2Benefits system
Carer’s Allowance
9.Carer’s Allowance is a flat rate, non-contributory, non-means-tested benefit paid to full-time carers of someone who is severely disabled.20 It aims to provide “a measure of financial support and recognition”.21 In 2018–19, Carer’s Allowance is £64.60 a week.22 To be entitled to these payments, a person must:
- be aged 16 or over;
- be providing at least 35 hours of care a week for someone in receipt of a qualifying disability benefit;
- not be in full-time education or studying for 21 or more hours a week; and
- if in paid work, have earnings after certain deductions of no more than £120 a week.23
10.Evidence to our inquiry highlighted three main concerns with Carer’s Allowance:
- the income “cliff-edge” that results from Carer’s Allowance being removed in full when earnings exceed the threshold;
- the disconnect between the earnings threshold and the National Living Wage; and
- insufficient information on what constitutes an “allowable deduction”.
We consider each in turn.
The cliff edge
11.If earnings calculated for the purposes of Carer’s Allowance exceed the threshold of £120 per week, the carer loses 100% of the benefit. A marginal increase in income can therefore result in £64.60 being withdrawn.24 Carers UK described this as “one of the harshest penalties in the benefits system”.25 It also acts as a disincentive for carers to increase their working hours. One carer told Contact, a charity for families with disabled children, that she felt “trapped” as she wanted to move into part time work but it was not a financially viable option.26 Another said:
“My employer created a part time role. Because of loss of benefits it didn’t pay any more than being on benefits”.27
Carer’s Allowance and Universal Credit
12.Universal Credit (UC) is designed to reward work, partly by removing ‘cliff edges’ in the benefits system which leave people worse off by working more or receiving a pay rise. The interaction of Carer’s Allowance and UC means that carers eligible for UC do not face a cliff edge (see Box 1). While the Carer’s Allowance earnings threshold remains, if a claimant exceeds the threshold, their UC award adjusts to compensate.
Box 1: Example 1: A carer eligible for Universal Credit
Susan is a single parent. She receives UC and has no other earnings. Based on her circumstances, she is eligible for £225 UC per week. Susan’s mother has a sudden accident and Susan takes on responsibility for her care. She is now eligible for Carer’s Allowance at £64.60 per week. Under UC, this counts as “income other than earnings”. So, Susan’s UC award reduces by £64.60 per week to £160.40, but the incorporation of Carer’s Allowance means she still receives a total of £225 per week. She also now qualifies for the carer’s element in UC (£156.45 per month, around £36 per week), which is added on top.
Susan accepts a part-time job, which pays £140 per week. Even after allowable deductions, her earnings exceed the threshold for Carer’s Allowance. She loses all her Carer’s Allowance, but as the income other than earnings is no longer deducted, her UC award increases to make up the difference. Her UC payments will gradually reduce as her earnings increase.
13.UC does not, however, offer a complete solution to the cliff edge. UC is currently being gradually rolled out for new claimants. The process of transferring existing claimants from legacy benefits such as tax credits is not now scheduled to be complete until March 2022.28 Given the long history of delays to the programme, there is a risk that date could shift further. In addition, some Carer’s Allowance claimants are not eligible for UC. For example, a carer who has (or whose partner has) savings or other capital of more than £16,000 is not entitled to UC.29 Exceeding the earnings threshold would still mean losing the entire Carer’s Allowance. Other carers may choose not to claim UC.
Box 2: Example 2: A carer not eligible for Universal Credit
Keith cares for his wife, who has a long-term illness, and claims Carer’s Allowance. Their savings exceed £16,000, which means they are not eligible for UC. He wants to start a part-time job, but even after deductions his earnings would exceed the threshold of £120 per week and he would lose his £64.60 Carer’s Allowance.
A taper for Carer’s Allowance
14.Sarah Newton MP, the Minister for Disabled People (the Minister), acknowledged that the Carer’s Allowance cliff edge was a “barrier” to work.30 She said the Government had raised the earnings threshold and value of the benefit, and would continue to do so.31 While this will benefit people close to the current threshold, a cliff edge will remain. Andrew Latto, a Deputy Director at the Department for Work and Pensions (DWP), said that the mechanism for determining eligibility for Carer’s Allowance had “not changed very much” since the benefit was introduced in 1976. It was the last benefit to use a negative test of earnings, meaning claimants had to continually prove they were not earning too much to receive it.32 The effect of the cliff edge was contrary to the Government’s objective in welfare policy, which the Minister explained as “for every hour that people work, they should always be better off”.33
15.A wide variety of witnesses told us that the solution to this problem was to introduce a taper for Carer’s Allowance.34 We also heard strong support for such a measure from carers we met in Stoke-on-Trent. Rather than being withdrawn in its entirety at an earnings threshold, the benefit would be gradually withdrawn as earnings increased, at a rate that rewarded work. This system is used in UC, which currently uses a 63% taper rate. For each additional £1 earned above a threshold, the claimant loses 63p in UC. Andrew Latto acknowledged that a taper was “something we do need to look at”.35 He noted that a taper applied from the current earnings threshold would have a fiscal cost. A cost-neutral approach would require the taper to kick in at a lower level.36 The Minister agreed, however, that the positive effects of removing the anomaly in the benefits system, which would include better incentives to work, would need to be incorporated in policy decisions.37
16.The current Carer’s Allowance system includes a cliff edge. Claimants can lose their entire weekly Carer’s Allowance of £64.60 by earning just £1 over the threshold. This is an outdated anomaly in the benefits system and counter to the Government’s objective of making work pay. The introduction of Universal Credit will resolve this problem for some claimants. However, it will be several years before Universal Credit is fully operational and even when it is, some Carer’s Allowance claimants will not receive Universal Credit. The Government already has a solution for work incentive cliff edges in the taper it uses for Universal Credit. Coherence and fairness in the benefits system dictates Carer’s Allowance should be withdrawn at the same rate. We recommend that the Government introduce a taper for Carer’s Allowance at the same rate as used for Universal Credit.
