The government's plan to allow direct deductions from bank accounts to recover benefit overpayments has been criticised by an independent watchdog for underestimating the impact on the poorest. The Regulatory Policy Committee (RPC) said the Department for Work and Pensions (DWP) had not sufficiently considered the effect on vulnerable people in its impact assessment of the Public Authorities (Fraud, Error and Recovery) Bill.
The bill would require banks to withdraw money from claimants' accounts in cases of overpayment due to fraud or error, with banks able to charge 'reasonable' administration costs. The RPC also flagged a lack of transparency over these charges, noting that the DWP had not quantified the costs to banks, which would be recovered from debtors.
Welfare Secretary Liz Kendall has said the measure could save taxpayers £500 million a year once fully implemented. In 2023-24, benefit overpayments due to fraud or error totalled £9.7 billion. However, the DWP's own accounts show that 76% of flagged claims were found to have no fraud or error.
Citizens Advice has warned the powers will disproportionately affect the most vulnerable, while the banking industry has raised concerns about potential clashes with the Financial Conduct Authority's consumer duty. The government insists that direct deductions will only occur after affordability and vulnerability checks, including reviewing bank statements.
Campaign group Big Brother Watch called the powers 'dystopian', arguing that decisions to seize funds should be made by courts, not officials. A DWP spokesperson defended the bill, citing safeguarding measures and noting that the RPC had rated it 'fit for purpose' with a green rating.
