Fraudsters who refuse to pay up will have cash taken straight out of their bank accounts.

New measures as part of a crackdown on fraud could save taxpayers up to £1.5billion over the next five years.

The Public Sector Fraud Authority will gain new powers in what is billed as the “biggest fraud crackdown in a generation”.

This is designed to avoid the need for “lengthy and costly court cases”.

The Department for Work and Pensions will be able to take cash from bank accounts through “regular or lump sum deductions”.

Fraud and error in the social security system, the Government claims, costs the taxpayer nearly £10billion a year.

It says that since the pandemic £35billion of taxpayers’ case has been incorrectly paid to people not entitled to the cash. Some of this has gone to criminal gangs.

The Government says it is planning measures to “overhaul the health and disability welfare system”.

Liz Kendall, the Secretary of State for Work and Pensions, said: “This government will not tolerate fraud and waste in the welfare system as we make it fit for the 21st century as part of our plan for change. The public expects this of us, and we are delivering for them.

“People who seek to cheat the system should know – our new powers will help us to catch you out and make sure you are held accountable.

“We will also introduce new powers to minimise overpayments to benefit claimants so that hard working families up and down the country know their money is being protected.”

Independent oversight is promised to “ensure these powers are being used fairly and effectively”.

Cabinet Office minister Georgia Gould said: “These new powers will give us the tools to fight fraud wherever we find it in the public sector, recovering taxpayers’ hard-earned money from those stealing from the public purse. There are companies getting away with fraud because Government investigators haven’t had the powers to detect and recover fraud across all parts of the public sector.

“We are changing this to make sure that there is nowhere to hide for fraudsters.”

Helen Whately, Shadow Work and Pensions Secretary, said the Conservatives had committed to these policies while in Government.

She said: “The Chancellor is clearly desperate to find any savings ahead of what may in fact be a mini-budget because she needs to repair the damage she has inflicted with her disastrous Budget last year.”