UK welfare fraud crackdown scrapped as benefits bill rises toward £431 billion, Digi Mart USA News (United Kingdom): The UK government has abandoned a planned welfare fraud crackdown, a move that critics say is another embarrassing retreat for Labour as it struggles to control the country’s ballooning welfare bill while protecting taxpayers from fraudulent claims.
The scrapped scheme was first announced by former Chancellor Rachel Reeves in her 2025 Spring Statement. It would have allowed the Department for Work and Pensions (DWP) to verify applicants’ savings through Open Banking or face-to-face checks, helping identify people claiming benefits despite holding more money than the rules permit.
Under Universal Credit regulations, claimants are generally ineligible if they have more than £16,000 in savings and other assessable capital. Those with between £6,000 and £16,000 have their payments reduced, although certain exemptions apply.
The original proposal was expected to save approximately £200 million by 2030 by preventing fraudulent or incorrect payments. According to The Telegraph, Treasury estimates indicate that abandoning the scheme could cost taxpayers an additional £5 million this financial year and £10 million next year.
The government now relies on a different system under which banks identify accounts that meet specified eligibility indicators and pass limited information to the DWP. The replacement, known as the Eligibility Verification Measure, was introduced under the Public Authorities (Fraud, Error and Recovery) Act 2025, with the first formal notice issued to financial institutions on 26 October 2026.
The government says the new approach will be more effective because, unlike the abandoned Open Banking proposal, it does not depend on claimants agreeing to share their information. Critics, however, ask why potentially ineligible claims should be allowed to result in payments before relevant bank information is checked, and fear taxpayers could be exposed to fraudulent claims at the point of application.
The controversy comes as Labour faces growing questions over its wider welfare strategy. Prime Minister Andy Burnham acknowledged on Friday that his forthcoming welfare reforms would not deliver reductions in the benefits bill for at least three years.
According to the Office for Budget Responsibility’s October 2026 forecast, annual welfare spending is expected to rise from approximately £353 billion in 2026/27 to £431 billion by 2031/32. That represents an increase of almost £79 billion, although the figures include state pensions, which account for roughly half of overall welfare expenditure.
The Conservatives have accused the government of effectively surrendering on the issue. Helen Whately, the Shadow Work and Pensions Secretary, said Labour had failed to deliver the changes needed to prevent the benefits system becoming an even greater burden on working households, warning that millions of people remained dependent on benefits.
Further welfare proposals are expected next year, including measures to help young people move from benefits into employment or education. Former Labour Health Secretary Alan Milburn is preparing recommendations examining youth employment programmes, including schemes operating in Germany and Denmark.
Analysis reported by The Telegraph suggests matching those countries’ spending levels could require around £6 billion annually.
Separately, The Telegraph reported on Sunday that ministers were considering arrangements allowing energy suppliers to examine income, tax and property information about their customers, a contrast critics are likely to raise given the abandonment of the bank verification scheme.
The DWP has defended its revised strategy, arguing that the original Open Banking proposal relied on claimant consent and could not have been applied consistently across all Universal Credit applications. Ministers estimate the Eligibility Verification Measure will save approximately £1.2 billion by 2030/31.
The department says the new system does not give officials unrestricted access to people’s bank accounts, transactions or spending habits, and that further checks are required before benefit decisions are made.
The replacement system may eventually deliver substantial savings, but ministers will still need to show it can prevent losses as effectively as it identifies incorrect payments. With the welfare bill still projected to rise sharply, the government faces mounting pressure to demonstrate a credible plan to bring spending under control.
