Rachel Reeves cracks down on benefit fraud. How much could she really save – and at what cost?

Rachel Reeves has pledged to tackle “fraud and error in our welfare system” – a push that could make life “much more stressful” for claimants, campaigners have warned.

The government has unveiled a ‘crack down’ on universal credit fraud intended to recoup £1.3 billion from overpayments, paying in part for the decision to scrap the two-child benefit limit.

“Taxpayers rightly expect that every penny of public money is spent wisely,” the budget reads. “The government is therefore taking focused and credible action to deliver a more productive state.”

Read more:

• What benefits can I claim from the DWP to help me cover the cost of living?
• Frozen housing benefit pushes renters into homelessness. Will Labour finally listen and thaw it?
• How did Rachel Reeves do in her first autumn budget? We ask people on the frontlines, one year on

This means “accelerating efforts to recoup funds lost to fraud and error” by “going further” reviewing Department for Work and Pensions (DWP) benefit claims.

The declaration is intended as a counter to critics who have sought to portray her as presiding over a growing welfare bill, particularly as she lifts the two-child limit.

That long-awaited decision has the potential to lift 350,000 children out of poverty.

But an accompanying fraud crackdown is a “step in the wrong direction”, campaigners have warned.

“It’s definitely linked to a feeling that they need to offset dissatisfaction with the idea around scrapping the two child limit, which is extraordinary, because I think there should be almost unanimous agreement that this is one of the most effective levers the government has to tackle poverty,” said Hannah Peaker, deputy chief executive of the New Economics Foundation.

“Rarely for public policy is there a lever that you can pull to lift hundreds of thousands of children out of poverty almost overnight. But that is how the debate has been set up. Even though benefit fraud makes up a tiny, tiny proportion of benefit expenditure. The overwhelming majority of benefit claims are genuine and accurate.”

In the financial year ending 2025 in Great Britain, the total overpayment rate due to fraud and error in the benefit system was 3.3%, which is an estimated £9.5bn. Of this, fraud accounted for 2.2% (£6.5bn).

The overall benefit bill in the same year was approximately £313bn – a figure driven by an ageing and increasingly unwell population, insufficiently supported by other public services.

Bringing benefit fraud into the discussion around the ballooning welfare bill is like “comparing oranges and apples,” Peaker added.

“Benefit fraud exists and it can result in overpayments, but it is not what is driving the increase in the number of people benefits, and that’s the bit that we should actually be concerned about,” Peaker told Big Issue.

“Why are people experiencing ill health? Why are they not in education or employment, why a good job is not available? We should all be concerned about those issues, but you’re not going to fix that through a crackdown on benefit fraud.”

How will the benefit fraud crackdown work?

The government already has powers to assess universal credit claims through the targeted case review, but those powers are set to expand even further. Extending the scheme will take total savings of the scheme to £9.6bn by March 3031, the Treasury says.

Universal credit has the highest rate of fraud among types of benefit claim – 8% of expenditure, compared to 0.4% of personal independence payment (PIP) expenditure.

The government’s flagship Public Authorities (Fraud, Error and Recovery) Bill is now in its final stages before passing into law, will give the DWP expanded powers to check claimants’ bank accounts for suspicious activity.

It will be able to deduct missing funds from the wages of people who are found to have committed fraud and even suspend their driving licenses.

“As important as any financial repercussions is how this is going to feel for all claimants,” said Mikey Erhardt, a campaigner at Disability Rights UK.

“It’s going to feel like you’re doing something wrong by getting support. It’s going to mean more reviews. It’s just going to feel very horrible.

“There is an era of sickness that is mostly caused by political choices – lots of us are getting more ill because of how bad work conditions are, or how bad housing is, or how overstretched health services are. Yet the focus is so-called fraud.”

Most governments over the past two decades have at some point targeted benefit fraud.

For example, in 2010, the Tories proposed a “three strikes” policy, taking unemployment benefits away from claimants for up to three years if they defrauded the system three times.  

These initiatives often “stigmatise” benefit claimants, assuming that they are out to game the system. In reality, most people claiming welfare are entitled to do so.

Indeed, people “often don’t claim what they are entitled to due to this stigma,” Erhardt added. In 2025-26 an estimated £24.1bn in income related benefits and social tariffs will go unclaimed across Great Britain.

Nonetheless, the spectre of the ‘benefit cheat’ is often invoked by governments looking to appease frustrated voters, Peaker said.

“We tend to create narratives about strivers and skivers, makers and takers in order to justify cuts to parts of the state. And look, welfare is always going to be quite an expensive part of the state, especially with an aging population, especially with changes in retirement, state pension age, and especially following a global pandemic and a decade of austerity,” she said.

“We tend to see this government positioning itself as ‘on the side of the worker’, and trying to separate itself out from those in receipt of welfare. And I think that’s a real shame, because it’s a false opposition, and betrays a lot of great work that this government has done to say here are the ways in which we need to kind of actively support people into employment.”

Do you have a story to tell or opinions to share about this? Get in touch and tell us more. 

Change a vendor’s life this Christmas.

Buy from your local Big Issue vendor every week – or support online with a vendor support kit or a subscription – and help people work their way out of poverty with dignity.