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Government seeks to view claimants’ bank accounts

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A new bill could compel banks to provide the Department for Work and Pensions with any information it demands from the bank accounts of benefit claimants, including state pensioners.

14th Dec 2023
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Accountants don’t usually have reason to get very excited about data protection bills presented to the House of Commons. When they become law we dutifully comply, but before then these things are usually the concern of data geeks, and most of us aren’t that.

Until 23 November 2023 that was. On that day, and at the last gasp in the passage of the Data Protection and Digital Information Bill through Parliament, the government presented 124 pages of amendments. There was almost no Parliamentary time allocated to discuss any of that proposed legislation, but included in it, starting at page 98, was a provision that impacts every practicing accountant and many of their clients quite significantly.

On that page a new clause 121DB was added to the Social Security Administration Act 1992, saying: “Schedule 3B makes provision about a power for the Secretary of State to obtain account information.”

If passed (and that is not certain, as the Lords are likely to have a great deal to say about this, if given the chance) the new Schedule 3B empowers the Secretary of State for Work and Pensions, who administers social security, to compel banks to provide any data that the Department for Work and Pensions (DWP) demands so that it might search for fraud and error on the part of benefit claimants. 

Crucially, this is not an investigative power taken so that fraud might be pursued when there is reasonable belief and prior evidence that it might be taking place. Instead, this is a general power, permitting the DWP, which now administers benefit payments, to request that banks that receive such payments provide information on the bank accounts of all benefit recipients on a regular and recurring basis.

State pensioners included

It was suggested at first that the power would be used to demand information on the bank accounts of universal credit, pension credit and employment and support allowance claimants. That is approximately 8.8m people. But then Stephen Timms, a veteran Labour MP, realised that the power extended to everyone in receipt of a state pension as well, and raised the issue in the Commons

That extends the right to collect data to another 11m or so people (having allowed for those already claiming pension credit). Other benefits are also covered. Child benefit, widely claimed by the clients of many accountants, could be on that list.

Extraordinarily, most of these covered by the new provision will be in receipt of benefits that are not earnings-related when it comes to determining entitlement. Given that many disability benefits also seem to be covered, many are also not linked to savings. Well over 10m people will have their bank account details sent to the government under this legislation on a regular basis, even though the data supplied cannot in any way impact their entitlement to the benefit that they are paid.

Routine scrutiny

Almost 9m more will be subject to routine scrutiny of their financial affairs even though they are completely honest. 

And this really will mean routine scrutiny. The expectation is that data might be demanded every four weeks to coincide with DWP payment cycles and Universal Credit declaration periods. Data collection could start from 2025 and artificial intelligence (AI) could be used to process the information collected.

The result will be that maybe half the tax-paying population might now have their bank accounts subject to regular scrutiny. No doubt the DWP thinks this an easy exercise. Anyone who has ever seen the bank statements of a client who mixes personal and business affairs will know what a nightmare this is. Birthday presents, personal repayments (for example, because of shared costs on a night out or holiday) and transfers to and from savings accounts, can massively complicate matters. Clients who also draw funds from their businesses in lumpy amounts can also create payment patterns that the DWP will despise.

Commonplace incomprehension

And, on their part, incomprehension is far too commonplace when it comes to such matters. I can always remember the VAT inspector who once added up all the deposits in a client’s accounts and solemnly declared she had an income of more than twice the amount declared. In reality, this was all down to her desperate desire to earn interest, meaning money went on and off deposit frequently, but the VAT inspector was adamant for a long time that this could not be the case, until being forced into submission. Expect no more understanding from a DWP AI bot, and in the meantime do expect enquiries, withheld benefits and distraught clients.

There can be no justification for this draconian power, but it sailed through the Commons. Any accountant with a client claiming benefits is going to need to warn their clients about this issue if this provision becomes law. The risks are high for failing to do so, as will be those for failing to keep absolutely meticulous records. Clients will need to know.

Replies (9)

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By Rob Swan
14th Dec 2023 10:53

Now you'll need three bank accounts, and just to be sure, use a different bank for each: one for business, one for personal, and one for benefits etc.

Thanks (7)
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By neiltonks
14th Dec 2023 17:44

The provision seemingly also covers people connected to the benefit claimant. So if you have a parent who gets State pension, or a spouse getting a disability benefit, your accounts may well be fair game even if you never get a penny in benefits.

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By FactChecker
14th Dec 2023 19:46

Despite the 'data protection' issues (which naturally arouse suspicion), the real danger is that mentioned briefly above:
* "artificial intelligence (AI) could be used to process the information collected".

And that's not a dig at AI (which might well do a better job than the DWP munchkins) ... it's a reflection on those who make the decisions (not just policy but also operational ones) not having the slightest understanding of numbers and human behaviour.

Until recently I operated a 'sweep facility' across multiple (all personal) accounts with one bank.
This meant that banking software automatically made daily transfers into and out of the various accounts merely to ensure that no overdraft or other penalty triggers were implemented.
The 'turnover' in any one of those accounts would look substantial to a casual observer, let alone if they then aggregated all the accounts ... typically by a factor in excess of 10 times actual 'income'.

And that was me keeping it simple (no mix with other banks, nor inclusion of business accounts) ... but TBH I wouldn't fancy writing software that disentangles that.

And more recently I've added both my sons as signatories to all my accounts (much cheaper and simpler than all that PoA palaver given that I trust them implicitly - as do they each other) ... so their names have appeared within the 'account name' field at the bank despite all income/expenses having nothing to do with them.

The banks own systems keep screuuing things up (change of address for one son being applied to all my/our joint accounts!) - so heaven knows what they'll send DWP (before they mess it up anyway)?

Thanks (8)
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By AdamJones82
14th Dec 2023 21:18

If only they went for the big fish with such fervour

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By Andrew Griffin
15th Dec 2023 10:04

I wonder if MPs realise that as many of them claim and receive Child Benefit administered by DWP, that their own bank accounts will become targets for this intrusive data gathering possibility.
If they did, I suspect that they might be a little bit more cautious about letting the fox into the hen-house !!

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Replying to Andrew Griffin:
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By Ian McTernan CTA
18th Dec 2023 10:20

I highly doubt many MPs receive Child Benefit given they all earn well over the 50k threshold for clawback...

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By Grizzler
15th Dec 2023 11:08

Good to see that millions of bank accounts will be open to the governments scrutiny,can't see anything that could go wrong here at all. Billions lost on PPE and loans but nothing done to recover these. Seems to me the greater the misdemeanor the less likely you are to be held to account. The world is upside down.

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By fitzroy
15th Dec 2023 11:31

It just gets more and more Orwellian. Just wait until they have removed cash, imposed a CBDC and a carbon-credit system that tracks every purchase against your carbon 'allowance' and once that is reached for the month you can't buy anything, go anywhere, or turn the heating on... Meanwhile the elites, who pay no tax and who can afford to buy however many carbon-credits they want, fly around the world in their private jets pontificating about 'equality'.

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By Marlinman
19th Dec 2023 04:28

Complete waste of time for benefits that are not earnings related, but since when did politicians and civil servants have any common sense?

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