Millions of customers with some of the UK's largest banks are set to be affected by a significant new government initiative aimed at reducing benefit fraud. The Department for Work and Pensions (DWP) is implementing controversial new powers that will compel financial institutions to hand over customer data and allow for direct withdrawals from accounts.
Major Banks Forced to Hand Over Customer Data
Under the new regulations, which represent the most substantial change to bank account rules since 2008, institutions will be legally required to provide information on specific customers to the DWP. This will effectively allow department officials to examine, or 'spy on', the financial activity within these accounts.
The policy specifically targets individuals who claim key benefits, including Universal Credit, Employment and Support Allowance (ESA), and Pension Credit. The government states the move is necessary to combat benefit fraud, which is estimated to cost the country millions of pounds annually. For instance, officials will be able to check savings balances to determine if a claimant holds funds that would make them ineligible for certain benefits.
Which Banks and Building Societies Are Involved?
The directive will involve many of the UK's biggest high street names, collectively serving tens of millions of customers. The financial institutions confirmed to be part of the scheme include:
- Nationwide
- Lloyds Bank
- NatWest
- Barclays
- Santander
The DWP has previously highlighted that the vast majority of its claimants use these major providers. Over 97% of all benefit payments from the DWP are made into accounts held with the 15 largest banks and building societies in the UK.
How the New 'Spy Powers' Will Work
The department has outlined the mechanics of the new system, which came into force under recent legislation. The Act grants the DWP authority to issue Eligibility Verification Notices (EVNs) to banks and other financial institutions.
These notices will require the institutions to examine data held on specified accounts and provide relevant information to the DWP. This process is designed to help verify a claimant's ongoing entitlement to benefits and to identify any incorrect payments that may have been made.
Furthermore, the powers extend to the recovery of funds. Money owed to the DWP can now be recovered directly from an individual's bank account. This will be done by issuing a direct deduction order to the claimant's bank, instructing it to repay the owed amount.
The government maintains that these measures are a crucial tool for safeguarding public funds and ensuring the benefits system supports those who are genuinely eligible. The rollout of these powers marks a new era in the relationship between welfare provision, personal finance, and state oversight in the UK.
