The UK government is weighing compensation payouts for unpaid carers who have been forced to repay thousands of pounds due to strict carer’s allowance rules. The move follows growing public outrage over what has been described as one of the harshest benefit scandals in decades.
More than 144,000 carers are repaying a combined £251 million in overpayments, with average debts around £5,000 and some as high as £20,000. Many carers were penalised for accidentally breaching earnings rules by just a few pence a week, triggering the “cliff edge” penalty. This rule forces carers to repay the entire benefit if they exceed the weekly earnings threshold, currently £196, even by tiny amounts.
In some cases, carers faced life-changing bills – for example, a worker earning just 50p above the limit for a year would owe more than £4,200. These debts have left carers, most of them women, struggling financially and mentally while caring for frail, ill, or disabled loved ones.
DWP failures under scrutiny
The scandal has been fuelled by administrative failings at the Department for Work and Pensions (DWP). Until recently, the DWP only checked half of the monthly HMRC alerts that flagged potential earnings breaches, allowing carers to unknowingly accumulate debts for years.
Many carers also fell foul of the rules because thresholds did not keep pace with minimum wage increases, or because holiday pay and bonuses were counted as weekly earnings. Campaigners and charities argue this reflects years of systemic neglect by successive governments.
Reform plans and independent review
New welfare secretary Pat McFadden has placed reform of carer’s allowance high on his agenda. The government is considering recommendations from a report by disability policy expert Liz Sayce, which was handed in at the end of July and is expected to be published soon.
Steps already underway include raising the earnings threshold, hiring additional staff to review alerts, and trialling text message warnings for potential breaches. Ministers are also debating whether to offer financial redress for those hardest hit by overpayments – a move that would mark a major policy shift.
Growing pressure for compensation
Charities, campaigners, and political leaders have urged the government to act. Ed Davey, leader of the Liberal Democrats, said compensation would be “a milestone for carers across the country” and a chance to properly support those who provide unpaid care.
Helen Walker, chief executive of Carers UK, added: “Far too many carers are repaying debts that they should never have been liable for. The financial and emotional toll has been devastating.”
The DWP has declined to comment on compensation plans but said it has already implemented the largest-ever increase to the carer’s allowance earnings threshold, set to benefit more than 60,000 carers by 2029-30.
Carers at breaking point
More than 5 million people in the UK provide unpaid care, and 1.4 million receive carer’s allowance of £83.30 a week. Nearly half of unpaid carers live in poverty, making the overpayment scandal particularly damaging. Critics say the system has punished carers instead of supporting them, leaving many in debt and even criminalised for fraud.
The government now faces mounting pressure to not only compensate victims but also to rebuild trust in the welfare system by ensuring that carers are protected, not penalised, for their vital work.
