Unpaid carers will go on losing their entire Carer’s Allowance for earning a penny too much until 2030-31, after the next general election, the Government has confirmed.
The Chancellor’s pre-Budget press release gave no start date. The statement laid before Parliament says the fix must wait for a new DWP computer system.
Ending the Carer’s Allowance cliff edge was the most eye-catching of five ‘everyday fixes’ unveiled by the Chancellor, John Healey, on Monday night ahead of today’s Budget.
The Treasury’s announcement promised that ‘unpaid carers no longer left worse off simply for earning more’. It did not say when.
The answer came in a written ministerial statement laid in the Commons on Tuesday. ‘The taper will begin within 2030-31 once the Department for Work and Pensions have developed a new IT system to implement the taper,’ it said.
Under the current rules, carers lose £86.45 a week for a 1p increase in earnings above the weekly limit, which the Treasury says is equivalent to 16 hours on the National Living Wage. A carer who takes an extra shift or a small pay rise can end up worse off.
Under the new system, earnings above the limit will be subject to what the statement calls a 100 per cent taper, with the allowance reduced by £1 for each extra £1 earned. Carers in that band will keep nothing from the extra pound, but they will no longer lose the whole allowance at once.
The timing matters. The present Parliament first met in July 2024 and must be dissolved within five years, so the next general election has to be held by August 2029. The earliest the taper can start is April 2030, in the next Parliament.
The same is true of another of the five fixes. A new Parental Allowance for self-employed fathers, partners and adopters, which the Treasury says will benefit more than 150,000 parents a year, is due from April 2029. The statement says ‘detailed eligibility criteria will be confirmed in due course’.
The cliff edge is not new. It has existed under governments of all colours, including Conservative ones, and the overpayment debts that have hit carers who strayed over the limit built up over many years.
But Labour is now the Government, and it has chosen to present on Budget eve a change that it does not expect to deliver in this Parliament.
Pat McFadden, the Work and Pensions Secretary, said ministers had ‘listened to their concerns about the cliff-edge built into the system which leaves them financially worse off for taking on a few more hours, or getting a modest pay rise, and intend to bring that to an end’.
Charities welcomed the commitment, and even the warmest praise carried a caveat. Emily Holzhausen of Carers UK said her charity had been calling for a taper ‘for many years’. ‘Once introduced, it should also help to significantly reduce the number of overpayments related to earnings which carers have found devastating financially and emotionally,’ she said.
Kirsty McHugh, chief executive of Carers Trust, said carers ‘should now be able to take comfort that they will be able to earn that bit more without being inadvertently plunged into debt’. On the Government’s own timetable, that comfort is at least three and a half years away.
Other parts of the package will arrive sooner. The 55p tax-free mileage rate for the first 10,000 business miles is being made permanent, with the rate above that rising from 25p to 35p. Tariffs are being suspended on more than 100 food products, fertilisers and kerosene heating oil, which the Treasury expects to save consumers around £120 million to £185 million a year.
That leaves the questions a Conservative opposition will want answered. What will the new DWP system cost, and when will work on it begin? How many carers will be caught by the cliff edge, and how many more overpayment debts will be run up, before 2030-31? Will today’s Budget set aside the money, or is the bill being left to the next Parliament?
Until a new computer system is built, the rule stays as it is. Earn a penny over the limit and the whole £86.45 goes.
Featured image: Pat McFadden, Work and Pensions Secretary. Official portrait by Richard Townshend/UK Parliament, CC BY 3.0, via Wikimedia Commons, cropped.
