The Government have today published the report from the independent review into overpayments of carer’s allowance linked to earnings and the Government’s response to its recommendations. These are available on gov.uk and copies will be placed in the Library of the House.
Finding out what went wrong with carer’s allowance
The Government inherited a system where some busy carers, already struggling under a huge weight of caring responsibilities, have found themselves with unexpected debts due to overpayments of carer’s allowance. This only affected some of the relatively small number of carer’s allowance claimants who also do paid work, but the impact on some of these unpaid carers has been significant.
Liz Sayce OBE was asked to lead an independent review into the matter. The review’s report has been invaluable in helping us assess how these overpayments have arisen; what we can do to support unpaid carers who have incurred debts in the past; and how we can minimise further overpayments in future.
For those who receive carer’s allowance, 92% say they have a positive experience, and most find the rules easy to understand. However, the review has shown that some mistakes were made, and we are determined to put them right. We welcome the report and are accepting or partially accepting 38 of the 40 recommendations. In some cases, we have already made the changes the report is asking for. Others will take more time to put in place.
The review finds that some carers could not have known that they were building up overpayments because it was not clear how their earnings would affect their entitlement, and this lack of clarity was due to issues with operational guidance. The Government accept this and we will act to put it right.
Averaging earnings and putting things right
The earnings limit in carer’s allowance is a weekly one, but in some cases, earnings can be averaged over a number of weeks. The review found issues with departmental guidance. And we accept that, between 2015 and summer 2025, the guidance on whether and how to average earnings did not accurately reflect the statutory position.
The Department will, therefore, be reassessing carer’s allowance cases with an earnings-related overpayment in England and Wales between 2015 and summer 2025 where the treatment of fluctuating earnings may have given rise to an incorrect overpayment. If that was the case, the Department will reduce the outstanding overpayment accordingly, and pay back any debts it should not have pursued in the first place. We will set out plans in the new year.
The independent review went beyond averaging earnings though and made recommendations in a number of other areas which we are accepting—for example, rebuilding trust with carers; improving communications and processes; and appointing a senior responsible owner, who will be responsible for taking forward the agreed recommendations and reporting on progress.
Modernising for the future
Carer’s allowance was introduced in 1976 and—unlike universal credit, which is the other main benefit to support unpaid carers—it has not kept up with changes in how people work or modern patterns of unpaid care. Many carers now want the flexibility to combine more paid work with their caring responsibilities.
The Government acknowledge this and have taken action to:
Increase the weekly carer’s allowance earnings limit to match 16 hours work at national living wage levels. This change from April this year resulted in the largest ever increase in the limit to £196 net earnings a week and the highest percentage increase since 2001. It means more than 60,000 additional people will be able to receive carer’s allowance between 2025-26 and 2029-30;
put in extra resources to process the earnings information we receive from HMRC through the verify earnings and pensions system. This allows us to contact people if it looks like they may have exceeded the earnings limit, meaning we can take action to prevent overpayments from building up;
correct and improve our guidance so carers and our own staff are clearer about what the benefit rules are and what information needs to be provided; and
begin scoping work to explore potential solutions to reduce the impact of the cliff edge, and automating the handling of earnings where possible using data collected by HMRC.
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