DWP warned over extensive new bank account check powers as public trust at stake - new PAC report

- PAC to keep a close eye on work to rebuild trust with wrongly-pursued carers facing two-year wait for resolution as unacceptable levels of benefit fraud and error near fourth decade

The Department for Work and Pensions' (DWP) new powers to reach further into citizens' lives must be used effectively and proportionately. In a new report on benefit fraud and error, the Public Accounts Committee (PAC) promises continued scrutiny of how the DWP will work to resolve the cases of carers wrongly pursued for overpayment debts, while also highlighting the unacceptable finding that levels of fraud and error have now rendered DWP's financial accounts qualified for almost four decades.

As of last December, the DWP has significant fresh powers to compel banks and other financial institutions to provide information to help verify a claimant's eligibility and entitlement to benefits. It can also force third parties to provide information when it is conducting criminal investigations, and in some cases recover money owed by people directly from their accounts without a court order. The DWP has not fully set out how it will use these powers in a way that supports public trust.

The PAC's inquiry was told the DWP has put safeguards in place in its exercise of these powers, but is calling on the Department to report annually on how often it has used them, and with what impact.

The DWP has now committed that it will put right the cases of 26,000 carers incorrectly recorded as having overpaid carer's allowance, with flawed guidance on the DWP's part resulting in some being wrongly pursued for debt. The PAC's inquiry heard that it will take around two years to identify all those affected, with 200,000 cases to be reviewed. The report finds that this issue was allowed to persist because of a lack of integrated, concerted leadership within the Department, and will be keeping a close eye on the DWP as it implements the recommendations of 2025's independent review into the matter.

The report further highlights that, due to the levels of benefit fraud and error, the DWP's accounts have now been qualified for 37 successive years. Overpayments totalled ?9.5bn in 2024-25 (down from ?9.7bn the previous year). This is a current level of 3.3% of benefit expenditure; the DWP has said that getting the rate down to 2.8% by 2028-29 would be “impressive”. The PAC is not convinced by this, and calls on the Department to go further and set out a more stretching ambition to bring down the overpayment rate.

In the area of underpayments due to an error by the DWP, a local authority or HMRC, the PAC's report finds these had risen from ?1.1bn in 2023-24 to ?1.2bn in 2024-25. Overpayments for the same reason were also up, from ?0.8bn to ?1bn in the same period. The DWP has carried out some work to tackle the root causes of fraud and error – but this has focused on those committed by claimants, rather than errors by officials. Given reducing this error is largely within the DWP's own control, and the large amounts of money involved, the PAC is seeking action from the Department on tackling the root causes of official error.

People not receiving their full benefit entitlement as a result of not informing the DWP of a change in their circumstances is also a growing problem, the report found. This unfulfilled eligibility, which particularly affects disability benefits claimants who may fail to report that their condition has worsened, rose to c.?3.7bn in 2024-25, up from ?3.1bn the year before. The PAC recommends the DWP should evaluate how well it is encouraging claimants to report changes in their circumstances.

Sir Geoffrey Clifton-Brown, Chair of the Public Accounts Committee, said: “Make no mistake, the DWP's new powers to reach further into citizens' lives are significant. Our Committee of course firmly supports government in its responsibility to ensure people are paid the correct benefits. But it is essential that these extensive new powers - of compulsion of disclosure over banks and financial institutions, of recovering funds directly from people's accounts without the aid of the courts – have the risk of overreach mitigated against right from the outset. Indeed, a separate element of our report, which saw a welcome apology from the DWP's Permanent Secretary to all those carers wronged by his Department, demonstrates the impact that wrongly-implemented powers can have on people's lives.

“Our report finds beyond doubt that current ambitions to address unacceptable levels of benefit fraud and error are not stretching enough. More could be done on a cross-government basis to improve the accuracy of benefit payments, and the Department has not yet taken a proper look in the mirror to address official error rather than focusing entirely on claimants. But our report marks the now 37^th year in which the DWP has had its accounts qualified by the UK's chief auditor due to material levels of fraud and error. As PAC Chair, I would say to the Department's leadership directly: we are just three years away from what would be a sad and embarrassing milestone. Urgent action must be taken per our recommendations for the DWP to have something to celebrate in the years to come.”

PAC report conclusions and recommendations 

The Department has started to make progress in bringing down the level of benefit overpayments, but the current rate is still too high. The Department's accounts have been qualified for 37 successive years due to the material level of fraud and error in benefit expenditure. The Department estimates that it overpaid 3.3% (?9.5 billion) of benefit expenditure in 2024-25, down from 3.6% (?9.7 billion) in 2023-24. In its 2024-25 annual report and accounts, the Department set out an ambition to reduce overpayment rates to the pre-pandemic level of 3.1% by 2028-29. It has since updated its ambition to align with the Office for Budget Responsibility's 2025 Autumn Budget forecast, which was that the overpayment rate will fall to 2.8% by 2028-29. The Department claims that achieving this reduction would be “impressive”, but we are not convinced by the scale of its ambition. It will need to go further if the longstanding qualification on its accounts is to be removed, and we expect it to press on with demonstrating that it has put in place a cost-effective control environment for benefit expenditure.

Recommendation 1. The Department should set out in its Treasury Minute response to this report a more stretching ambition for reducing the overpayment rate, going beyond what is forecast to a level that indicates that it has cost-effective controls over benefit spending.

