Banks and other financial institutions can be required to check accounts receiving certain DWP payments against eligibility criteria set by the Government.
The measures form part of the Public Authorities (Fraud, Error and Recovery) legislation and are being introduced gradually.
The initial focus is on three payments where the Government says incorrect payments are currently highest:
Universal Credit
Pension Credit
Employment and Support Allowance
Other benefits could potentially be included in future, although this would require approval from Parliament.
The State Pension is specifically excluded from the measure.
It means someone receiving their normal State Pension does not face having their account checked under these particular powers simply because they receive that pension.
Can the DWP see what you spend your money on?
The new powers do not give the DWP unrestricted access to people’s bank accounts or their everyday spending.
Instead, financial institutions can be required to check accounts receiving specified benefits against indicators contained in an Eligibility Verification Notice.
Where an account meets one of those indicators, limited information can be supplied to the DWP.
This can include details identifying the account, such as its sort code and account number, information about the account holder, including their name and date of birth, and information showing how the account met the relevant eligibility indicator.
Banks are not supposed to provide details of individual transactions under this process and could face penalties for sharing information beyond what is permitted.
This means the checks are not designed to tell the DWP where somebody shops, what they have bought or how they spend their money.
Information being passed to the department also does not in itself mean the account holder is suspected of committing an offence.
Why could savings trigger a DWP check?
One area where bank information can be relevant is the amount of capital a claimant holds.
Universal Credit normally has an upper capital limit of £16,000, although there are circumstances in which particular types of capital can be disregarded.
The new system is intended to help identify accounts that may not match the eligibility rules applying to the benefit being paid.
A flag does not automatically mean someone’s benefits will be stopped.
Where further inquiries are considered necessary, the case will continue to be investigated by the DWP.
What happens if an account is flagged?
The Government has said decisions about people’s benefit entitlement will not be left to artificial intelligence.
Human decision-makers will continue to be involved where action is considered following an investigation.
The bank-checking system is also being introduced gradually using what has been described as a “test and learn” approach.
This is intended to allow processes to be refined before the measure is used more widely.
Once the system is fully introduced, the DWP estimates it could help identify between 50,000 and 100,000 cases of benefit overpayment each year.
For claimants, the important distinction is that the new power allows specified information to be provided when an account matches an eligibility indicator.
It does not give the DWP a general power to monitor everything someone buys or routinely inspect their day-to-day transactions.