Labour Scraps Controversial Plan to Check Benefit Claimants’ Bank Accounts Amid Welfare Fraud Crisis

The Labour Government has reportedly abandoned plans to give the Department for Work and Pensions (DWP) greater access to the bank accounts of people applying for Universal Credit.

The proposal was designed to help officials identify claimants who were receiving benefits despite having savings or investments above the permitted threshold.

Under existing rules, people claiming Universal Credit are generally not allowed to have more than £16,000 in money, savings and investments.

The abandoned proposal would have introduced additional checks to establish whether applicants met the financial eligibility requirements before receiving payments.

Reeves Had Projected £200 Million in Annual Savings

The scheme was originally announced by former Chancellor Rachel Reeves during her Spring Statement last year.

At the time, the Treasury estimated that introducing additional verification measures could save approximately £200 million annually by reducing overpayments caused by incorrect declarations.

The Government had identified around £1 billion in Universal Credit overpayments linked to claimants providing inaccurate information about their financial circumstances.

Overall, the DWP is estimated to overpay almost £10 billion annually through welfare fraud and errors.

Open Banking Was Central to the Original Proposal

Under Reeves’s plan, the DWP would have relied on Open Banking or face-to-face checks to establish how much money claimants held in their accounts.

Open Banking allows financial institutions to share customers’ banking information with authorised parties, subject to the necessary consent.

The proposed measures were intended to give the department additional ways to verify savings and investments declared by people applying for Universal Credit.

However, according to The Telegraph, the scheme has now been scrapped by the new Work and Pensions Secretary, John Healey.

Instead, the department plans to require banks to conduct checks on claimants’ accounts after they have started receiving Universal Credit.

Labour Faces Criticism Over Welfare Policy

The reported decision has attracted criticism from the Conservative Party, which accused Labour of abandoning its efforts to reduce welfare spending.

Helen Whately, the Shadow Work and Pensions Secretary, said the Government had effectively surrendered on welfare reform.

She said: “There will be no savings in this Parliament and they don’t even want to make savings over the next decade.”

Whately also argued that millions of people remained dependent on benefits while taxpayers continued to shoulder an increasing financial burden.

She called for the Government to take stronger action to address problems within the welfare system.

Government’s Wider Welfare Reform Plans

The development comes after Prime Minister Andy Burnham acknowledged last week that reducing Britain’s growing welfare bill would require the Government to increase spending in other areas first.

He suggested that investment would be necessary to address the situation facing almost one million young people who are not in education, employment or training, commonly referred to as NEETs.

The Prime Minister is not expected to announce further welfare reforms until next year.

This is expected to follow the publication of a major report on the NEETs crisis, which is being prepared by former Health Secretary Alan Milburn and is anticipated before Christmas.

DWP Explains Why the Original Scheme Was Dropped

A Department for Work and Pensions spokesperson told The Telegraph that the previous Open Banking proposal had been abandoned because it depended on benefit claimants giving consent for the Government to access their bank account information.

The spokesperson said the arrangement could not be applied to every Universal Credit claim.

They added that the Government remained committed to tackling fraud and errors while protecting public money.

The department is instead introducing the Eligibility Verification Measure (EVM), which will require banks and other financial institutions to provide information when accounts meet specified criteria.

According to the DWP, the new arrangement will provide a more consistent approach to identifying incorrect payments and tackling benefit fraud and errors.

The department also stated that the Eligibility Verification Measure is expected to generate savings of £1.2 billion by the 2030–31 financial year.