The government's independent Regulatory Policy Committee (RPC) has criticised the Department for Work and Pensions (DWP) for underestimating the impact on the poorest of plans to directly deduct benefit overpayments from claimants' bank accounts.
The Public Authorities (Fraud, Error and Recovery) Bill would allow the DWP to require banks to withdraw cash from accounts where overpayments have occurred due to fraud or error. Banks could also charge claimants 'reasonable' administration costs, though the government has not specified the value of these charges.
The RPC said the DWP's impact assessment 'does not sufficiently take into consideration the potential impact on the poorest members of society of reclaiming overpayments due to error'. It also raised concerns about a lack of transparency regarding the costs banks will charge claimants for facilitating the deductions.
Welfare Secretary Liz Kendall has said the use of 'direct deduction orders' could save taxpayers £500 million a year once fully rolled out. In 2023-24, benefit overpayments due to fraud or error totalled £9.7 billion. However, the DWP's own annual report revealed that 76% of flagged claims were found to have no fraud or error.
Citizens Advice and campaign group Big Brother Watch have warned the powers will disproportionately affect vulnerable people. Jasleen Chaggar of Big Brother Watch said: 'We should not be giving the government powers to go behind our backs and pilfer through our bank accounts, especially when the purpose is not just to tackle serious fraud but to correct accounting errors.'
A DWP spokesperson said the bill includes safeguarding measures to protect vulnerable customers and that debt recovery is aimed at those who have the financial means to repay but repeatedly refuse. The RPC rated the bill as 'fit for purpose', giving it a green rating.
