Plans for automated surveillance of millions of bank accounts to catch welfare cheats should be scrapped, campaigners have said, warning the approach risks a repeat of the Post Office Horizon scandal.

The Department for Work and Pensions is seeking new powers to require banks to trawl the accounts of millions of people who receive benefits in an effort to cut the £8bn currently lost annually to welfare fraud. The plan is close to being passed into law by parliament and will be “fully automated”, the government said. It is likely to use artificial intelligence to flag activity considered suspicious by the DWP.

The government said no decisions on whether a claimant was committing fraud would be made on the basis of the mass surveillance, but it would examine cases flagged as possible fraud or error “through our business-as-usual processes”.