Carer’s Allowance: Overpayments

Baroness Sherlock Excerpts

Tuesday 2nd December 2025 Lords Chamber

[Baroness Pitkeathley (Lab)]

My Lords, in begging leave to ask the Question standing in my name on the Order Paper, I acknowledge the Government’s positive response to the recommendations in the independent review.

[The Minister of State at the Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, the Government accept that between 2015 and summer 2025, the guidance on whether and how to average earnings in carer’s allowance did not accurately reflect the statutory position. We will therefore be reassessing earnings-related overpayment cases that occurred between 2015 and September 2025. Where it is found that overpayments were lower than originally calculated, carers will have their debts reduced or cancelled entirely, with the Government refunding any money already paid. We will set out plans for doing this in early 2026.

[Baroness Pitkeathley (Lab)]

I thank my noble friend for that response and for her patience at my persistence. After the problems for carers were ignored for so long by the previous Administration, and after systems did not respond to the clear evidence about the distress caused, carers naturally have a high level of mistrust about how their benefits are administered. Does my noble friend agree that rebuilding that trust must be a priority and that any changes must be completely transparent, with carers consulted and informed at every step of the way?

[Baroness Sherlock (Lab)]

I thank my noble friend for that question and for her work. I pay tribute to the millions of unpaid carers across this country; the Government greatly value them and the work they do. Carers are also fortunate to have some excellent advocates, including many Members of this House—and I think we would probably all acknowledge that supreme among them is my noble friend, whose work in this area has for so very long been recognised by us all.

Carer’s allowance provides support to around 1 million people and, for most of those who receive it, the experience is positive and the rules are clear. But my noble friend is right that, when we came into government, it became clear that there were far too many cases where working carers had been left with large overpayments to be repaid. That is why we commissioned an independent review of earnings-related overpayments. We are very grateful to Liz Sayce for her recommendations, but also to her advisory panel and especially to the unpaid carers who shared their experiences to make that right. We have accepted or partially accepted 38 of the 40 recommendations in the report, we have begun working on many of them already, and we will set out the details in the new year. We will be very clear and transparent: many of the recommendations regard reviewing how we write to people, how we make things clear and how transparent we are. Above all, when the Government make mistakes, they should acknowledge them and put them right, and that is what we are doing.

[Lord Young of Cookham (Con)]

When we discussed this matter a few days ago, I raised with the Minister the issue of the so-called cliff edge, whereby if you earn 1p over the earnings limit you lose the whole allowance. The Minister replied with characteristic sympathy, but she said that modernising the system would take “some years”. The independent review referred to by the noble Baroness, Lady Pitkeathley, takes a totally different view. It says that addressing the impact of a cliff edge is urgent, and asks the department to be

“creative in its thinking about options for short term changes to remove or reduce this impact more quickly”.

Does the Minister accept that recommendation?

[Baroness Sherlock (Lab)]

My Lords, what I said last time we discussed this is absolutely the Government’s position. For the reasons I explained then—I will not go back into them again—carer’s allowance is traditionally not a classic means-tested benefit, so we want to find ways to tackle this. It will take time, because everything about the system has been built in ways that were designed around a simple, non-means-tested benefit. However, we have already done significant things to make a difference; one of the most important of those was to raise the level at which people could earn by the largest cash amount since the benefit was created. This means that if you earn less than 16 hours a week at the national living wage, there is no problem at all. We have also gone through to make sure that most of the ways in which people have fallen foul of the system can be corrected. For example, we have taken action on guidance and communications, and we are now checking automatically all the data that comes in directly from HMRC. We are doing all the things that can be done in the short term.

Much as I do not want to say this, the noble Lord will have to be patient. To be able to remove a cliff edge, the first requirement is to automate earnings coming from HMRC, which cannot be done overnight. We have already begun the work and we are looking for all possible workarounds in the short term. This problem has been around for a long time and no one paid any attention. We spotted it, we are taking action and we will sort it.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the Minister for that. The Sayce review identified the problem. I am reminded, sadly, of Lewis Carroll’s “jam tomorrow”, a promised reward that is often postponed. I am not really encouraged by the point that it will be dealt with in 2026. I ask the Minister to be more definite and give us a date in 2026 when this will happen, so that it is not, in Lewis Carroll’s words, “jam tomorrow”.

