Carer’s Allowance Overpayments

Rushanara Ali Excerpts

Tuesday 14th April 2026 Westminster Hall

[Anna Dixon]

I absolutely agree with the hon. Gentleman that the impact of the overpayments on carers is terrible, and I am going to share the story of someone who was affected. I am sure others have heard similar shocking stories. As many as one in five unpaid carers who claim carer’s allowance and work part time were hit with overpayments. Thousands of carers have been left with huge debts and the fear of financial ruin.

Helen cares for her son Robin. He was born with a heart condition, respiratory vulnerabilities, developmental delay, mobility issues and Down’s syndrome. Helen gave up work as a teacher to support Robin and she relied on carer’s allowance. She also received some royalties for online resources that she had created as an education provider. She was paid those every six months, but the Department for Work and Pensions considered them as monthly earnings. It stopped her carer’s allowance and informed her that she had incurred overpayments going back over four years. She was charged more than £2,000 and told to pay back £50 a week. In her words,

“there was no care of how we would live or survive. It took me three very long years to repay the debt. It hung over like a great shadow, the letters, the fear of what could come. We were devastated by the department’s actions. Carers just don’t have bank balances that can stretch and withstand such pressures…you are so vulnerable…it shouldn’t be this difficult”.

As I have said, Helen’s is not an isolated case; thousands of carers are in this position, not as a result of failure on their part to report to and notify the DWP, but owing to a failure of Government. This scandal is a stain on the record of the British state.

I therefore commend this Labour Government for asking Liz Sayce to conduct an independent review of carer’s allowance overpayments. She made it clear that overpayments were caused

“not by widespread individual error by carers in reporting their earnings but by systemic issues preventing them from fulfilling their responsibility to report.”

I welcome the fact that the Government have accepted the vast majority of her recommendations and set aside £75 million to implement them.

Among other things, the review called on the Government to reform the earnings averaging processes and guidance, as well as that for allowable expenses, so that there is clarity, transparency and predictability, and it called for a thorough reassessment of cases to right the wrongs and deliver redress. It called for creative short-term solutions to address the cliff-edge crisis, while the DWP works on a longer-term plan. That is vital. If someone earns one penny over the earnings limit, they have to pay back the whole weekly carer’s allowance. The Sayce review found that although the earnings limit cliff edge does not itself cause overpayments, it dramatically increases their scale and impact, negatively affecting people’s health, finances, wellbeing and opportunities to work. Will the Minister update us on progress on the introduction of a taper system?

Liz Sayce recommended a whole range of other reforms, from upgrading computer systems to using more empathetic language, improving the join-up between types of benefits and simplifying the system. I thank her and her team for completing this crucial task. I urge the Minister to implement the recommendations with urgency and to set out the timeline for doing so.

Turning to those affected, I welcome yesterday’s announcement that the Government have launched an audit of more than 200,000 carer’s allowance cases affected by unclear Government guidance that was in place between 2015 and 2025. The cases will be reviewed, and debts potentially reduced, cancelled or refunded for some 25,000 unpaid carers. That is excellent news and I am sure the Minister will say more. However, I believe that there are several categories of people who have been adversely affected whose cases remain outstanding. The DWP appears to be accepting responsibility only for those affected by the unlawful guidance on average earnings and not for the lack of clear guidance on expenses deductions.

Will the Minister ensure, as the audit begins, that the DWP fully addresses all aspects of maladministration? First, there should be consideration of cases in which the DWP held information regarding expenses but did not act on it or make corrections for many years. Secondly, I urge him to ensure that cases in which data has been “lost” by the DWP are dealt with as Liz Sayce recommended, and treated as cases of official error unless the DWP can prove otherwise. Thirdly, in the cases of those affected by the failure to adjust universal credit correctly, Sayce recommended that the DWP should pay UC arrears. I would be grateful if the Minister addressed whether the audit will include reviews for those missing groups.

[Rushanara Ali (Bethnal Green and Stepney) (Lab)]

I congratulate my hon. Friend on securing this important debate. She rightly highlights the important contribution that carers make to our country and the savings of £184 billion a year. The carer’s allowance scandal that this Government have had to deal with, which has taken place over a number of years, has parallels with the Post Office scandal in the way that individuals have been treated. Does she agree that the Department for Work and Pensions, which rejected a recommendation by the Work and Pensions Committee to undertake a regular audit of its progress on carers, should do that, so that we can see the progress the Department is making?

