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Carers saving Treasury £billions every year “set up for a fall” by design of Carer's Allowance

2 August 2019

The Work and Pensions Committee calls on DWP to completely reassess its approach, consider writing off debts due to its own protracted administrative failures in its report on the Overpayments of Carer's Allowance.

Carers are being disproportionately heavily penalised for years of DWP administrative errors or their own honest mistakes, in a confusing and outdated system where the IT cannot even adapt a basic information letter within a year, says the Work and Pensions Committee in a report published today, Friday 2 August 2019.

I have always worked and a few years ago I was put in a position that turned my life upside down. My mum had dementia and Alzheimer's. I accidentally did too many hours, I was caring for my mum and my mentally ill son and holding down my job, I wasn't aware that I'd done wrong until I was called for an interview at the job centre. I was charged with fraud and taken to court, I was given community service of 180 hours unpaid work as if I didn't have enough to deal with. My son went into care because I couldn't cope, and I have now had to give up work and care for mum. I had to move in with her and give up my home, my job, my life. I am now having to pay the money back. My own health has suffered, and my finances are rock bottom. I feel my life has been in a downward spiral and I haven't been able to cope since.

(Respondent with overpayment of £3,000)

Chair's comments

Rt Hon Frank Field MP, Chair of the Committee, said:

“Carers are damned if they do, damned if they don't: penalised as soon as they earn even a pound over the threshold, and punished by the Department's own administrative failures and hopelessly outdated systems. The Department sets itself no targets for tackling fraud and error for individual benefits, yet jumps on struggling carers for every honest mistake. DWP has got its priorities all wrong. Bullying carers is no way to recognise, much less support, the invaluable contribution they make to our society and the people they care for, or the hundreds of billions of pounds they save the taxpayer. Will the Government now please get off the back of carers? They have important work to do.”

It is estimated that there are around 7 million carers in the UK (around 1 in 8 adults) – set to rise to 9 million -  who make an unpaid contribution of £132 billion to the UK economy every year. Most people will become a carer at some point in their lives, caring for a partner, parent, friend or disabled child who cannot cope without their support.

Many of these people find it difficult to make ends meet. According to Carers UK's 2019 ‘State of Caring' report, 39% are in financial hardship and 73% of carers on Carer's Allowance (CA) are unable to afford to save for retirement. The Committee previously reported on the need for the Government to make changes in the benefit system and in the workplace better to support carers to both find work and stay in employment. With the number of carers at an all-time high, saving the Treasury billions of pounds annually, it is even more vital that the Government provides carers with both the support and recognition they deserve. Instead, administrative failures by DWP have led to substantial overpayments which the Department is now clawing back as debt, leading unsurprisingly to substantial distress and hardship for carers.

The Committee says:

- The earnings threshold “cliff edge” in CA means that carers can be heavily penalised when they make small, honest mistakes. If a claimant fails to report a rise in their earnings of even £1 above the weekly threshold, the Department counts this as overpaying them by the full rate of £66.15 a week. This is compounded by the fact that the Department has, for many years, allowed overpayments to build up because of administrative failures and a prolonged lack of resources. The Department has belatedly decided to remedy its past failures, but pursuing these debts can be costly for both the Department and the carers affected.

- The Department places the burden of reporting even minor changes in their circumstances on carers. It provides information on this to carers in a long and complex annual letter containing a lot of information but which still fails to inform carers of the basic, central fact that if they earn even £1 over the £123 a week threshold, they will lose their entire week's Allowance of £66.15 or be considered to owe it back to the Department as a debt.  An extraordinary letter from DWP minister, echoed in evidence from the Permanent Secretary,  explained that the Department is using a computer system which makes it almost impossible to update the information letter for at least 12 months.

- In theory, the Department should be spotting these errors, because it has access to data about carers' earnings from HMRC. But problems with its systems, compounded by prolonged staff shortages, have led to substantial backlogs in the checking process.

- The Department has previously rejected this Committee's recommendation to introduce a taper for CA, which would reduce the impact on carers if they make honest mistakes and overpayments occur. However, the fact remains that the design of CA sets carers up for a fall. The Department must do more to minimise the risk for claimants: it should look again at the different options for introducing a taper into CA as the only real way to address this systemic source of error.  If it will not do this it should adapt its approach to be more proportionate to the scale of the error: where claimants' earnings are within 5% of the earnings threshold, the Department should limit the period for which an overpayment is recoverable to one month.

- The Department has an outdated understanding of the causes of overpayments in CA. Its most recent figures suggest that most overpayments are fraud, but the NAO has questioned this and indeed the Department has not conducted any analysis of rates of fraud and error in Carer's Allowance for over 20 years.  Using these “last century” estimates the Department thinks that 89% of overpayments are caused by claimant fraud or error, blaming the vast majority (80%) on claimant fraud. However, data on the overpayments it identified in recent years suggest that this is not the case. The NAO noted that less than 10% of overpayments were referred to the Crown Prosecution Service for prosecution or had an administrative penalty—an alternative to prosecution—applied over the last five years.

- The Committee heard that carers—often already struggling financially—can suffer considerable stress and anxiety as they face substantial financial debts  - which in some cases may take years or even decades  to repay, compounded by the Department's approach to debt collection. The Department needs a new approach -  it should now:

  • conduct a review of the individual cases where it is seeking to recover overpayments of CA and where its own administrative failures have allowed overpayments to accrue.
  • consider on a case by case basis whether overpayments are worth pursuing given its culpability, the cost of recouping the overpayments and the impact on the lives of carers and those who they care for.
  • start with cases of overpayments worth over £2,500, the majority (two-thirds) of which its internal audit team found it could have detected earlier, and decide whether it should be writing off amounts where the claimant has made an error in failing to report changes in their circumstances: errors that are easily understandable given the complexity of the rules around CA and unclear advice issued by the Department.

-  In some cases of overpayments to carers, the disabled person for whom they care would have been entitled to a similar amount in disability benefits if Carer's Allowance had not been claimed. In those individual cases and with the consent of the carer and the disabled person, the Department should seek to resolve the situation without the circular, unnecessary extra expense of  clawing back the money from the carer, only to pay a similar amount to the person they were caring for.

- The Department could, and should, have got to grips with the problems in Carer's Allowance much more quickly. Instead it took the action of a whistleblower—who first raised concerns over issues in CA in 2010—over many years, an NAO investigation and a select committee inquiry to persuade the Department of the urgent need to act and to listen to carers' representatives. The result is that thousands of carers are now being asked to pay back large sums of money, and are experiencing distress and hardship as a result. Government should set out, in response to this report, an action plan for improving the Department's capacity to listen—to its own staff, to its customers, and to outside organisations—and how it will measure success.

In evidence to the Committee the Permanent Secretary at DWP refused several times to apologise for the hardship and distress caused by repaying overpayments, on the grounds that the Department offers flexible repayment plans—known as hardship rates—to claimants who are struggling financially. However, the NAO noted that just 1,000 carers were in receipt of these hardship rates and that the Department “does not know how these repayments [of overpayments] affect carers or the disabled person they care for, as it has not assessed the impact of these repayments.”

Carers—who often lead very stressful lives and whose invaluable contribution saves the taxpayer substantial costs—can suffer considerable distress and face financial difficulties when they have to repay overpayments that they often had no idea they were accruing. The Committee says it is  unacceptable that the Department has stuck its head in the sand and done nothing to assess how these repayments affect the lives of carers and those that they care for. The Permanent Secretary's refusal to apologise for the Department's role in creating this problem, and to accept that the result is hardship for many carers, is profoundly disappointing.

Further information

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