Tougher rules will mean claimants will face a two-year driving ban if they refuse to pay back welfare they have received fraudulently.
Officials in the Department for Work and Pensions (DWP) responsible for investigating organised crime-related benefit fraud will also receive new powers.
The DWP will be equipped to recover money from bank accounts of those no longer on benefits or in pay as you earn (PAYE) employment by requesting statements to prove they can repay what they owe.
The government said the tough approach to fraud will “be underpinned by a principle of fairness and proportionality” with people offered “affordable and sustainable repayment plans” before being subject to the penalties.
Ministers have promised to claw back £1.5bn over five years due to the Public Authorities (Fraud, Error & Recovery) Bill, introduced to parliament today.
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Read MoreWork and Pensions Secretary Liz Kendall is under pressure to make significant welfare savings in the coming years.
A policy document spelling out how the government intends to cut welfare spending for disabled people is expected in spring but ministers are yet to set out any details as to how money will be saved.
The Labour Government said it will maintain the savings but would do so differently, bringing forward their own changes.
“Any genuine efforts to crack down on benefit fraud are welcome, and this is a continuation of our work in this area,”Helen Whately MP, shadow Work and Pensions Secretary said.
Kendall, said she would be cracking down on “criminals who cheat the system and steal law-abiding taxpayers’ money”.
“Backed up by new and important safeguards including reporting mechanisms and independent oversight to ensure the powers are used proportionately and safely.”
She said voters needed to have “confidence” the government was doing all it could to tackle fraud and waste.
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