This Data Protection Bill goes too far!
Yedidya Zaiden - Raffingers
Whenever I advise my clients to open a bank account, the suggestion is almost always met with groans. It seems that the process of negotiating ID checks and other verifications and dealing with the bank’s admin team is a tedious one. Yet, this is what I am going to suggest that you do, and it is all because of clause 34 of the new Data Protection Bill.
Back in July 2022, the first version of the Data Protection and Digital Information Bill was introduced to Parliament. The proposed legislation was not approved, and it was replaced by a second version of the Bill which passed its second reading on 17th April 2023. The Bill completed its committee stage on 24th of May and was expected to be passed with minor amendments. Somehow, six months on from then, and on the last available day to do so, the government presented Parliament with 240 (!) amendments to the Bill. As a result, the amendments were not given sufficient time for debate and there is a real possibility that the Bill will pass into Law.
The cause for concern is because clause 34 of the Bill gives the Government the right to inspect the bank account of anyone who claims or who is connected to someone who claims ‘social security benefits’. Although I do not advise on social security benefits, the legislation has been drafted such that it includes anyone who receives child benefit or even the state pension.
It goes further. Currently, the Department for Work and Pensions (DWP) can request details of bank accounts and transactions on a case-by-case basis, when there is reasonable belief and prior evidence that fraud might be taking place. The proposed legislation allows government departments to mass monitor individuals receiving welfare payments, even when there is no suspicion or any sign of fraudulent activity. No court order is needed and affected individuals will not be informed.
According to ministers, the measure is expected to save half a billion pounds over the next five years by helping identify fraud more quickly so that appropriate action can be taken. Through allowing regular checks to be carried out on the bank accounts held by benefit claimants, the DWP will be able to spot increases in their savings which push them over the benefit eligibility threshold, or when people spend more time overseas than the benefit rules allow for.
There is more! The expectation is that data might be demanded every four weeks to coincide with DWP payment cycles and Universal Credit declaration periods. Data collection could start from 2025 and artificial intelligence (AI) could be used to process the information collected. Prem Sikka, an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, and a Labour member of the House of Lords has commented that the focus on bank accounts suggests that the government is looking for unusual patterns. So, if you give a lump sum to someone for a birthday, holiday or home repairs, and it passes through a bank, the government could seize upon that as evidence of excess resources and reduce or stop benefits.
With potentially well over 10 million people having their bank accounts scrutinised, the concern is that artificial intelligence will be driving the enquiries. Anyone who has had HMRC looking through their personal bank accounts will know that Inspectors do not always fully understand the nature of what may appear to be unusual transactions. The reliance on AI to spot anomalies is likely to result in many more enquiries and the withholding of benefits whilst these are in place.
The proposal in the Bill for surveillance where there is absolutely no suspicion at all, is a substantial expansion of the state's powers to intrude, and is starting to draw criticism from concerned groups. Child Poverty Action Group said that it shouldn't be that people have fewer rights, including to privacy, than everyone else in the UK simply because they are on benefits.
It may be that the Lords realise that clause 34 is a step too far, but if the legislation is brought into law, it may be an idea to open a bank account solely for the receipt of ‘benefits’ so as to avoid the potential fallout from an overzealous piece of artificial intelligence.
Yedidya is a Partner at Raffingers, a top 100 accountancy practice that specialises in strategic business, tax planning, charities and commercial solutions. If you would like to discuss any aspect of this article or for any other business or accounting advice, please email Yedidya Zaiden at firstname.lastname@example.org