The Department for Work and Pensions (DWP) has been warned that its extensive new powers to access bank account information must be exercised proportionately, as MPs raise concerns about public trust and persistent fraud and error levels within the benefits system.
In a new report examining benefit fraud and error, the Public Accounts Committee (PAC) said the DWP’s strengthened authority to compel banks and other financial institutions to share claimant data represents a significant expansion of state power. Since December, the Department has been able to require financial information to verify eligibility for benefits, demand data from third parties during criminal investigations, and in some circumstances recover money directly from individuals’ bank accounts without a court order.
While the PAC acknowledged that safeguards have been introduced, it criticised the DWP for failing to clearly set out how these powers will be used in a way that maintains public confidence. The Committee has called on the Department to publish annual reports detailing how frequently the powers are exercised and what impact they have.
The scrutiny comes against the backdrop of longstanding concerns about fraud and error. Overpayments reached £9.5bn in 2024-25, a slight improvement on £9.7bn the previous year but still representing 3.3% of total benefit expenditure. The DWP has suggested that reducing the rate to 2.8% by 2028-29 would be “impressive”, but the PAC said this ambition lacks sufficient stretch and urged ministers to set more demanding targets.
The Department’s accounts have now been qualified for 37 consecutive years due to material levels of fraud and error. The Committee described this as an unacceptable position that has persisted for nearly four decades.
Official error remains a significant contributor. Underpayments caused by mistakes by the DWP, local authorities or HMRC rose from £1.1bn in 2023-24 to £1.2bn in 2024-25. Overpayments resulting from official error also increased, climbing from £0.8bn to £1bn over the same period. The PAC found that the Department’s efforts to tackle root causes have focused largely on claimant fraud rather than administrative failings within government, despite the latter being more directly within its control.
The report also highlights the case of 26,000 carers wrongly recorded as having overpaid carer’s allowance due to flawed guidance. Around 200,000 cases are now set to be reviewed over a two-year period. The Committee concluded that a lack of integrated leadership allowed the issue to persist and said it would monitor implementation of the recommendations from the 2025 independent review.
Unfulfilled eligibility is another growing issue. Benefits not paid because claimants failed to report changes in circumstances, particularly in disability cases, rose to around £3.7bn in 2024-25, up from £3.1bn the previous year. The PAC recommended that the DWP assess whether it is doing enough to encourage accurate and timely reporting.
Public Accounts Committee chair Sir Geoffrey Clifton-Brown 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.”
The PAC said it would continue to scrutinise the Department’s progress, particularly in balancing fraud prevention with fairness and public trust.
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