[Anna Dixon]

I am a member of the Public Accounts Committee, and we have requested that the DWP reports every six months on its progress on implementing the Sayce review. As a member of that Committee, I will certainly be keeping a close eye on progress.

My final point is about the culture in the DWP. I have had the opportunity to challenge its senior officials in the Public Accounts Committee, and I was shocked by the culture on display, which clearly regarded the victims of Government incompetence as benefit fraudsters. It disturbs me that that culture has been prevalent for so long and that, despite knowing about carer’s allowance overpayments for many years, the Department did little or nothing. As a Committee, we are clear that the lack of integrated and concerted leadership from the Department exacerbated the crisis. I ask the Minister for reassurance that he is confident that the senior team at DWP understand the nature of the harm done to carers, are fully committed to putting this right and do not adopt a defensive culture.

On the 50th anniversary of carer’s allowance, I call on this Labour Government to right the wrongs caused by the state, which have parallels with the Post Office Horizon scandal, as my hon. Friend the Member for Bethnal Green and Stepney (Rushanara Ali) said, and to put right the scandal of carer’s allowance overpayments so that our carers are paid what they deserve and not punished for the dedication and care they provide.

--- Later in debate ---

[Sir Stephen Timms]

My hon. Friend makes a very good point. I will come on to that, because there is some progress in that area.

As my hon. Friend said, having made the change to the earnings limit, we commissioned the independent review led by Liz Sayce, the former chief executive of Disability Rights UK and a well-respected and widely recognised expert in disability benefits. Her review was published in November and, in my view, she did a brilliant job. She really got to grips with what had gone wrong, and I echo my hon. Friend’s thanks to her. The report found that many carers had faced unexpected debts because of errors in the way that the DWP had applied averaging rules on fluctuating earnings. The guidance used by DWP staff since 2015 had not properly reflected the law, which permits averaging over a period when assessing whether earnings are above or below the earnings limit.

The case that my hon. Friend mentioned of somebody who was receiving income once every six months is a clear example of the problem. I do not know what the figures were in that case, but it may well be that if Helen’s earnings had been averaged over six months instead of being taken into account in one month, they would have been below the limit. That is exactly the sort of instance that we will examine in the reassessment exercise, which I will say more about in a moment.

We accepted 38 of Liz Sayce’s 40 recommendations in full or in part, and we have already made progress on more than half of them. I will set out those recommendations and what we have done in response, and I will pick up on a couple of my hon. Friend’s questions. The review recommended putting right historical overpayments caused by flawed guidance on the averaging of earnings. I am pleased to say that new and correct guidance has now been in place since the start of September 2025, but it was wrong from 2015 for 10 years.

We are now delivering the reassessment exercise that Liz Sayce recommended: reclassifying affected overpayments as “not recoverable”, refunding carers where appropriate, and applying a fair approach where records are no longer held by the Department. The reassessment exercise began yesterday, so this debate is particularly well timed, and I am grateful to my hon. Friend for having secured it.

As my hon. Friend said, the Government have set aside £75 million of funding for refunds under the exercise in the financial years 2026-27 to 2028-29. That is a three-year period; we are hoping we can complete the exercise in two, but just to be sure, we have allowed three years to ensure we can complete it properly. We are expecting to review more than 200,000 cases, so it is a major undertaking. As she said, we estimate that we will be reducing, cancelling or refunding debts for perhaps some 25,000 carers in the course of the exercise.

[Rushanara Ali]

I draw the Minister’s attention to a point about reassessment made in yesterday’s Guardian:

“the government has admitted its existing ‘business as usual’ overpayment recovery policies will be maintained while a full overhaul of the benefit is completed, in effect ensuring that carer’s allowance penalties will continue to be imposed.”

Can the Minister assure us that that is not the case and that these penalties will not continue to be imposed?

[Sir Stephen Timms]

Let me come to that point in a moment. I saw the article that my hon. Friend refers to. It is an important point, and I will address it in a couple of minutes.

My hon. Friends have quite rightly raised questions about accountability for the review’s delivery. We have appointed a senior responsible officer, and we have committed to update both the Public Accounts Committee and the Work and Pensions Committee on progress every six months. The review highlighted the need for clearer guidance and better communication with carers, particularly on earnings averaging, overpayments and reporting responsibilities, so we have revised the decision letters so that carers are clearer on how their earnings have been averaged and on exactly what changes they need to report and when.