[Baroness Sherlock (Lab)]

My Lords, if I could give the noble Lord a precise date on which all the computer systems and all the systems will have changed, I would be glad to do it. Let me put this in context: we estimate that about 15% of people who get a carer’s allowance payment are also in paid work and 90% of people who reported earnings did so without difficulty, so we are talking about a very important but specific subset of people, most of whom had fluctuating earnings, which this is designed to address. The biggest challenge in the short term is to make sure that we have clear guidance, we communicate with people, they know what to tell us and we are able to manage that. There is a big prize at the end as we modernise all DWP systems to get this right. A lot of the improvements will be made by really old-fashioned analogue systems—by making sure that we have the right information, communicate well with carers and make it as easy as possible to get the information. Those recommendations may not be exciting, but they actually make a lot of difference.

[Baroness Stedman-Scott (Con)]

My Lords, given that some 185,000 unpaid carers will now have their carer’s allowance overpayments reviewed following the independent report, will the Minister set out how these carers will be notified of the reassessment process and what steps the Government will take to ensure that communications are clear, timely and accessible?

[Baroness Sherlock (Lab)]

I am grateful to the noble Baroness for her important question. Our data suggests that there are around 212,000 overpayment cases in the relevant period, between 2015 and September 2025. We will set out the details in the new year, but we plan to review every case to understand where mistakes were made. Cases that were affected specifically by our unclear guidance will have their overpayment reassessed. If the review confirms that the money was not due, we will make an appropriate refund or reduction. I should say that if it were to result in a higher overpayment, we will not ask anyone for additional money—I just want to reassure anyone who is listening. If the review confirms that the person still owes money, we will give the usual support to make sure that it can be repaid appropriately, because it is not to do with this question.

I want to reassure those who are listening that nobody needs to get in touch with DWP at the moment. Our intention is to work through the cases. We have data for most of these cases and we will contact people proactively. We will set out in the new year how that process will work and what we will do in any remaining cases, but no one needs to get in touch. Please do not phone us at the moment.

[Baroness Tyler of Enfield (LD)]

My Lords, I welcome the independent review and the Government’s response, but what will happen to those carers who have already been convicted of benefit fraud as a result of the mistakes that have been made? Why did the Government decide not to offer compensation to those who have already been so badly affected and whose lives have, frankly, been made a nightmare by the mistakes?

[Baroness Sherlock (Lab)]

My Lords, I said that we will set out in the new year the details of how the reassessment is going to work. We will be working our way through all the cases. I do not know how many, if any, of the cases resulted in prosecution. We will work through what will happen in cases where people, for example, either had overpayments or may have had a civil penalty or even possibly another form of administrative penalty. On compensation, it is not unusual for there to be reassessment exercises when guidance or other systems are found to be wrong, and DWP does not routinely make special payments under those circumstances. The noble Baroness may not welcome it, but I am very grateful that carers’ organisations have really welcomed the fact that we have taken the trouble to work out through an independent review precisely what went wrong and are putting it right. I am delighted that we are able to do it, and I look forward to our being able to right those wrongs.

[Lord Laming (CB)]

My Lords, I hope I am right in thinking that the whole House is in support of what the Minister is trying to achieve, so well done. Can she extend this just a little further and help carers feel that they are recognised and listened to? Some of the points that I receive are of course about the financial arrangements, but more than that, many carers continue to feel aggrieved that their work and their worth are not recognised and valued.

[Baroness Sherlock (Lab)]

I am grateful to the noble Lord, who makes a really important point. One of the good things about the Sayce review is that it involved carers directly and listened to them, and by listening to them was able to get to the bottom of what had gone wrong. My colleague Minister Timms, who is the Minister in charge of this, has carefully gone out to meet carers and is going to do so again. I know that he will want to hear not just what went wrong here but how people’s lives are impacted by the care that they give. How do the Government make their lives easier or harder, and how can we learn from that?

Finally, since the noble Lord prompts me to do the right thing always, I say once again that the whole House will want to join me in thanking carers for the service they give to those they love. Many in this House will have experience of either giving or receiving care, possibly both. It is an act of love and it is the Government’s job to support it and not get in the way, and we pledge to try to do that.