Impact assessment forecasts that prosecutions will rocket, but claims staff will take ‘account of circumstances and vulnerabilities’ of benefit recipients and ‘no automatic decisions will be made on data alone’
New laws allowing the Department for Work and Pensions to monitor the bank accounts of benefit claimants are predicted to lead to 7,400 extra prosecutions for fraud each year – resulting in 250 custodial sentences.

The forecasts are made as part of the department’s newly published impact assessment for proposed legislation that would require financial institutions to provide government with data on account holders that receive benefits. The aim of the new law would be to alert the DWP to benefits being paid in error or obtained fraudulently when a recipient has understated their savings or income. Currently, the DWP can only undertake checks of account data for a named individual who is already under suspicion of fraud.

The ability to monitor potential fraud in a more proactive way will result in “an additional 74,000 prosecution cases, 2,500 custodial sentences and 23,000 applications for legal aid” over the 10-year period considered by the assessment.

This would seemingly represent an enormous rise on the current levels of prosecution with only 487 cases referred to prosecutors by the DWP during the 2022-23 year, according to recent evidence submitted to the Public Accounts Committee. Over the past three years, an annual average of 385 people have been convicted based on these referrals.

The assessment document indicated that DWP caseworkers will bear in mind the potential vulnerability of claimants and automation will be used responsibly.

“[This] measure can potentially include vulnerable people, [and] these areas will be explored further in the equality impact assessment,” the document said. “We are clear, however, that no automatic decisions will be made based on data alone, and DWP staff will follow the usual business processes when looking into any cases, taking account of circumstances and wider vulnerabilities before deciding on a course of action.”

The DWP said that it has already had discussions with banks, building societies, and trade body UK Finance and has been “clear that any data received under this measure should not be seen as indicative of any financial crime” in and of itself.

“Many claimants will have a legitimate, authorised reason to hold savings in excess of capital benefit rules – disregards for injury compensation, for example – and in many cases, overpayments could have been caused by genuine claimant error,” the assessment said. “Given this, we have been clear that there should be no action to de-bank claimants.”

The department also said that it will make sure to “protect privacy… only looking at data that is signalling potential benefit fraud and error and only drawing in data on DWP customers, [and] will create a system for [banks] that is effective, simple, and secure and data will be transferred, received, and stored safely”.

The assessment concludes that the proposed “measure is proportionate and targeted and will help DWP tackle fraud and error more effectively”.

‘A clear message’
The department projects that implementing the data-sharing policy will cost £370m over the coming years, and then £30m a year in staffing and other operational costs from the 2031/32 year onwards.

The initiative will deliver overall benefits of £2.93bn – equating to a net return of £2.57bn, it forecasts.

Plans have been made to test the data-sharing with two – unspecified – banks or building societies in 2025, with a full-scale rollout across all institutions from 2030 onwards.

This will encompass all of the 15 banks and building societies that, collectively, receive 97% of all benefit payments. This includes: Bank of Scotland; Barclays; Halifax; HSBC; Lloyds; Metro Bank; Monzo; NatWest; Nationwide; Santander; Starling; The Co-Op; Royal Bank of Scotland; TSB; and Yorkshire Bank.

While extending data sharing to cover the smaller institutions that constitute the other 3% “would likely be ineffective” and overly burdensome, the DWP believes it is “important to not shut off this option in primary legislation as we do not want fraudsters to see this as a loophole and change their banking approach to deliberately circumvent our measure”.

Work and pensions secretary Mel Stride said: “These new powers send a very clear message to benefit fraudsters – we won’t stand for it. These people are taking the taxpayer for a ride and it is right that we do all we can to bring them to justice. These powers will be used proportionately, ensuring claimants’ data is safely protected while rooting out fraudsters at the earliest possible opportunity.”

The plans for giving the DWP access to bank data were announced as part of a range of what the government described as “common-sense changes to the Data Protection and Digital Information Bill”.

Other proposed legal changes would see social media firms required to retain the data of users that have died by suicide. This information “could then be used in subsequent investigations or inquests”, according to the government.

UK counter-terror police would also be empowered under the updated law to retain indefinitely the biometric data of individuals with a conviction overseas.

Secretary of state for science, innovation and technology Michelle Donelan, said: “Britain has seized a key Brexit opportunity – boosting small businesses, protecting consumers and cracking down on criminal enterprises like nuisance calling and benefit fraud. These changes protect our privacy and data while also injecting common sense into the system – whether it is cracking down on cookies, scrapping pointless paperwork which stifles productivity, tackling benefit fraud or making it easier to protect our citizens from criminals. These changes help to establish the UK as a world-leading data economy; one that puts consumers and businesses at the centre and removes the ‘one-size-fits-all’ barriers that have held many British businesses back.”

The amendments are set to go through the report stage in the House of Commons tomorrow, before then making their way on to the House of Lords.