Interaction with the National Living Wage
17.We heard that a further problem with the Carer’s Allowance earnings threshold is the absence of a link between it and the National Living Wage (NLW).38 Employees could be inadvertently tipped over the threshold by an increase in the NLW, meaning they lose their Carer’s Allowance and are worse off because of a pay rise.
16 hour thresholds
18.This is a particular problem for people claiming both Carer’s Allowance and Working Tax Credit (WTC). Certain claimant groups, such as single parents, must work at least 16 hours per week to receive WTC. However, 16 hours at the current NLW (for people aged 25 and over) of £7.83 pays £125.28, more than the current Carer’s Allowance earnings threshold of £120. Carers on the NLW can effectively face a choice between the two benefits.
19.Andrew Latto said that, as it does not have a 16-hour threshold, UC will largely resolve this problem.39 The current UC rollout schedule means, however, that some existing claimants will still be on WTC in 2022. Furthermore, a wide range of organisations and individuals highlighted that a 16-hour rule will persist, despite the advent of UC.40 Parents must work at least 16 hours at the NLW or more to be eligible for free childcare for three and four-year olds.41 A rise in the NLW could tip a carer working 16 hours a week over the Carer’s Allowance earnings threshold, but if they chose to work one fewer hour each week to retain their benefit, they could lose entitlement to free childcare. Again, a pay rise works against the carer and a delicate balance between work, parenting and other care could be upset. Carers UK said:
Each year, with the uprating of the National Living Wage, Carers UK hears from carers whose earnings rise over the earnings threshold by just a matter of pence and who are forced to choose between giving up work, reducing their hours or losing their benefit.42
This is likely to continue as progress is made towards the Government’s recommendation to the Low Pay Commission that NLW reaches 60% of median earnings by 2020.43
A link between the National Living Wage and the threshold
20.Carers UK, the Low Incomes Tax Reform Group (LITRG) and Contact all suggested that the most appropriate remedy to this problem was to create a link between the NLW and the Carer’s Allowance earnings threshold.44 This would mean that an uprating of NLW would be automatically reflected in an increase to the threshold and would not financially disadvantage claimants.
21.A taper for Carer’s Allowance will remove many of the work disincentives currently built into the benefit. There will continue to be problems, however, for as long as the threshold for removing or reducing Carer’s Allowance is below 16 hours at the National Living Wage. While the 16 hour eligibility rule in Working Tax Credit will be removed by Universal Credit, the transition between those two benefits will not be complete for several years. Regardless, a similar 16 hour rule remains in eligibility for free childcare. For parents who both work and care, a pay rise could mean they lose their benefit and must reassess the precarious balance between their commitments. Parent carers considering work can face a disincentive to take a job. The Government should seek to eradicate such barriers in its quest to make work pay. We recommend a link between the National Living Wage and the Carer’s Allowance earnings threshold. For as long as 16-hour rules exist in the benefits system, the Carer’s Allowance threshold should be equivalent to no less than 16 hours at the National Living Wage.
