Welfare Fraud Crackdown Sparks Labour Backlash

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Prime Minister Keir Starmer is encountering significant opposition within his own Labour Party over plans to combat welfare fraud by directly deducting overpaid benefits from individuals’ bank accounts and suspending driving licences for repeat offenders. The government aims to recover an estimated £9.7 billion annually lost through benefit fraud and errors by empowering the Department for Work and Pensions (DWP) with new enforcement tools based on Conservative proposals.

The proposed Fraud, Error and Recovery Bill would authorize the DWP to access bank data to verify claimants’ eligibility and identify those able to repay overpayments. Those not receiving benefits or PAYE employment but found with sufficient funds could have money clawed back directly from their accounts. Persistent non-repayment could lead to a suspended disqualification order, potentially banning individuals from holding a driving licence.

Work and Pensions Secretary Liz Kendall defends these measures as essential to fixing a “broken welfare system” and estimates that direct deductions could save taxpayers £500 million annually once fully implemented. However, the banking sector has expressed concerns about conflicts with consumer protection rules, particularly under the Financial Conduct Authority’s duty to vulnerable customers.

The crackdown has sparked a rebellion led by Labour backbenchers, including Neil Duncan-Jordan MP, who has tabled amendments to restrict the bill’s scope. Duncan-Jordan argues the legislation amounts to mass surveillance of welfare recipients, treating them as suspects by default and risking wrongful investigations similar to the Post Office’s Horizon scandal. He calls the driving licence sanctions a “poverty penalty” and urges the government to focus on targeting actual fraud rather than errors or innocent claimants.

Critics warn the policy risks deepening stigma around benefits, potentially deterring vulnerable people from seeking support. Charities and some Labour MPs fear the tough approach could disproportionately harm disabled people, carers, pensioners, and the poorest, who may face burdensome appeals to prove their innocence.

Despite the backlash, the government maintains the bill is fair and proportionate, designed to protect public funds while safeguarding vulnerable claimants. Starmer’s administration insists it will “leave no stone unturned” in tackling welfare fraud to free up resources for public services, even as dissent grows within Labour ranks