DWP warns of 'negative behavioural changes' as it targets Universal Credit cheats

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The Department for Work and Pensions (DWP) has warned that some people might try to cheat the system during its new fraud crackdown. They say some folks could exploit loopholes, while others may cancel claims for benefits they’re not entitled to.

The DWP’s main focus is asking the top 15 banks to check for undeclared savings over the limit for claiming Universal Credit. If you’ve got more than £16,000 saved up, you can’t get the benefit, and if you’ve got more than £6,000, your monthly payments will be less.

New rules will also spot cases where people are living abroad longer than allowed or even claiming benefits from the UK Government while living overseas. Even those on a State Pension could be investigated if they’ve retired to countries where annual increases aren’t applied but are pretending they’re still resident in the UK.

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The DWP said: “Banks/building societies and the financial sector know how much capital their customers have, or when people make transactions abroad, and they will always know if those customers are benefit claimants.”

The Department for Work and Pensions (DWP) has revealed that a large part of fraud is due to undeclared or under-declared assets. This accounts for 16 per cent (£894 million) of the total Universal Credit overpayments in the year ending 2023.

Another big loss comes from abroad fraud, where claimants spend more time out of the country than benefit rules allow. This represents £187 million of the total overpayments in Universal Credit.

There are also significant overpayments in Pension Credit (£138 million for capital fraud and £52 million for abroad fraud in 2022-2023) and Employment and Support Allowance (£167 million capital fraud and £10 million abroad fraud in 2022-2023).

The DWP believes that the new powers in the Data Protection and Digital Information Bill will change some claimants’ behaviour. They might cancel a benefit claim when they know they aren’t eligible.

However, the DWP warns there could be negative changes too. Claimants may split their money across multiple bank accounts to ensure that there is not £16,000 or above with one provider. This would allow them to go undetected by this measure and reduce its effectiveness.

Officials reckon that about 5% of people will try to dodge the new rules. But, independent advisers warn that the DWP can find out about multiple accounts through tax data and credit scores.

The DWP said: “We know that the vast majority of DWP claimants bank with, and have their benefits paid into, the largest 15 banks in the UK. These banks and building societies receive over 97 per cent of all payments to DWP claimants as established by internal analysis. Extending this measure to small and micro-sized businesses would likely be ineffective due to the burden it might place on them and the number of returns the Department will receive from any data matches.”

They added: “It is, however, important to not shut off this option in primary legislation as we do not want fraudsters to see this as a loophole and change their banking approach to deliberately circumvent our measure. It is therefore crucial that the measure is then perceived and seen as a measure that could be applied to all banks.”

“It is also essential that the Department is able to keep pace with changing technology and methods of fraud, which is why the ability to apply the measure to other sectors is needed. When that need is identified, a further impact assessment will be produced to accompany the necessary secondary regulations.”

* An AI tool was used to add an extra layer to the editing process for this story.