The Department for Work and Pensions (DWP) will gain new powers from October to directly access individual, joint, and business bank accounts to recover cash from suspected benefit fraud, under the Labour government's Public Authorities Fraud, Error and Recovery Act (PAFER).
The move targets benefits with the highest fraud rates first, specifically Universal Credit, Pension Credit, and Employment and Support Allowance (ESA). DWP staff will be able to send direct notices to banks, compelling them to hand over information on individuals suspected of cheating the welfare system.
How the new powers will work
Once a notice is issued, the DWP can enter bank accounts to directly recover owed funds. The accounts covered include individual, joint, and business accounts. According to the DWP, a business account is one relating to a sole trader or partnership used for business or commercial purposes but held (alone or jointly) by the liable individual. This does not include accounts held by corporations such as limited companies or limited liability partnerships.
A joint account is defined as one where "any individual who holds a bank account jointly with the liable individual." The DWP explained that this "will normally mean each account holder has access to, and responsibility for the account and any funds in it."
Prioritising recovery from business and joint accounts
The DWP will only apply a Direct Deduction Order (DDO) to accounts known to be primarily used for business purposes when it is not reasonably possible to recover from another account held solely by the liable individual. Where a business account is held exclusively by an individual, it will be considered before any joint accounts.
For joint accounts, the DWP says each account holder will be notified separately of the intention to recover directly from the account and invited to make representations. No recovery will start until all parties have been notified and the relevant period has passed, it added.
Impact on benefit claimants
The new powers are part of a wider crackdown on fraud and error in the benefits system, which the government says costs billions of pounds each year. By targeting accounts directly, the DWP aims to recover funds more efficiently and deter potential fraudsters.
However, the move has raised concerns about the impact on innocent joint account holders and small business owners who may be affected by recovery actions. The DWP has assured that safeguards are in place, including notification requirements and the ability to make representations before any recovery begins.
