Ministers set aside £75m to fix failures that caused carer’s allowance crisis

Most of money earmarked to fix ‘systemic’ problems expected to pay for officials needed to reassess overpayments

Ministers have set aside £75m to fix systemic failures that caused hundreds of thousands of unpaid carers to be hit with huge bills after unwittingly breaching complex and confusing benefit rules.

A damning independent review, published on Tuesday, found that outdated technology, unclear guidance and a failure of leadership by ministers and senior welfare officials had led to punitive sanctions on vulnerable families.

It followed a year-long Guardian investigation into how hundreds of unpaid carers had been criminally prosecuted and hundreds of thousands penalised for errors the review concluded were mostly not “wilful rule-breaking”.

Pat McFadden, the welfare secretary, promised this week that the government would fix the “mess” he said had been left by previous administrations.

The Department for Work and Pensions (DWP) has said it will reassess 145,000 cases in which people were overpaid carer’s allowance, with some of those debts likely to be struck off or reimbursed. However, the DWP has stopped short of issuing a formal apology or offering compensation.

Figures released as part of Rachel Reeves’s budget on Wednesday showed that ministers have earmarked £75m from 2026 to fix the issues raised by the review, led by the disability rights expert Liz Sayce.

It is understood that most of the £75m will pay for the large number of officials needed to reassess the 145,000 overpayments. A smaller amount is expected to be used to either write off debts or reimburse unpaid carers who have already paid.

Official documents show that £20m is due to be spent in 2026-27, £35m the following year and £20m in 2028-29. The money is to cover the costs to “reassess overpayments from 2015 to 2025 caused by incorrect operational guidance”.

The “incorrect operational guidance” refers mainly to guidance issued to DWP staff in 2020 that caught out carers whose weekly or monthly earnings fluctuated, and who were penalised despite their “average” total earnings over a defined period being within allowed earnings limits. The guidance resulted in a surge of overpayment penalties.

Unpaid carers who look after loved ones for at least 35 hours a week are entitled to £83.30 a week carer’s allowance, as long as their weekly earnings from part-time jobs do not exceed £196. If they exceed this limit, even by as little as 1p, under “cliff edge” rules they must repay the entire week’s allowance.

This means a carer who oversteps the earnings threshold by 1p a week for a year must repay not 52p but £4,331.60, plus a £50 civil penalty.

Carers in zero hours or seasonal work were especially vulnerable to penalties. The review cites a part-time NHS worker who was forced to pay back £300 carer’s allowance after getting a one-off £200 Covid bonus, leaving them £100 out of pocket.

The review said the guidelines were flawed, confusing and out of step with social security law. It “was not clear why the new guidance was introduced” it said, adding it appeared to have been done so without being tested or legally checked.

The guidance was never published, leaving carers in the dark about whether it was permissible to average their earnings. Carers told the review they had received conflicting advice from the DWP. New guidance was introduced in September this year.

Helen Walker, the chief executive of Carers UK, said the fix was a “vital step towards addressing the injustices carers have faced for far too long”. She added: “In the coming days, we will be examining how much of this funding will directly benefit carers and how much will be used to implement the new systems and processes that are so urgently needed to prevent this happening again.”