Benefit cheats could lose driving licences in anti-fraud drive

Convicted benefits cheats who fail to pay back the taxpayer could be stripped of their driving licences, under government plans to crack down on fraud.

Those who repeatedly cheat the system and have debts of £1,000 or more could be punished with a driving ban of up to two years.

Fraudsters can already be jailed in the most serious cases – but Work and Pensions Minister Alison McGovern said it would provide an additional “tool in the box” to chase repayments.

The plans also include new powers to force banks to hand over account information about benefit claimants to help target investigations, echoing a scheme announced by the previous Conservative government.

But this is likely to face strong opposition from the banks and privacy campaigners.

Providing false information to obtain benefits can see fraudsters hit by fines, while serious cases of conspiracy to defraud can attract prison sentences of up to ten years, under current laws.

Pressed on whether the power to disqualify drivers would provide an additional deterrent, McGovern told BBC Breakfast it would provide a “backstop” to chase repayment from those determined to “evade collection”.

She added that the department already tries to collect fraudulently claimed benefits via banks or the PAYE system, but the licence powers could help with those who still “don’t want to co-operate”.

According to latest annual figures, overpayments due to fraud amounted to £7.4bn last year, around 2.8% of total welfare spending.

A further £1.6bn (0.6%) was overpaid due to inadvertent errors by claimants, with £0.8bn (0.3%) overpaid because of errors by the DWP.

Ministers have estimated greater access to banking data could save taxpayers £1.6bn over five years, by helping DWP investigators identify suspect claims more effectively.

But campaign groups have warned that it will invade claimants’ right to financial privacy, and could lead to legitimate claimants being wrongly investigated.

In a letter to Kendall in September, the directors of Big Brother Watch and Age UK described the plans as “mass financial surveillance powers” which they said would “represent a severe and disproportionate intrusion into the nation’s privacy”.

Currently, the department can only request such financial information where it has reason to suspect fraud, and only in individual cases.

The previous government argued broader powers to obtain banking information in bulk would help investigators catch previously undiscovered fraud cases.

But a Tory bill to deliver the scheme failed to make it through Parliament before July’s election.

Under that plan, financial institutions would have been required to send information to the DWP about bank accounts receiving benefit payments that indicated a “potential risk” of fraud or error, or face fines for not complying.

An official assessment of the law said the system would be “fully automated, running within existing banking systems” and be rolled out gradually from 2027.

At the time, Labour attacked the Tory legislation as “poorly delineated” – while Tory ministers argued wide-ranging powers were necessary to ensure they could apply to all types of future banks, including accounts with newer, online-only providers.

Conservative shadow work and pensions secretary Helen Whately said the government’s bill was a “continuation” of work started by the previous government and Labour “must do more to tackle the spiralling welfare budget”.

Since entering government, Labour has pledged that only “very limited information” will be shared with the department under its equivalent plan, but is yet to set out in detail how its system will work.

DWP minister Andrew Western confirmed last year this will include cases where claimants are “living abroad” without notifying the department, although a timeframe for this has yet to be specified.

Accounts could also be flagged if they are holding more than £16,000, the usual savings limit for being able to claim Universal Credit.

In a change from Tory plans, the government has said the new powers will not be used to target payments of the state pension.

Ministers have sought to reassure critics by emphasising that the DWP will not have powers to “access” bank accounts.

But campaigners have told the BBC they believe this is a “misdirection”, as the measures would give DWP the power to instruct banks to access the information on its behalf.