180,000 carers owed £300 million after cliff-edge rule scrapped in budget

Chancellor John Healey plans to abolish the carer’s allowance cliff-edge in Wednesday’s budget, ending a rule that forced 180,000 unpaid carers into debt totaling £300 million between 2019 and 2025. The controversial practice dictated that if a carer earned even one penny over the weekly limit of £204, they forfeited the entire week’s allowance of £86.45. A carer who exceeded the limit by 52p over a year would owe a repayment of £4,495.40.

The Department for Work and Pensions knew of these breaches but refused to warn carers, stating it was their responsibility to report changes. Many spent years unaware of the overpayments, accumulating debts that typically ranged from £2,000 to £5,000, though some reached £20,000. Welfare officials used legislation designed for drug dealers and organized crime bosses to recover the funds, and some carers were convicted of fraud.

The new digital taper system will remove only £1 of allowance for every additional £1 earned above the limit. This change ensures carers are not financially worse off for working extra hours or receiving pay rises. Healey described the old system as working against carers, noting that an extra shift could leave someone worse off. He said the taper will give carers the freedom to earn more without suddenly losing all their support.

This announcement is one of five everyday fixes coming in the budget. Healey’s room for maneuver is constrained by the fiscal backdrop, including the conflict in Iran. Treasury insiders expect a low-key budget, with major tax and spend decisions delayed until next year’s spending review. Labour MPs are anxious about the scale of these early measures, especially after Andy Burnham came to power promising major change.

Other measures include making higher tax-free mileage rates permanent, locking in 55p per mile for the first 10,000 business miles and raising the rate to 35p per mile above that. 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 extra 150,000 new parents, including self-employed fathers, worth up to £194 a week.

Ministers are removing import tariffs on more than 100 products, including baked beans, chocolate, and gherkins. They will also support farmers facing higher fertiliser bills and households relying on paraffin. The government plans to install hundreds more Post Office drop boxes, bringing the total to 1,000, to make parcel sending and returns more convenient without queuing.

Healey is also expected to raise the minimum wage by about 4% to roughly £13.20 an hour. Youth rates for workers under 21 will rise by a similar amount, a shift from previous budgets that saw inflation-busting increases. Ministers are concerned that raising youth wages too high could dissuade companies from hiring young employees.

Andy Burnham, the prime minister, said the government is taking on big challenges while addressing everyday problems that cost people money. Work and pensions secretary Pat McFadden said the department listened to carers’ concerns about the cliff-edge. Carers Trust chief executive Kirsty McHugh called the reform long-overdue but urged the government to use it as a springboard for deeper changes, as the benefit system remains stuck in the 1970s.