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Ministers are examining proposals to grant banks access to all of the accounts of benefit claimants, as they try to crack down on fraud to fix a “gaping hole” in the UK welfare system.
Officials in the Department for Work and Pensions have been asked to investigate the proposal as a possible means to ensure welfare recipients do not hold more funds than they claim to, according to people briefed on the matter.
“We are looking at whether it would be possible to get access to claimants’ bank accounts in the same way they get access to all of your accounts when you apply for a mortgage,” one official said.
The Public Authorities (Fraud, Error and Recovery) bill would require lenders to inform the government if they found evidence of overpayment by the state or breaches of eligibility rules, including if claimants held more than £16,000 — the savings limit for universal credit — in the account where they receive their benefits.
Under the legislation, which is moving through parliament, the government would have powers to recover the benefit money or overpayments from individual accounts without a court order.
But ministers are concerned that fraudsters will still be able to get around the rules by holding cash in different accounts in their name, which banks have no duty to scrutinise, according to people briefed on the matter.
“There is a huge gaping hole in the system,” one of them said.
The person added that officials were investigating whether the principles of open banking could be applied to the welfare system. The model has been used by mortgage lenders since 2018 to grant banks read-only access to customers’ account balances and transaction history.
They added, however, that the scoping exercise was at an early stage and was unlikely to form part of the current fraud, error and recovery bill.
About £8.6bn was lost to fraud and error overpayments in the financial year to April 2024, according to government data.
Roughly 3.7mn people of working age receive health-related benefits, a 1.2mn increase compared to February 2020, before the Covid-19 pandemic.
The UK spends about £65bn a year on incapacity and disability benefits, more than it does on defence, according to the House of Lords economic affairs committee.
UK Finance, the industry body, has pushed back against the new fraud measures, arguing the requirements on banks can clash with their regulatory obligations to protect financially vulnerable consumers.
“The proposed approach on recovering money from bank accounts in the Public Authorities bill needs careful consideration, to ensure it doesn’t create risks for vulnerable customers and is aligned with existing regulatory obligation . . . Alongside looking at bank accounts, we believe the government could also enhance controls to prevent fraud and error entering the benefits system in the first place,” said Daniel Cichocki, director of economic crime policy at UK Finance.
Karla Prudencio Ruiz, director and advocacy officer at Privacy International, said the push to expand the scope of the government’s powers even further was “deeply troubling”, warning it risked “overshadowing fundamental rights to privacy and due process”.
“In principle it’s a generalised surveillance mechanism,” said Prudencio. “[The government] will be on a fishing expedition looking for suspects without necessarily having the grounds of suspicion.”
A government spokesperson said: “The government is bringing forward the biggest fraud crackdown in a generation, saving the taxpayer £1.5bn over the next five years, part of wider plans that will save £8.6bn by 2030.”