Errors by the Department or other parts of government caused ?1.0 billion of overpayments and ?1.2 billion of underpayments in 2024-25. Official error occurs when a benefit is paid incorrectly due to action, delay or a mistake by the Department, a local authority or HM Revenue & Customs. In 2024-25, official error overpayments were estimated at ?1.0 billion, up from ?0.8 billion in 2023-24, and official error underpayments were estimated at ?1.2 billion, up from ?1.1 billion in 2023-24. The Department has published information on some of the work it has done to identify and tackle the root causes of fraud and error, but this analysis focused on claimant error and fraud. We expect the Department to take official error as seriously as it does claimant error and fraud, given the large amounts of money involved and the fact that reducing this error is largely within its own control.

Recommendation 2. The Department should set out what action it will take to address the root causes of official error, with the aim of publishing a progress update in its 2025-26 annual report and accounts.

The Department has not made clear how it plans to spend the ?3.5 billion of dedicated funding it has available to tackle fraud and error in the three years from 2026-27. The government has awarded the Department ?6.7 billion of dedicated funding for fraud and error activity over the nine years from 2020-21 to 2028-29. Of this, ?3.5 billion will be available in the three years from 2026-27. The Department says that it will use ?300 million to ?400 million each year to continue its Targeted Case Review programme, which seeks to detect and correct fraud and error in Universal Credit claims. It is also planning to extend Targeted Case Review to Pension Credit, at a cost of up to ?70 million per year. However. the Department has not made clear how it will use the remainder of the available funding, which amounts to over ?2 billion. It has indicated that it intends to use some of the money to implement its new legal powers, but did not say how much this would cost.

Recommendation 3. The Department should set out in the Treasury Minute how it plans to spend the ?3.5 billion of dedicated funding available from 2026-27, including how it will measure the cost-effectiveness and return on investment of the areas it funds.

The Department is not doing enough to share data with other government departments and thereby improve the accuracy of benefit payments. Administering the benefits system is complex: for example, targeting benefits such as Universal Credit to claimants' needs and circumstances introduces complexity and increases the risk of fraud and error. Access to reliable data is key to keeping benefit payments accurate. However, the Department's benefit systems are not fully integrated and it lacks common data standards, which makes it difficult to take a data-driven approach to preventing and detecting fraud and error. The Department uses real-time PAYE earnings data from HM Revenue & Customs to verify claimants' employment earnings, which it holds up as a 'gold standard' example of data sharing. However, it does not seem to have similar data-sharing arrangements with other government departments, which could help it tackle key loss areas such as household composition. Data from the Department for Education, for example, could help the Department to verify the number of children in households claiming Universal Credit.

Recommendation 4. The Department should set out in the Treasury Minute how it plans to work directly with other departments on data sharing, including how it can work with the Department for Education to help verify household composition as part of its checks for Universal Credit.

The Department has not fully set out how it will use its new legal powers in a way that supports public trust. The Public Authorities (Fraud, Error and Recovery) Act, which received Royal Assent on 2 December 2025, gives the Department new powers to tackle fraud and error and recover debt. For example, it can now compel banks and other financial institutions to provide information to help verify a claimant's eligibility for benefits, and third parties to provide information when it is conducting criminal investigations. It will also be able to recover money owed by individuals directly from their bank accounts without the need for a court order where an individual is not on benefits or in PAYE employment. It is important that the Department uses these extensive powers proportionately and effectively. The Department says it is putting in place safeguards to make sure it does so, such as issuing codes of practice, and it also highlights the role HM Inspectorate of Constabulary and Fire & Rescue Services will play in providing oversight of how it uses the new powers.

Recommendation 5. The Department should report annually, in its annual reports and accounts, on how often it has used the powers in the Public Authorities (Fraud, Error and Recovery) Act 2025 and with what impact.

Claimants not reporting changes in their circumstances remains a key cause of people not receiving the full amount of benefit they are entitled to. Unfulfilled eligibility occurs where a claimant fails to provide accurate information or evidence to the Department about their circumstances and as a result does not receive their full benefit entitlement. Unfulfilled eligibility was estimated to be ?3.7 billion in 2024-25, up from ?3.1 billion in 2023-24. It particularly affects claimants of disability benefits, such as Personal Independence Payment, who fail to report that their condition has worsened. The Department acknowledges that building trust with customers is key to reducing the number of incorrect benefit payments, alongside making it easier for people to report changes of circumstances. It is launching a communications campaign in January 2026 to help customers identify what they need to tell the Department and to encourage them to do so. The Department also acknowledges that it needs to do more to build public trust by ensuring that people feel raising concerns about potential fraud is worthwhile, and has agreed to consider what information it might be able to share about the outcome of cases with people who make fraud referrals.

Recommendation 6.

2026. a) The Department should evaluate the impact of its communications campaign to encourage claimants to report changes of circumstances and publish the results by the end of 2026.
2027. b) In its Treasury Minute response to this report the Department should update us on how it plans to provide more information to update people who raise concerns with it about cases of potential fraud.

Inaccurate operational guidance has led the Department to incorrectly assess around 26,000 carers as having been overpaid Carer's Allowance. The main cause of Carer's Allowance overpayments is claimants having earnings which exceed the permitted limit. The Independent Review of Carer's Allowance Overpayments, which was published in November 2025, found that the prevalence of earnings-related overpayments had been caused by systemic issues that prevented carers from fulfilling their responsibility to report information about their circumstances. This included the Department having operational guidance that was inconsistent with the governing regulations and that did not allow staff discretion to average fluctuating earnings where claimants had an irregular earnings pattern. The Department estimates that, over the past 10 years, about 26,000 people were incorrectly recorded as having been overpaid Carer's Allowance as a result. It has committed to put this right and believes it will take around two years to identify all those affected, with 200,000 cases reviewed in the process. A lack of integrated, concerted leadership from the Department allowed this issue to persist, and it must now work quickly to provide redress to the people affected.

Recommendation 7. Within six months, DWP should write to update the Committee on its progress with identifying and resolving the cases of carers affected by its inaccurate guidance.