Healey to scrap carer penalty in budget

£300 million. That is the total amount of debt unpaid carers in the United Kingdom accumulated between 2019 and 2025 due to a specific administrative rule, according to an independent review by disability rights expert Liz Sayce.

Chancellor John Healey will announce the end of that rule in his budget on Wednesday. The government plans to replace the current "cliff-edge" system with a digital taper. This change will stop the practice where earning even a penny above the weekly limit caused a carer to lose their entire weekly benefit payment.

Under the existing rules, a carer who earned one penny over the limit of £204 forfeited the entire £86.45 weekly allowance. Over the course of a year, a breach totaling just 52p in extra earnings resulted in a repayment demand of £4,495.40. The Department for Work and Pensions knew when these breaches occurred but did not issue warnings. The department stated that the responsibility to report changes lay with the carers.

The new taper system will operate on a one-for-one basis. For every extra pound a carer earns above the limit, only one pound of their allowance will be removed. This ensures that working additional hours or receiving a pay rise does not leave carers financially worse off. Healey told the Guardian that the previous system meant an extra shift or a small raise could leave someone worse off, a situation he described as incorrect.

An award-winning investigation by the Guardian revealed the scale of the issue. Hundreds of thousands of carers ran up debts ranging from £2,000 to £20,000. Welfare officials used legislation designed for recovering funds from organized crime to chase these debts. Some carers were even convicted of fraud. The review found that systemic injustices, including the cliff-edge, caused widespread depression and hardship.

One specific case from the review involved a carer whose hours did not change but whose pay increased by 15p a week because the national minimum wage rose faster than the earnings limit. Months later, she was told she owed a £2,000 penalty for total above-limit earnings of just £5.

The announcement is part of five "everyday fixes" Healey is unveiling ahead of the full budget. Treasury insiders describe the budget as low-key due to a tight fiscal backdrop caused by global events, including the conflict in Iran. Major tax and spend decisions are expected to wait until the spending review next year.

Other measures include making higher tax-free mileage rates permanent. The rate for the first 10,000 business miles will be locked at 55p, and the rate for miles above that will increase to 35p. The Treasury estimates this will benefit about 3 million people who use their own vehicles for work. The budget will also extend parental support to an additional 150,000 new parents, including self-employed fathers, with weekly payments worth up to £194.

Work and pensions secretary Pat McFadden said the government listened to concerns about the cliff-edge leaving carers worse off for taking on extra hours. Kirsty McHugh, chief executive of Carers Trust, called the move a long-overdue reform but urged the government to use it as a springboard for wider changes. Emily Holzhausen of Carers UK noted that carers have shared deep fears of losing all their benefit for going a few pence over the limit.

Healey is also expected to raise the minimum wage by about 4% to approximately £13.20 an hour. Youth rates for workers under 21 will rise by a similar amount. This approach differs from previous budgets, which saw higher increases for younger workers. Ministers are concerned that raising the youth minimum wage too quickly could discourage companies from hiring young employees. Labour had promised in 2024 to align the youth rate with the full rate, but recent months have brought a focus on youth unemployment rates.