The government is poised to launch a crackdown on benefit fraud, with proposed changes potentially allowing investigators to work with banks to monitor fraudulent activity among millions of benefit claimants. As of February 2025, 24 million people were receiving various benefits from the Department for Work and Pensions, meaning they could face these fresh measures next year when the bill is anticipated to take effect.
Under the proposed legislation, the DWP will possess the power to examine banking information for those receiving Universal Credit, ESA, and Pension Credit. Should ministers wish to extend this coverage to other benefits, a parliamentary debate will be necessary and require approval from Parliament, according to the Liverpool Echo.
Due to take effect in 2026, the Fraud, Error and Recovery Bill seeks to recover £1.5billion of taxpayer funds over five years by pursuing benefit cheats. Labour has championed these fresh measures as part of the “biggest fraud crackdown in a generation.”
The proposed rules could see offenders lose their driving privileges for up to two years. This power is designed as a final option for cases involving welfare debt of £1,000 or more where individuals have repeatedly and deliberately refused to repay money owed, despite possessing the means to do so.
The Department for Work and Pensions (DWP) will be able to utilise the Eligibility Verification Measure in fraud investigations. This key tool allows investigators to request financial information about claimants from their banks, aiding the DWP in verifying if claimants genuinely meet the eligibility criteria for the benefits they are receiving, such as having less than £16,000 in savings to claim Universal Credit.
However, the DWP will not have direct access to the bank accounts of millions receiving means-tested benefits like Universal Credit, Pension Credit, and Employment and Support Allowance. The DWP’s role is to identify those who may have breached the eligibility criteria for means-tested benefits.
Once a person is flagged, the department will initiate an investigation into the claimant to prevent potential overpayments and possible fraudulent activity. This is when banks may be asked to assist.
Benefit fraud occurs when you knowingly claim benefits you’re not entitled to, either by failing to report changes in your circumstances or providing false information. If you’re suspected of benefit fraud, you’ll be contacted by the DWP, HM Revenue and Customs (HMRC), Defence Business Services, or your local authority.
Your benefit could be halted whilst you are being investigated. If this happens, you will get a letter explaining the circumstances. Fraud Investigation Officers might visit you or you could be asked to attend an interview to discuss your claim – this is called an ‘interview under caution’.
If you have carried out or tried to commit fraud, one or more of the following could also occur:
- you will be told to pay back the overpaid money
- you may be taken to court or asked to pay a penalty (between £350 and £5,000)
- your benefits may be reduced or stopped
Government guidance states: “Your benefits can be reduced or stopped for up to 3 years if you’re convicted of benefit fraud. The amount of time they’re stopped for depends on how many times you’ve committed fraud.
“Only certain benefits can be reduced or stopped. These are called ‘sanctionable benefits’. But if you commit fraud on a benefit that cannot be reduced or stopped, your other benefits can be reduced instead.”
