DWP faces scrutiny over bank account check powers

The Department for Work and Pensions’ (DWP) new powers to reach further into citizens’ lives must be used effectively and proportionately.

In a new report on benefit fraud and error, the Public Accounts Committee (PAC) promises continued scrutiny of how the DWP will work to resolve the cases of carers wrongly pursued for overpayment debts, while also highlighting the unacceptable finding that levels of fraud and error have now rendered DWP’s financial accounts qualified for almost four decades.

As of last December, the DWP has significant fresh powers to compel banks and other financial institutions to provide information to help verify a claimant’s eligibility and entitlement to benefits.

It can also force third parties to provide information when it is conducting criminal investigations, and in some cases recover money owed by people directly from their accounts without a court order. The DWP has not fully set out how it will use these powers in a way that supports public trust. 

The PAC’s inquiry was told the DWP has put safeguards in place in its exercise of these powers, but is calling on the Department to report annually on how often it has used them, and with what impact.

The DWP has now committed that it will put right the cases of 26,000 carers incorrectly recorded as having overpaid carer’s allowance, with flawed guidance on the DWP’s part resulting in some being wrongly pursued for debt.

The PAC’s inquiry heard that it will take around two years to identify all those affected, with 200,000 cases to be reviewed. The report finds that this issue was allowed to persist because of a lack of integrated, concerted leadership within the Department, and will be keeping a close eye on the DWP as it implements the recommendations of 2025’s independent review into the matter.

The report further highlights that, due to the levels of benefit fraud and error, the DWP’s accounts have now been qualified for 37 successive years. Overpayments totalled £9.5bn in 2024-25 (down from £9.7bn the previous year).

This is a current level of 3.3% of benefit expenditure; the DWP has said that getting the rate down to 2.8% by 2028-29 would be “impressive”. The PAC is not convinced by this, and calls on the Department to go further and set out a more stretching ambition to bring down the overpayment rate.

In the area of underpayments due to an error by the DWP, a local authority or HMRC, the PAC’s report finds these had risen from £1.1bn in 2023-24 to £1.2bn in 2024-25. Overpayments for the same reason were also up, from £0.8bn to £1bn in the same period.

The DWP has carried out some work to tackle the root causes of fraud and error – but this has focused on those committed by claimants, rather than errors by officials. Given reducing this error is largely within the DWP’s own control, and the large amounts of money involved, the PAC is seeking action from the Department on tackling the root causes of official error.

People not receiving their full benefit entitlement as a result of not informing the DWP of a change in their circumstances is also a growing problem, the report found.

This unfulfilled eligibility, which particularly affects disability benefits claimants who may fail to report that their condition has worsened, rose to c.£3.7bn in 2024-25, up from £3.1bn the year before.

The PAC recommends the DWP should evaluate how well it is encouraging claimants to report changes in their circumstances.

Sir Geoffrey Clifton-Brown, Chair of the Public Accounts Committee, said “Make no mistake, the DWP’s new powers to reach further into citizens’ lives are significant. Our Committee of course firmly supports government in its responsibility to ensure people are paid the correct benefits.

“But it is essential that these extensive new powers – of compulsion of disclosure over banks and financial institutions, of recovering funds directly from people’s accounts without the aid of the courts – have the risk of overreach mitigated against right from the outset.

“Indeed, a separate element of our report, which saw a welcome apology from the DWP’s Permanent Secretary to all those carers wronged by his Department, demonstrates the impact that wrongly-implemented powers can have on people’s lives.

“Our report finds beyond doubt that current ambitions to address unacceptable levels of benefit fraud and error are not stretching enough. More could be done on a cross-government basis to improve the accuracy of benefit payments, and the Department has not yet taken a proper look in the mirror to address official error rather than focusing entirely on claimants.

“But our report marks the now 37th year in which the DWP has had its accounts qualified by the UK’s chief auditor due to material levels of fraud and error. As PAC Chair, I would say to the Department’s leadership directly: we are just three years away from what would be a sad and embarrassing milestone.

“Urgent action must be taken per our recommendations for the DWP to have something to celebrate in the years to come.”