacrifice their privacy.

"The government must abandon these plans and recognise that the receipt of state money does not justify stripping disabled people, carers, the elderly, single parents and the poorest in society of their rights and dignity."