This bill grants the government powers of surveillance on the bank accounts of the poor, old, sick and disabled people receiving specified benefits
Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.
The UK government’s much publicised approach to dealing with social security benefit fraud is contained in the Public Authorities (Fraud, Error and Recovery) Bill (PAFER). It has been passed by the House of Commons and is going through the House of Lords.
The background is that the government estimates that in the year to 31 March 2025 benefits were overpaid by £9.5bn (2024; £9.7bn). Of this, £6.5bn (2024; £7.3bn), about 2.7% of total benefits, is estimated to be lost due to frauds. Overpayments due to Official Error were £1.0bn and claimants errors added up to £1.9bn. Whilst focus on fraud detection, prevention and recovery is welcome, PAFER unleashes a new age of big brother. It grants the government powers of surveillance on the bank accounts of the poor, old, sick and disabled people receiving specified benefits. Large parts of PAFER resurrect the Tory government’s Data Protection and Digital Information Bill which fell because of the general election.
Scope of Legislation
PAFER assumes that recipients of benefits have criminal tendencies and must therefore be denied financial privacy. It empowers the Department of Work and Pensions (DWP) to compel banks and financial institutions to scrutinise accounts of benefit claimants and provide specified information to help it verify eligibility of claimants of benefits.
Banks will be required to develop algorithms to search and report information demanded by DWP. The cost of developing algorithms is to be borne by banks and will ultimately be passed to bank customers. Inevitably, banks are not keen on the new duties, especially as it makes them a de facto arm of the repressive state and conflicts with their duty of confidentiality.
No court order is needed for such en masse surveillance. The affected individuals won’t be told. There is no right of appeal. The information that DWP will demand has not yet been explained. The government has promised a code of practice but that has not yet been published i.e. the law has been passed by the Commons without knowing the full details.
The requested information could relate to thresholds which if exceeded could raise suspicion of fraud. For example, persons with more than £16,000 in savings (capital) are not eligible for Universal Credit (UC). So, the DWP could demand information about a benefit claimant’s savings. It is not clear how the level of savings will be determined. Suppose you give a loved one some money to replace furniture and the money remains in their bank account for some time. At what point would that be construed as saving, and lead to accusations of fraud and denial of UC? A mistake could have severe consequences. There are 7.5m people on UC and a 1% reporting error could cause 75,000 people to lose the benefit.
The information sent by banks to the DWP will be examined by its staff and they will decide if it raises suspicions and the next necessary steps. Around 3,180 extra staff (covers DWP and HMRC) are expected to be recruited. The DWP assessment would be communicated to the individual who may challenge it. If the benefit claimant is not willing to return overpayment or is unable to repay, the Secretary of State can issue orders and recover the money directly from the claimant’s bank account. This would be done via a lump sum deduction for specified amounts and regular direct deductions from wages and incomes. No court order is needed. The DWP will be able to apply for and obtain search warrants to enter premises and seize evidence relevant to fraud investigations; the police will continue to be responsible for arresting suspects. The Bill does not promise legal aid or advice to enable anyone to challenge the DWP.
The DWP can apply to the court to disqualify a debtor from driving for two years even if the overpayment is due to DWP’s own error and due to tight finances, the debtor is unable to repay. With a driving ban many might struggle to earn a living, meet family needs or be able to travel from rural areas lacking public transport. Driving licences depend solely on the ability to drive safely, but that criterion is being abolished.
The government estimates that PAFER will enable it to recover £1.5bn over the next five years. The government’s total spending for 2025-26 is expected to be £1,335bn.
Application of the Legislation
The legislation would initially apply to recipients of Universal Credit, pension credit and employment support allowance, and the government retains power to amend, add or remove this list. The government is separately targeting disability benefits and in due course their claimants too would probably become subject to financial surveillance. The government is reeling from the backlash on cuts to winter fuel payments and has exempted 13m recipients of the state pension. It does not mean that pensioner bank accounts won’t be scrutinised. For example, 1.6m pensioners receive pension credits, which opens the door to winter fuel payment, housing and other benefits, and would therefore be subject to surveillance. We are all one serious accident or illness away from being reliant upon benefits and can potentially become subject of surveillance.
The rate of fraud varies from some 10.9% for Universal Credit payments to 4.5% for pension credit, 4.1% for housing benefit, 2.5% for carer’s allowance, 0.4% for personal independence payment (PIP) and 0.1% for state pension. The fraud on universal credit is an outlier and may require special investigation whilst others seem manageable. In the light of this some might question the need for new mass surveillance and disciplinary powers.
PAFER conflates error and fraud. The overpayment constituting fraud and error may arise because of the complexity of checks. For example, the form to claim Pension Credit is 22 pages long and has 243 questions. The form to claim Personal Independence Payment (PIP) is 50 pages long and has intrusive personal questions about matters such as bathing and personal cleanliness, including questions about whether the applicant uses incontinence pads, needs help to clean himself/herself after going to toilet. Many may be embarrassed to answer such questions or discuss them repeatedly with strangers. At what point does an incorrect answer become fraud?
The Bill has not been accompanied by an impact assessment.
Some Issues
Anyone receiving public money in the forms of wages, travel expenses, grants, subsidies, government contracts can commit fraud, but PAFER only removes financial privacy from benefit claimants i.e. the poor, old, sick and disabled. This discriminatory Bill creates an underclass stripped of rights. The normal assumption in law is that people are innocent until proven guilty. PAFER reverses the presumption. It makes a mockery of equality laws and is likely to fall foul of Articles 8 and 14 (of the European Convention on Human Rights.
Benefits can be received by Britons living abroad and paid into a foreign bank account. Such accounts won’t be subject to surveillance because no sovereign state will permit another state to snoop on its financial system. Thus, surveillance will only apply to Britons without foreign bank accounts.
As banks bear the cost of developing algorithms and surveillance, they might refuse bank accounts to recipients of benefits and expand financial exclusion.
To avoid snooping, landlords might refuse to have housing benefit of tenants paid directly into their bank accounts. This policy has been pushed by successive governments, especially as many people don’t have a bank account or struggle to manage money. Would this increase homelessness? There is no consideration of the unforeseen consequences.
The Bill says that the DWP will only issue direct deduction orders after careful consideration, but errors are always possible. The Post Office scandal is a reminder of the consequences of blind faith in computer generated data. Removing money from people’s bank accounts could leave many in dire financial hardship.
Permitting the state to remove money from anyone’s bank account sets a bad precedent. Might these powers be misused in future? In a democracy, the policing power to enter people’s homes and seize items should be restricted to as few agencies as possible. This Bill extends that to DWP.
The surveillance provided by PAFER does not apply to thieves, tax dodgers, money launderers, scammers or disqualified company directors. No one robbing a bank or committing identity theft is deprived of driving licence, but those accused to benefit fraud can be disqualified from driving.
The Bill is part of a class war that demonises the less well-off by creating an underclass that is assumed to be criminal, denies them privacy and subjects them to arbitrary sanctions.
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