DWP anti-fraud measures will allow monitoring of bank accounts of landlords, carers and parents

Housing

Peers have raised concerns that the bill could exacerbate housing problems by deterring landlords from renting to people on benefits.

The Lords heard that landlords who received benefits payments from the government directly into their bank accounts from the government would be liable to have all of their bank accounts monitored as “connected accounts” under the terms of the legislation.

Lord Sikka for Labour said: “Why would a landlord want to receive money from housing benefits directly when it will mean that all of his bank accounts and linked accounts will be looked at? He will simply say no.

“I have received lots of emails and letters and met individuals who are very concerned ... that they will be made homeless because their landlords will not want their bank accounts to be put under surveillance.”

The government confirmed last week that “landlords are in scope”.

Risk of debanking

Peers also raised concerns that the legislation could lead to banks refusing to provide accounts to people on benefits as this would require banks to introduce new systems to monitor benefit claimants.

Conservative peer Lord Kammal said: “Putting additional onerous obligations on banks may make them decide that it is too difficult to provide accounts to those in receipt of benefits.”

Trade association UK Finance, which represents banks and financial services companies, was concerned that legal requirements to monitor bank accounts of benefit claimants could conflict with their legal duty of care to their customers, he said.

The body was also unhappy that the government was introducing a “one-off” measure rather than “an overall strategy to deal with fraud and financial misunderstandings within the sector.”

Mistakes could lead to injustice

Peers warned that errors in algorithms used to monitor bank accounts could lead to people being wrongly investigated, or having their benefits wrongly suspended.

Baroness Chakrabati for Labour said it could lead to injustices of the type experienced by the postmasters at the hands of the Post Office.

For example, a person giving a gift to a pensioner could trigger a response in an algorithm that could lead to them losing benefits or being accused of criminality.

Over 150,000 unpaid carers face huge fines for unwittingly going over the earnings limit while caring for a vulnerable person when the DWP failed to act on notifications alerting them to the issue.

Lack of oversight

Lord David Anderson, former independent reviewer of terrorism legislation, said that the DWP’s new powers had not been subject to detailed consultation or scrutiny by a commons committee.

The “vague” powers had been included in a bill without an accompanying code of practice, and there was no independent approval and oversight mechanism equivalent to the Investigatory Powers Commissioner’s Office (IPCO) that oversees surveillance.

Article eight of the European Convention on Human Rights, which guarantees the right to privacy, applies as soon as a machine harvests data in bulk, irrespective of whether it is reviewed by a human.

“If we do not get this potentially valuable power right from the start, it will immediately be subject to legal challenges, which will swiftly render it unusable,” he told the House.

Parliamentarians sign open letter

An open letter signed by 20 MPs and members of the Lords, to the Secretary of State for Science Innovation and Technology, Michelle Donelan, argues that the proposed powers would be “far-reaching” and “highly intrusive”.

According to the letter, dated 19 April 2024, they would require banks to sift through tens of millions of bank accounts to identify people in the welfare system, around 40% of the population the letter states.

“Searching for such signals without reasonable grounds for suspicion would reverse the well-established presumption of innocence,” it says.

Risk of errors

The letter, signed by parliamentarians including Lib Dem DWP spokesperson Wendy Chamberlain MP, Charles Walker MP and member of Conservative Disability Group, Liberal Democrat Lord Clement-Jones and Labour’s Baroness Chakrabarti, argues that in the absence of safeguards, it is inevitable that mistakes will be made.

“Incorrectly flagged accounts could have disastrous consequences from intrusive investigations, to heightened stigma in the welfare system, to the wrongful suspension of benefits,” they said.

“We note the tragic events of the Horizon scandal in which innocent people suffered wrongful prosecutions, financial ruin and reputational damage following data used from faulty software in algorithmic systems. We cannot condone powers that risk replicating this disaster on a much broader scale with vulnerable people, many of whom live on the poverty line.”

The parliamentarians argue that the government already has powers to review the bank statements of welfare fraud suspects under the Social Security Fraud Act 2021.

“According to the government’s own figures, the powers would only recoup around 3% of all fraud in the welfare system, making the population-wide financial intrusion disproportionate to the problem it sets out to solve,” they say.

ICO ‘wording of bill too broad’

The information commissioner said in March that the bill had not been drafted tightly enough to minimise the level of data collected, to make it clear what information is processed for what purpose.

The ICO raised concerns that the wording of the bill “does not sufficiently limit the scope of the power to only obtaining information that would permit the identification of accounts and people that warrant further investigation”, and could be interpreted more broadly.

DWP has confirmed that as it looks to expand the use of the power in future to organisations outside of the financial sector, it will do so via secondary legislation.

The government claims financial surveillance powers in the Data Protection and Digital Information Bill, currently going through Parliament, will save £600m over the next five years by reducing overpayments to people claiming benefits and reducing fraudulent claims.

Data published by DWP reveals the scheme will cost £370m to set up, and £30m a year to run once it’s fully up and running from 2032.

The department plans to test the monitoring regime from 2025, initially working with a limited number of banks and building societies and trade body UK Finance, which represents banks and financial services companies, to develop IT systems and data-sharing mechanisms.

The department will initially focus on the top 15 banks in the UK, which account for 97% of the accounts used by people claiming benefits. They include Bank of Scotland, Barclays, Halifax, HSBC, NatWest, Santander and TSB. 

“The DWP powers were added late to the Bill and have not had proper scrutiny by the Commons,” said Baroness Kidron. “They raise significant issues of privacy, proportionality and practicality, and it will impact primarily on the old, the disabled and the vulnerable.”

Silkie Carlo, director of campaign group Big Brother Watch, which has commissioned a legal opinion on the measures that found they are likely to breach privacy rights, said the bill would impact the whole population. 

“This action by parliamentarians shows that opposition to bank snooping spans across all parties and both Houses of Parliament,” she said. “The government must avert this disaster and drop their bank spying plans.”

DWP says measures are not surveillance

The DWP said its new powers do not amount to surveillance and will not give investigators direct access to bank accounts.

A DWP spokesperson said: “This is an information-gathering power. It is not a surveillance power or an investigatory power.

“It requires third parties to look within their own data and provide minimal, relevant information to DWP only where this may signal that a claimant does not meet the eligibility criteria for the benefit they are receiving,” they said. “DWP will not receive any data on the vast majority of claimants who comply with rules around benefit entitlements.”

Banks will be required to provide “minimal, relevant information” only where it signals that benefit claimants may not be eligible to receive a benefit and decisions on whether to withdraw benefits would always be made by a human.

The DWP maintains that the claim that the measures will only tackle 3% of welfare fraud is incorrect, but has not provided an alternative percentage figure.