We have also redesigned the overpayment communications to be clearer and to show more empathy, I hope, than was shown in communications previously. We have strengthened the signposting to independent advice and debt support, including to charities and free money guidance, and we have made it clearer how carers can ask questions, challenge decisions or agree affordable repayment plans. We are continuing to test and develop the letters and the guidance, and there has been recent user research to assess clarity, understanding and impact.

We are planning further improvements. I want to express my appreciation for the carers organisations, particularly Carers UK and the Carers Trust, that we have been working with. They have put a good deal of work into this, together with the Department, to try to ensure we get these communications right. I hope that is going to be a significant improvement.

The Sayce review pointed to the lack of awareness and take-up of carers’ national insurance credits. We want to make sure that carers understand what they are entitled to, so we have been reviewing our letters and guidance to increase awareness. The review recommended reducing the impact of the earnings cliff edge while longer-term reform is developed. As my hon. Friend the Member for Shipley quite rightly pointed out, if someone is a penny over the earnings limit, they are not entitled to any carer’s allowance; that has been the case ever since 1976.

We have commissioned research on the impact of the higher earnings limit, which is now being regularly updated, unlike in the past, and commissioned behavioural research to inform future policy decisions, including changes to regulations, short-term mitigations and longer-term reform, including a taper. In the end, I think that will be the answer: instead of an earnings cliff edge or cut-off limit, there should be an arrangement so that the carer’s allowance reduces in a tapered way. It will take some time to develop that and put the IT in place and so on, so we are looking at what we can do in the meantime.

As my hon. Friend touched on, the review recommended better join-up between carer’s allowance, universal credit and other benefits. We are aware that a considerable burden is placed on carers, requiring them to resolve offsetting issues themselves. We have accepted Liz Sayce’s recommendation, and we will put in place an automated solution. While we develop that—again, that will take a while—we will put in place a manual workaround.

The review recommended tackling backlogs and identifying overpayments earlier. We have reduced the backlog of automated earnings notifications from HMRC. We now process those alerts much faster, allowing issues to be identified more quickly—another point raised by my hon. Friend. In future, we want to follow up on all those alerts, not just about half of them as we did in the past, so that we can draw people’s attention to problems as they arise. Taken together, those actions are about listening to carers, fixing what went wrong, supporting people better and modernising carer’s allowance in the future.

In response to the review’s recommendations on faulty averaging guidance, we will reassess carer’s allowance cases that might have been affected. A number of people, including my hon. Friend the Member for Bethnal Green and Stepney, have raised the question of why we did not pause all carer’s allowance earnings overpayments action pending the review’s outcome. My answer is that we have been clear about our approach all along: we have to balance fairness for carers with our duty to taxpayers. If money has been paid out incorrectly, it needs to be recovered. We have retained that position as the review was under way.

In most cases, the Department already holds enough information to carry out the reassessment, and affected carers will not need to take action unless the DWP asks for additional details. For older overpayment cases, dating back to 2015 or perhaps a few years after that, the DWP may no longer hold the relevant data and information: we are required to retain data only as long as it is needed for the purpose for which it was collected. The Department will open a simple online form to allow people to submit the relevant information. We are aiming to do that in November this year.

The Department will work closely with organisations supporting carers who think they may have been affected to register for reassessment on gov.uk. Everybody whose case is reviewed will be notified of the outcome, including whether their overpayment has been confirmed or changed. Advice and support for anyone whose carer’s allowance case is, or might be, involved in the reassessment exercise will be available, at no cost, from the Department or trusted partner organisations such as Carers UK and the Carers Trust—I thank them again.

Hon. Members have asked how progress will be tracked. The reassessment exercise is part of our broader response to the independent review and, as I have said, we have committed to updating the Public Accounts Committee and the Work and Pensions Committee on our progress every six months. Those updates will include statistics on progress, and they will enable the Committees to scrutinise progress and hold the Department to account. We will also put some information in our annual report and accounts.

Rebuilding trust requires honesty, accountability and action, and that is the approach we have aimed to take throughout this process. We have to fix the problems and correct the mistakes; the work of unpaid carers is too important and too valuable not to do so. More broadly, we want to improve and modernise carer’s allowance to make it easier for unpaid carers to combine their caring responsibilities with paid work where they are able to, and better reward them for doing so. We will also ensure that those receiving carer’s allowance and universal credit receive a more joined-up service than they have in the past. We owe that to those who provide such a vital service to our fellow citizens.

I know that my hon. Friend the Member for Shipley, the all-party parliamentary group and the Committees represented in the debate will scrutinise how we deliver on those aims very closely. They are absolutely right to do so.

Motion lapsed (Standing Order No. 10(6)).