The government will scrap the 'cliff-edge' rule in carer's allowance and replace it with a tapered system, in an announcement the chancellor, John Healey, will make in Wednesday's budget. Under the current carer's allowance earnings limit, a carer who earns a penny above the threshold loses the whole week's payment. The reform is one of five more 'everyday fixes' Healey has announced ahead of the budget.

How the cliff-edge worked

Carer's allowance is worth £86.45 a week. The earnings limit is £204 a week, and anyone earning even a penny more than that forfeits the entire week's payment.

• •A carer who earned a penny over the limit every week for a year would breach it by 52p in total, yet be asked to repay £4,495.40.
• •Overpayment debts typically ranged from £2,000 to £5,000, and in some cases reached £20,000.

What the taper changes

The all-or-nothing rule gives way to a gradual reduction: only £1 of carer's allowance will be removed for every additional £1 earned above the earnings limit. Healey said working an extra shift or receiving a small pay rise could leave carers worse off, and that this cannot be right.

The taper will be run through a new digital system, and the technical demands of building it mean it will not be introduced before the end of the decade.

The overpayments scandal behind the reform

The reform follows an independent review by Liz Sayce, which found that about 180,000 carers ran up overpayment debts amounting to £300m between 2019 and 2025. The review concluded that unpaid carers suffered depression and hardship on a huge scale after falling foul of a series of systemic injustices, including the cliff-edge.

• •Hundreds of thousands of carers have, through no fault of their own, run up life-changing debts in recent years after overstepping weekly earnings thresholds by a few pence, with some convicted of fraud.
• •The Department for Work and Pensions knew when carers breached the earnings limits but refused to warn them, insisting the onus was on carers to report any changes.
• •In one case reviewed, a carer was put 15p a week above the limit by a minimum wage increase despite her hours staying the same, and months later was told she had incurred a £2,000 penalty for above-limit earnings totalling just £5.

Reaction and the wider budget

Campaign groups welcomed the change. Carers UK said the cliff-edge disrupts carers working part-time around their minimum 35 hours a week of caring duties, leading many to give up paid work or refuse promotions, overtime or bonuses.

Emily Holzhausen, the charity's director of policy, said a taper on the earnings limit should give families much more choice about working and still caring. Kirsty McHugh, chief executive of Carers Trust, called the removal of the cliff-edge important and long overdue, and urged wider reform of carer's allowance. The work and pensions secretary, Pat McFadden, said the government has listened to carers' concerns and intends to bring the rule to an end.

The taper is one of five more 'everyday fixes' announced by Healey ahead of his budget on Wednesday. Treasury insiders have warned that the budget will be low-key, with difficult tax and spend decisions put off until the spending review next year.

The new tapered arrangement is not expected before the end of the decade, because of the technical demands of building the digital system that will run it.