Carer’s Allowance Overpayments

Stephen Timms Excerpts

Tuesday 14th April 2026 Westminster Hall

[The Minister for Social Security and Disability (Sir Stephen Timms)]

I am delighted to serve under your chairmanship this morning, Sir Roger. I congratulate my hon. Friend the Member for Shipley (Anna Dixon) on securing this extremely timely debate, which is a welcome opportunity to set out some of the work that the Government have been doing in response to the concerns that she has raised. She is a very strong advocate for unpaid carers; she was before entering Parliament, as she said, and she is now as chair of the all-party parliamentary group on carers. I echo her remarks about the significance of this year, which is the 50th anniversary of the introduction of carer’s allowance by Harold Wilson’s Government. It is right to mark and celebrate that.

My hon. Friend has spoken previously of how her mother cared for her grandmother for nearly 30 years. I think all of us can grasp how important and valuable the heroic scale of the contribution made by unpaid carers is, and my hon. Friend the Member for Bethnal Green and Stepney (Rushanara Ali) is right to draw our attention to the economic value of that contribution. The contributions of unpaid carers are vital to the family members, friends and neighbours they look after, but also to our communities, our country and our economy.

We inherited a dreadful situation in which some very busy, hard-pressed carers, already struggling under a huge weight of caring responsibilities, found themselves with large, unexpected debts due to alleged overpayments of carer’s allowance. My hon. Friend the Member for Shipley gave a particularly clear example of the problem that arose, and I will comment on it a moment.

The Work and Pensions Committee, among others, including the Public Accounts Committee, looked at this problem when I was the Chair, and I am pleased to now be a part of a Government who are able and willing to do something about it. We made a very early move after we were elected—I think that it was in the first Budget after the general election—to increase the weekly carer’s allowance earnings limit, as my hon. Friend said, to match 16 hours of work at national living wage levels.

As my hon. Friend said, that change from April 2025 resulted in the largest ever increase in the limit. It means that more than 60,000 additional people will be able to receive carer’s allowance between 2025-26 and 2029-30, but it is also important to note, particularly in the context we are discussing, that the chance of inadvertently slipping above the earnings limit is greatly reduced, because the limit will keep track with increases in the national living wage in the future. As my hon. Friend said, the earnings limit rose again to £204 per week from the beginning of this month.

People had a real problem in the past when the national living wage was increased, because their earnings that had been below the earnings limit went above it, and there was nothing to alert them to that; they had to monitor it themselves. Quite a lot of people were tipped inadvertently above the earnings limit, leading to an overpayment of carer’s allowance. I am very confident that the change we have made to keep the earnings limit in line with the national living wage will be a big step forward in reducing the incidence of overpayments in the future.

[Anna Dixon]

I had understood that we were also looking into opportunities to alert carers of potentially having breached the earnings limit. Is there anything in place to help communicate information from His Majesty’s Revenue and Customs or the DWP to carers?

[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)).