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Extra pay would usually be seen as a good thing, especially in the midst of a cost-of-living crisis.
But the complexity of the UK benefits system means that in some cases people’s lives can actually suddenly become worse, leading to them falling into debt or even ending up in court.
Such predicaments, which leave claimants feeling “trapped”, have become more common due to recent high inflation which has translated into higher cash, if not real, wages for most workers.
This trend was confirmed last month when the national living wage was increased by 9.8% to £11.44 an hour, benefiting more than one million workers.
Carers may be particularly vulnerable to hidden tit-for-tat with such increases, as they rely on the Carer’s Allowance benefit, which is paid to around 1 million people.
This will allow “unpaid” carers who look after someone with a disability to pay more than £35 a week to claim an allowance of £81.90 a week, unless they earn more than £151 a week from paid work.
But if you earn more than that, the benefits cliff means you lose your benefits completely instead of tapering them off.
So a small pay rise could cause people to lose their entitlement without realising – and then be liable for overpayments that could run into thousands of pounds.
The government then cancels the benefits, but this is when problems really begin, with some carers running into debt and facing the threat of prosecution.
“I felt like a criminal, I had to go to court.”
Elizabeth Tate, from Elbridge, Surrey, is a single mother and widow. She cares for her 20-year-old son, Oliver, who has Down syndrome and complex medical needs.
“If you have two parents, one can work and the other can claim carer’s allowance,” she says. “And when our son was born with a disability, I decided that I would take care of him and sometimes work as a supplementary teacher. My husband was the main breadwinner.
“In 2012-2013, my husband became ill and I took on more jobs to help make ends meet, but I inadvertently [a carer’s allowance] Overpayment of £1,623. We were in crisis because her husband’s health was failing and I had a disabled child and another child. I was making all the money I could and taking my eye off the ball.
“I had to go to court and felt like a criminal. I paid everything back.”
“I am currently unable to claim carer’s allowance as my weekly wage exceeds £151. I am a single mother and widow and I look after my son full-time for over 35 hours a week. He attends school. Since I quit my job, I am now confined to receiving meals only two or three days a week.
“I think social care needs a complete overhaul because as a carer, it’s not a situation where I can decide it’s just life. You can only get carer’s allowance if the person you care for is receiving disability qualifying benefit and therefore the government already recognises that you are caring for someone with high needs. There’s a £60,000 limit on child benefit and it’s gradually reduced, so why am I only getting £150 a week with carer’s allowance?
“If you are in crisis as a carer, you get a £300 bonus from the Crisis Fund. The fact that we have a Crisis Fund in the first place says a lot about the situation that carers are in. The government says they value carers, but they treat us with contempt, and we can’t go on strike. Carers and disabled people need to take completely different paths. I think there is.”
Old-style tax credit claimants and parents receiving child benefit may also be hit by the increase in income. But what seems particularly egregious to some is the plight of caregivers.
Last week, the government There are currently 134,800 people with unpaid carer allowance debts, with a total outstanding of £251 million..
Dominic Carter, director of policy and communications at the Carers Trust, said the “complexity” surrounding benefits was making it difficult for carers to understand the benefits they were entitled to.
“There are limits to how much money you can earn and how much time you can study, so if you’re in full-time education you can’t apply for it,” he says.
“Another problem is that so many people face getting their overpayments back because they are on a cliffhanger and are not reduced when they hit one of the many limits. The increase in the minimum wage has also outpaced the increase in carer allowance, meaning carers are now working fewer hours than in previous years before reaching the income limit of just £151 a week.
“Most people face overpayments through no fault of their own – innocent mistakes caused by the complexity of the benefits meant to help them. In recent weeks we have heard from all quarters of society that Carer’s Allowance is not fit for purpose and is not supporting unpaid carers to take part in the economy as much as many would like.”
He said the benefit should be reformed to “better recognize the enormous value that carers provide to society”, and in particular to reflect the realities of carers who are studying and caring for someone. He said that the rules regarding full-time education needed to be changed.
