The Department should report annually how often it has used the powers given to it and with what impact, the Public Accounts Committee urged.
The Department for Work and Pensions (DWP) must make sure it uses its significant new bank account checking powers proportionately because public trust is at stake, according to a spending watchdog.
The Public Accounts Committee (PAC) highlighted how the DWP has been given powers to compel banks and other financial institutions to provide information to help verify a claimant’s eligibility and entitlement to benefits.
The Public Authorities (Fraud, Error and Recovery) Act 2025 gives the Department its new legal powers.
The Department can 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.
But the PAC said the DWP has not fully set out how it will use its powers in a way that supports public trust.
In a report, it is calling for the department to report in its annual report and accounts on how often it has used the powers given to it in the 2025 Act, and with what impact.
The PAC’s report said: “The department also needs to improve its processes and controls to stop overpayments arising in the first place and prevent losses to the taxpayer.
“A key element of this is drawing on data held by other government departments to help check claimants’ entitlement to benefits.”
The report also highlighted how the DWP has now committed that it will put right the cases of 26,000 carers incorrectly recorded as having overpaid carer’s allowance.
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 PAC also said that 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.
Its report said: “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 PAC said said 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 over-reach 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 37th 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.”
A DWP spokesperson said: “We have introduced major reforms to ensure people are paid the correct benefits, to recover overpayments and to help save billions of pounds for the taxpayer.
“The powers in the Fraud, Error and Recovery Act have numerous safeguards and will be independently overseen.
“We will not have access to claimants’ bank accounts when checking they are receiving the correct benefits.
“We are forecasting an ambitious reduction in fraud and error levels to 2.8% by 2028-29, the lowest level since tax credits were introduced in 2003-04.”