Ministers have reportedly rushed an amendment through the Commons last week, allowing it to look into the bank account of everybody claiming State Pension or State Benefits. Why?
The Department for Work and Pensions (DWP) is planning to implement monitoring of the bank accounts of all individuals receiving pension credit, universal credit, and employment and support allowance.
Publishers Benefits and Work have reported that almost 9 million claimant bank accounts will be monitored. That would include freelancers who receive means-tested benefits. However, some MPs believe anyone who receives a state pension regardless of their income falls within the scope of the new DWP powers (see below).
What’s the rush?
Perhaps the reason the initiative was fast-tracked in the Commons had to do with a bill undergoing parliamentary review. The DWP intends to leverage these new powers to broaden the scope of data collection from third-party sources.
The Data Protection and Digital Information Bill, which has passed its third reading in the House of Commons and is now being considered by the House of Lords, contains last-minute amendments that grant the DWP the authority to compel third parties to provide any information deemed necessary for fraud detection and error correction, reported Benefits and Work.
The DWP will oblige the UK’s top 15 banks to monitor the accounts of all means-tested benefits claimants and report any instances where an account exceeds the capital limit or is used abroad for more than four weeks. Any freelancers, namely digital nomads, that consider working remotely abroad should ensure they inform their UK bank. This could even include someone hoping to start a side hustle that is staying with family abroad. We highlight below how freelancers could also be impacted.
Due to the unique identifying code attached to every DWP payment deposited into a bank account, banks can readily identify which of their customers receive benefits and the specific types of benefits they receive, said the report.
MPs question the initiative
Sir Stephen Timms, Labour Member of Parliament for East Ham since 1994 took it upon himself in Parliament as did Sir Chris Bryant, Labour MP for the Rhondda, to question how this access could and would be used.
Sir Timms said the current government’s only reason was that it “might be useful one day.” According to Timms the only change which could make it useful would be to means-test the State Pension. However, the government is now saying that it would be to clamp down on benefit fraud.
Culture Minister Sir John Whittingdale told the House of Commons: “The state pension will not currently be an area of focus for the use of these powers.”
He said, “The purpose of the proposed new schedule is narrowly focused. It will ensure that where benefit claimants may also have considerable financial assets, that is flagged with the DWP for further examination, but it does not allow people to go through the contents of people’s bank accounts.
Sir Whittingdale said it was more of an “an alarm system” where financial institutions that hold accounts of benefit claimants can “match those against financial assets, so where it appears fraud might be taking place, they can refer that to the Department.”
Sir Chris Bryant, saw things entirely different. “The House of Commons Library makes it absolutely clear that the Bill, if taken forward in the way that the Government are proposing at the moment, does allow the Government to look at people in receipt of state pensions.”
Sir Whittingdale responded, “I can tell the hon. Gentleman it is not the case that the DWP intends to focus on the state pension—and that is confirmed by my hon. Friend the Member for Corby. This is specifically about ensuring that means-related benefit claimants are eligible for the benefits for which they are currently claiming. In doing that, the identification and the avoidance of fraud will save the taxpayer a considerable amount of money.”
Sir Whittingdale said he was “surprised” that the Opposition regarded this as something to question. “Obviously, they are entitled to seek further information, but I would hope that they share the wish to identify where fraud is taking place and take action against it. This is about claimants of benefits, including universal credit.”
UK freelancers can be means-tested benefits claimants
Freelancers and those who are self-employed can claim benefits such as Universal Credit if their income and savings fall below certain thresholds (see below). However, some additional factors will be taken into account when assessing their eligibility, such as whether they are considered to be “gainfully self-employed”.
Gainful self-employment is defined as having a business that is expected to make a profit and that is the claimant’s main source of income. Freelancers who are considered to be gainfully self-employed will have their earnings calculated using the Minimum Income Floor (MIF). This means that they will be treated as if they have earned a certain amount of money, even if their actual earnings are lower. This is to ensure that they are not able to artificially reduce their income in order to qualify for benefits.
Freelancers who are not considered to be gainfully self-employed will have their earnings calculated based on their actual income. This means that they may be eligible for more benefits if their earnings are low.
In addition to their earnings, freelancers will also have their savings taken into account when assessing their eligibility for means-tested benefits. The capital threshold for Universal Credit is currently £16,000. This means that freelancers with savings of more than £16,000 may not be eligible for the full amount of Universal Credit.
If you are a freelancer and you are unsure whether you are eligible for means-tested benefits, you should contact the Department for Work and Pensions (DWP). The DWP will be able to assess your individual circumstances and advise you on whether you are eligible to claim.
Here are some of the means-tested benefits that UK freelancers may be eligible for:
- Universal Credit
- Housing Benefit
- Council Tax Reduction
- Income Support
- Job Seeker’s Allowance