Carers Trust also argues that the total amount carers are entitled to should be increased.
“In essence, unpaid carers are often seen as a cost-saving measure for the government, as it provides billions of pounds worth of support for free every year, but gives very little in return to them,” Carter added. “There needs to be a push for this, and in an election year different political parties have a fantastic opportunity to improve the lives of millions of people across the UK.”
The Government emphasizes that anyone struggling to make repayments can negotiate sustainable and affordable plans, and in some cases even temporary suspension. The government said carer allowance overpayments amounted to 2.1% of the £3.3 billion spent on carer support.
violate tax credits
Caregivers are not the only benefit recipients who may end up taking on unexpected debt when their pay rises. There are also people who receive old tax credits but have not yet moved into the new Universal Credit system.
The credit was designed to help people who are low-income but still need some kind of benefit, but Alex Clegg, an economist at the Resolution Foundation, explains that if tax claimants earn more in the same year, they could be left with an overpayment that can later be deducted from their benefits.
This can be avoided by notifying HMRC of changes in income, but often people are unaware of this and can end up falling foul of the scheme and receiving a lower-than-expected payout.
“You can ignore the £2,500 but if your income goes beyond that you’ll have to pay it back,” Mr Clegg said. I.
“This means that the recent increase in the National Living Wage is not taken into account, but many people in low-paid jobs work precariously and struggle to estimate their income years in advance, leading to the accumulation of significant tax credit liabilities.”
The gradual transfer of benefit claimants to Universal Credit has solved these problems.
However, other challenges can arise when it comes to ensuring that working claimants, particularly those whose working hours are unstable, are paid the right amount.
Mr Clegg said Universal Credit had moved its benefit scheme to be paid in monthly arrears to avoid the assessment of tax credits which could lead to overpayments.
“But this has created other problems for Universal Credit,” he added. “For example, if a claimant receives two payments during a monthly assessment period, the next month’s Universal Credit payment could be zero. And if no payment is made at all during the next assessment period, the next payment will be higher.”
This could leave people “essentially getting no benefit” from some of the work they do.
Clegg argued there was a general problem that benefit levels were “historically low” and there was limited room for error because people had not saved enough to have a safety net.
“People often do not have enough to live on even with standard benefits, which can lead to overpayments that are absorbed into the additional living costs people need. ” he said. “If you are then required to pay it back, you may not be able to live on the reduced benefit level.”
Parents who claim child benefit are also at risk of being hit by increased incomes. However, this does not happen at a cliff edge in the same way as carer allowance, but tapers off at much higher pay levels.
In his budget, Chancellor Jeremy Hunt announced that the high-income child allowance would increase from £50,000 to £60,000. This means that the allowance will not be reduced until the parent has no income beyond that amount.
The tax step-down rate has also been halved, so benefits will not be lost in full until one breadwinner in a household earns £80,000.
Ministers are currently under pressure to change the way child benefit is calculated, which assesses pay based on households rather than individuals, and the government has said it will consider it.
Feminist think tank Women’s Budget Group (WBG) welcomed the increase amid concerns that more households are losing benefits due to inflation.
But he would reintroduce universal child benefits, arguing that a more generous approach to child benefits in general – ensuring they are not dependent on income – is better.
“Universal benefits that target all children, rather than low-income children, are more effective at reducing and preventing poverty,” said World Bank Director Dr. Mary Ann Stevenson. “Reinstating child benefit as a universal benefit will also ensure that the right to independent taxation is not undermined by the move to household means testing.”
A government spokesperson said: “We support millions of people every year and our priority is to ensure they receive the support services and benefits they deserve.
“We’ve put work at the heart of welfare, making sure most people are better off working than claiming benefits, increasing child benefit to help thousands of families and cutting National Insurance by £900 a year for the average worker.
“Benefit overpayments account for just 4% of total welfare payments and we carefully balance our obligation to taxpayers to recover overpayments with safeguards to help people manage their repayments.”