Information and support
Allowable deductions
22.The DWP told us that the Carer’s Allowance earnings threshold applies after deductions, which include National Insurance and half the contribution to a workplace or a personal pension. Deductions of up to half of net earnings can also be allowed towards the cost of alternative care for the disabled person, or for a child aged under 16, while the carer is at work.45 LITRG told us that many carers do not fully understand these deductions. They said that greater awareness of allowable deductions “may give more people the opportunity to work part time and still qualify for Carer’s Allowance”.46 They pointed out that there was no mention on the gov.uk website of the rule that carers can deduct expenses not repaid by the employer but “wholly, exclusively and necessarily” incurred through employment duties.47 The Minister told us “if there is any evidence of things not being on the gov.uk website [she] would be very pleased to hear it”.48
Jobcentres
23.Many carers do not realise that support is available to them. Evidence to our inquiry highlighted missed opportunities to provide carers with advice and information. Bethan Pound, a young carer, told us that her experience of applying for Carer’s Allowance was “the routine questionnaire and filling in forms. Nobody mentioned any support for carers”.49 Katie O’Shaughnessy had a similar experience at the Jobcentre. She told us “they did not identify me as a carer, even though I was taking the Carer’s Allowance”.50 The Minister recognised this issue. She said that Jobcentre Plus Work Coaches, frontline staff who help people find work, “have had good training in identifying carers and being able to signpost to local support”.51 However, someone applying only for Carer’s Allowance, which is administered by the Pension Service, a different part of the DWP, will not get access to a Work Coach. The Minister told us it was something to think about
so that, when that person comes into the Jobcentre to fill in that form, we can improve communications and referrals into other services, which they may benefit from.52
24.We also heard of varying levels of understanding of caring among Work Coaches. Fiona Malpas, a representative of a carer employment pilot scheme that operated in Bristol and South Gloucestershire, told us:
There is nothing worse than somebody going into the jobcentre and being told that there is a full-time job that they need to take, when they could never do it because they are already caring for somebody.53
Sarah Jackson, Chief Executive of Working Families, a work-life balance charity, said:
one work coach will be incredibly understanding of your care responsibilities and the restrictions and constraints that those create; and another will not be, and you will be quickly into the sanctions system.54
She said better Work Coach training on caring would be a simple step to improve consistency.55 Carers UK told us that in 2017 their Adviceline was contacted by over 150 carers who had been told to attend a Work Focused Interview. They explained, “a common theme is that carers are told attendance at the interview is mandatory” when in fact, for the majority, that was not the case.56
Other frontline services
25.Jobcentre visits are not the only frontline public service opportunities to support carers being missed. Olga Budimir, a carer, described her regular contact with nurses, GPs and consultants when looking after her father:
All these people around me knew I was a carer, yet none of them came forward and said, “Do you need any help?”[ … ] I did not know I was a carer but they knew.57
Nikki Kimber, a carer for her disabled daughter, shared a similar experience:
For a long time we were in a complete bubble with this child, working with the health professionals. We had no idea there was potentially support and guidance, which is legislated for, for families like ours.58
Many carers have regular contact with the NHS accompanying the person they care for. The evaluation of Carers in Employment pilots, which took place in nine locations across the country, found that GP surgeries and hospital wards “proved to be effective in identifying working carers and signposting carers to available support provision”.59
26.The life of a carer can be very complex. This complexity is only added to by the intricacies of the benefits system. Information and support for carers is, however, very patchy. Some carers do not even realise they are carers. Others have contact with the benefits system or other public services, but valuable opportunities to offer or signpost assistance are missed.
27.We recommend a series of simple steps to improve support for carers:
- Guidance on Carer’s Allowance on the gov.uk website should include full details of the taxes and expenses that can be deducted from earnings before the threshold applies.
- As part of the application process for Carer’s Allowance, claimants should receive information on support services, including signposts to those provided locally by the third sector. This information should also be made available in GP surgeries and hospitals.
- People who only claim Carer’s Allowance are not currently entitled to an appointment with a Jobcentre Work Coach. If they want one, they should be eligible for one.
- DWP should review Work Coach training and guidance to ensure it adequately covers carer awareness, and collect data on the quality of the support and accuracy of information given to carers as part of its regular performance monitoring.
20 While Carer’s Allowance has an earnings threshold, it does not have a test of wealth
21 Department for Work and Pensions (SFC 0044)
22 Department for Work and Pensions (SFC 0044)
23 HM Government, Carer’s Allowance, accessed 14 May 2018
24 Ian Peters and Katherine Wilson (SFC 0056)
27 Age UK (SFC 0034)
28 House of Commons Library Briefing Paper Number 8096, Universal Credit roll-out: Autumn/Winter 2017, 15 November 2017
29 House of Commons Standard Note SN06469, Universal Credit: an introduction, 9 November 2012
30 Q144 (Sarah Newton MP)
31 Q147 (Sarah Newton MP)
32 Q149 (Andrew Latto)
33 Q146 (Sarah Newton MP)
35 Q150 (Andrew Latto)
36 Q149, Q150 (Andrew Latto)
37 Q151 (Sarah Newton MP)
38 Carers UK (SFC 0033), MS Society (SFC 0017), Contact (SFC0008), Low Incomes Tax Reform Group (SFC0039), Name Withheld (SFC0006)
39 Q150 (Andrew Latto)
40 MS Society (SFC 0017) , Contact (SFC 0008), Low Incomes Tax Reform Group (SFC0039), Name Withheld (SFC0006), Carers UK (SFC0033)
41 HM Government, Help paying for childcare, accessed 14 May 2018
43 Department for Business, Energy and Industrial Strategy, National minimum wage and national living wage: Low Pay Commission Remit 2017, August 2017
44 Carers UK (SFC 0033), Low Incomes Tax Reform Group (SFC 0039), Contact (SFC 0008)
48 Q145 (Sarah Newton MP)
49 Q74 (Bethan Pound)
50 Q78 (Katie O’Shaughnessy)
51 Q141 (Sarah Newton MP)
52 Q141 (Sarah Newton MP)
53 Q35 (Fiona Malpas)
54 Q12 (Sarah Jackson)
55 Q12 (Sarah Jackson)
57 Q83 (Olga Budimir)
58 Q76 (Nikki Kikber)
59 Institute for Employment Studies, Evaluation of the Carers in Employment (CiE) Project, January 2018
Published: 17 May 2018