The decision changes how authorities will check whether claimants meet the financial conditions for receiving benefits. Rather than verifying savings before payments begin, the new approach will involve checks after Universal Credit has been paid. The DWP maintains that the replacement scheme will provide a more consistent means of identifying fraud and incorrect payments.
Why the Government Has Dropped the Original Bank Account Checks
According to The Telegraph, Reeves announced the previous proposal during last year’s spring statement, saying the Government would verify claimants’ bank accounts to establish whether their savings exceeded the permitted threshold.
Under Universal Credit rules, claimants generally cannot receive the benefit if they have more than £16,000 in money, savings and investments. The limit applies to individual claimants and couples, whose combined finances are assessed.
Savings below £6,000 do not affect Universal Credit payments. Between £6,000 and £16,000, payments are reduced by £4.35 for every £250 above the lower threshold, with a further £4.35 deducted for any remaining amount below a complete £250.
Different eligibility rules can apply to people transferring from tax credits to Universal Credit after receiving a Migration Notice.
Reeves had estimated that her proposed checks would save £200 million by 2030. The policy formed part of wider efforts to address benefit fraud, which costs the Treasury almost £10 billion annually.
The original proposal involved Open Banking, which allows financial information to be shared with customer consent, alongside possible face-to-face checks.
A DWP spokesman explained that the Government had abandoned the approach because it depended on claimant consent and could not be applied to every Universal Credit application. According to The Telegraph, an official Treasury estimate suggests the decision could cost taxpayers £5 million this year and £10 million next year because of higher levels of fraud.
Banks Will Carry Out Checks Under the Replacement System
The Government is instead introducing the Eligibility Verification Measure (EVM), which will require banks and financial institutions to provide information when accounts meet specified criteria.
Unlike the abandoned proposal, the replacement system will involve checks after claimants have received Universal Credit, with financial institutions reporting relevant findings to the Government.
The DWP argues that this arrangement will offer a more consistent approach to identifying incorrect payments and tackling fraud and error. The department expects the EVM scheme to save £1.2 billion by 2030-31 as part of its broader programme addressing fraud, error and debt.
The decision has attracted criticism from the Conservatives. Shadow work and pensions secretary Helen Whately accused Labour of failing to control welfare spending, arguing that taxpayers were facing an increasing financial burden.
The wider debate comes as Government spending on welfare is expected to rise. The Office for Budget Responsibility estimates that the welfare bill will increase from £353 billion this year to £431 billion in 2032, with the state pension accounting for approximately half the total.
Meanwhile, Prime Minister Andy Burnham has acknowledged that forthcoming welfare reforms will not reduce the benefits bill for at least three years. Further proposals concerning youth employment and health-related benefits are expected next year. The DWP nevertheless maintains that its replacement verification system forms part of its continuing efforts to protect public funds and address incorrect benefit payments.
