The DWP will receive data from banks (Image: Getty)
The DWP is being handed new powers to clamp down on benefits fraud including making banks report suspicious benefits activity to the government.
A new law known as the Fraud, Error and Debt Bill is being introduced by Labour and is similar to plans the Conservatives were set to launch but had to be shelved for the General Election.
The government says the plans will save £1.6Bn over the next five years by unearthing fraudulent benefits claims, as well as forcing people to pay back benefits fraud after falsely claiming they can’t afford to.
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Under the new law, banks will be made to share information with the which show ‘indications of potential fraud’.
But the government has assured that “The will not have access to people’s bank accounts and will not share their personal information with third parties.”
The said: “This legislation will give powers to: Better investigate suspected fraud and new powers of search and seizure so can take greater control investigations into criminal gangs defrauding the taxpayer.
“Allow to recover debts from individuals who can pay money back but have avoided doing so, bringing greater fairness to debt recoveries.
“Require banks and financial institutions to share data that may show indications of potential benefit overpayments.”
The government added: “The Bill is expected to save £1.6 billion over the next five years and will extend and modernise ’s powers to stop fraud in its tracks, recover money lost to fraud and protect vulnerable customers from racking up debt.
“Fraud and error in the social security system currently costs the taxpayer almost £10 billion a year and since the pandemic a total of £35 billion of taxpayers’ money has been taken away from those who need it most.”
Labour also stressed that the Bill would contain safeguarding measures for vulnerable welfare claimants, and staff would be trained to the highest standards on the appropriate use of new powers.
But the announcement could set up another clash with the left of the Labour Party, which has previously argued that the Government should focus more on tax avoidance by large corporations and the rich rather than benefit fraud.
Labour has also promised a crackdown on tax avoidance, with Chancellor Rachel Reeves saying the Government would hire 5,000 more compliance officers at to do so.