Ministers have set aside £75 million to fix systemic failings which left millions of unpaid carers facing huge bills after inadvertently breaching complex and confusing benefits rules.
An independent review published on Tuesday found that outdated technology, unclear guidance and a failure of leadership by ministers and senior welfare officials have resulted in punitive restrictions being imposed on vulnerable families.
It follows a year-long Guardian investigation into how hundreds of unpaid carers were criminally prosecuted and hundreds of thousands penalized for errors, with the review concluding that they were mostly not “deliberate rule breakers”.
The welfare secretary, Pat McFadden, promised this week that the government would fix the “mess” she said had been left by the previous administration.
The Department for Work and Pensions (DWP) has said it will reassess 145,000 cases where people were overpaid Carer Allowance, with the possibility of some of those debts being forgiven or reimbursed. However, the DWP has stopped short of issuing a formal apology or offering compensation.
Figures released as part of Rachel Reeves’ budget on Wednesday revealed ministers have set aside £75 million from 2026 to fix issues raised in the review led by disability rights expert Liz Sayes.
It is understood that the majority of the £75 million will be paid for by the large number of officers required to reassess 145,000 overpayments. It is expected that a small amount will be used to either forgive the debts or reimburse unpaid caregivers who have already been paid.
Official documents reveal that £20m is to be spent in 2026-27, £35m the following year and £20m in 2028-29. The money is to cover the cost of “reevaluating overpayments from 2015 to 2025 due to inaccurate operational guidance”.
“Incorrect operational guidance” primarily refers to guidance issued to DWP staff in 2020, which caught carers whose weekly or monthly earnings fluctuated, and who were penalized despite their “average” total earnings over a set period being within the permitted earnings range. The guidance resulted in increased penalties for overpayments.
Unpaid carers who look after loved ones for at least 35 hours a week are entitled to £83.30 per week Carer’s Allowance, unless their weekly earnings from part-time jobs exceed £196. If they exceed this limit, even by less than 1p, they must repay the full week’s allowance under “cliff edge” rules.
This means that a carer who exceeds the income limit by 1p per week for a year will have to repay £4,331.60, not 52p, plus a civil penalty of £50.
Caregivers in zero hours or seasonal work were particularly vulnerable to penalties. The review cites a part-time NHS worker who was forced to return a £300 carer’s allowance after receiving a one-off £200 Covid bonus, leaving her £100 out of pocket.
The review said the guidelines were flawed, confusing and not in line with social security law. “It is not clear why the new guideline was introduced,” it said, adding that it appears to have been done without testing or legal scrutiny.
The guidance was never published, leaving carers in the dark about whether averaging their earnings is allowed. Carers told the review they had received conflicting advice from the DWP. The new guidance was introduced in September this year.
Helen Walker, chief executive of Carers UK, said the solution was a “Significant step towards addressing the injustice long suffered by carers”. He said: “In the coming days, we will examine how much of this funding will directly benefit carers and how much will be used to implement the new systems and processes that are urgently needed to prevent this happening again.”
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