Thousands of unpaid carers will continue to be hit with huge and potentially unfair benefit repayment demands, it has emerged, as a government initiative to fix a welfare injustice has been likened to a Post Office scam.
Ministers will on Monday launch an audit of more than 200,000 historic Carers Allowance benefit cases, which estimates that 25,000 carers have been issued unlawful overpayments since 2015, which could result in their repayment loans being canceled or reduced.
The so-called reparations exercise is a major step forward in the Government’s attempt to “correct” the systemic injustice that has left hundreds of thousands of vulnerable carers with debts of up to £20,000 through no fault of their own.
However, the Government has accepted that its existing “business as usual” overpayment recovery policies will be maintained while the full overhaul of the benefit is completed, virtually ensuring that the Carer’s Allowance penalty will continue to be levied.
Furthermore, it is still unclear how ministers will compensate thousands of carers who were issued illegal overpayment demands due to flaws in the long-standing system linking Universal Credit and Carer’s Allowance, or who were wrongly asked to repay money after authorities lost evidence of reporting changes in earnings.
Overpayments were issued to almost 22,500 Carers Allowance claimants in three months after an independent review was published. Freedom of Information Request Published this month.
These include a stockpile of overpayments identified in 2025, which officials sent to almost 1,400 carers in January, even though they knew decisions to penalize carers were based on illegal and discredited earnings-average guidance, which was formally discontinued by the Department for Work and Pensions (DWP) in September.
The government took action last year after an award-winning Guardian investigation revealed that senior welfare officials and Conservative ministers had ignored warnings for years that carers were being unfairly pushed into debt and poor health, and in some cases convicted of fraud, as a result of failings in the carer’s allowance system.
The two-year, £75m recalibration exercise, which will focus only on cases where carers were unlawfully prevented from averaging their annual earnings to avoid earnings penalties, was welcomed by Liz Sayes, author of the independent government-commissioned review into the overpayment of carer’s allowance.
Their scathing report, published in November, found that systemic errors and management shortcomings at the DWP had caused avoidable hardship and distress to hundreds of thousands of carers and led to millions of pounds of public money being wasted.
It found that one in five unpaid carers who claimed Carers Allowance and worked part-time faced overpayments totaling more than £300m between 2019 and 2024 alone, while hundreds received criminal convictions for fraud.
Disability rights expert Sayes said: “I’m pleased (DWP) is moving ahead with the reassessment exercise. It’s the culmination of everything carers have worked for and the Guardian reporting.”
Pat McFadden, the Welfare Secretary, said: “We have inherited a system that left unpaid carers owing debts through no fault of their own, which we are determined to fix. That’s why we have accepted most of the recommendations of the Sys review and are now working to implement them.”
While ministers have been clear on the need to reform the Carer Allowance, the DWP hierarchy has struggled to convince MPs and campaigners that it has the credibility to fix the benefit and gain the trust of carers. Sayes himself has expressed dismay at the presence of “forces of resistance” in the department.
Helen Walker, chief executive of Carers UK, said: “We are pleased to see this government taking decisive action to address past failings and provide carers with the redress they deserve. The reassessment process is an important step in tackling these systemic failings.”
Kirsty McHugh, chief executive of the Carers Trust, said: “It is pleasing to see the Government doing the right thing by admitting its mistakes and now returning money to carers who were penalized through no fault of their own. This is an important first step in solving the myriad problems with this outdated benefit.”
