DWP to Reclaim £500m Annually via New Bank Checks Targeting Benefit Fraud
DWP Bank Checks to Recover £500m Yearly from Benefit Fraud

DWP to Reclaim £500m Annually via New Bank Checks Targeting Benefit Fraud

The Department for Work and Pensions (DWP) is set to implement rigorous new bank checks this year, with the ambitious goal of clawing back approximately £500 million per annum once the system is fully operational. This decisive move forms part of a broader legislative crackdown embedded within the Public Authorities (Fraud, Error and Recovery) Bill, designed to combat escalating levels of fraud and error across three key welfare benefits.

Uncovering Undeclared Wealth and Overseas Stays

The new powers granted to the DWP will primarily focus on identifying two major discrepancies. Firstly, the system will target claimants who possess undeclared savings that exceed the permissible capital limits for benefit eligibility. Secondly, it will seek evidence of individuals residing overseas for longer periods than regulations allow or who have relocated abroad permanently without notifying the authorities.

When the Eligibility Verification Measure is completely rolled out, the DWP anticipates detecting between 50,000 and 100,000 instances of overpayment each and every year. This automated detection system will require banks to establish protocols that flag potential issues, such as unusually high savings balances or extended sequences of overseas financial transactions.

Staggering Losses Across Key Benefits

Recent DWP figures paint a stark picture of the financial drain caused by inaccuracies and fraudulent claims:

  • Universal Credit: Total expenditure reached £6.46 billion during the 2023/24 financial year, yet overpayments hit a concerning 12.4%. Capital-related fraud and error, stemming from unreported cash savings, accounted for a staggering £1.02 billion in losses. Abroad-related fraud and error added a further £250 million to this total.
  • Pension Credit: With an expenditure of £520 million, this benefit saw overpayments at 9.7%. Capital-related issues led to £200 million in losses, while abroad-related discrepancies accounted for £80 million.
  • Employment and Support Allowance (ESA): Although recording a lower overpayment rate of 3.4% on a £430 million spend, capital-related fraud and error still represented a substantial £180 million loss. Abroad-related issues were estimated at a lower figure of £10 million.

A Phased Rollout with Validated Projections

The DWP plans to introduce the Eligibility Verification Measure gradually, adopting a test-and-learn approach to refine the most effective processes. The financial projections for this initiative have received external validation. The Office for Budget Responsibility (OBR) has confirmed the DWP's estimates, which predict savings of up to £940 million over the coming five-year period.

This comprehensive strategy underscores the government's commitment to ensuring that the welfare system functions with greater integrity and that financial support is directed solely to those who are genuinely entitled to it.