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Wednesday, 30 November 2016

GOVERNMENT LEAVES CARERS STUCK IN BENEFITS TRAP

The Government will leave carers aged over 25 stuck in a benefits trap in April 2017 despite a big increase in the amount they can earn before losing Carer's Allowance.

People get Carer's Allowance, which will be £62.70 a week from April, if they look after a disabled person for at least 35 hours a week. Many of them are parents - many single parents - some are over 60 without a state pension, and many are themselves disabled. Nearly three out of four (72%) are women.

Many carers supplement their Carer's Allowance by working part-time. If they earn more than a certain amount - the earnings limit - they lose their carer's allowance completely. At the moment that limit is £110 a week and will rise to £116 a week from April 2017.

In the past they could claim extra help through working tax credit. To get that they must work at least 16 hours a week*. But from April 2016 the new National Living Wage for those over 25 means they can no longer work 16 hours and keep below the earnings limit because 16 x £7.20 = £115.20 taking them above the £110 limit. So this year carers must choose between their carer's allowance worth £62.10 a week and working tax credit. For a lone parent that would be £76 a week, for someone over 60 £37 a week and for a carer who is disabled themselves it could be £94 or £119 per week depending on their disability. (Thanks to entitledto for those WTC calculations).

The same choice will have to be made in 2017/18 despite the big rise in the earnings limit to £116.

From April 2017 the National Living Wage will be £7.50 an hour. So 16 hours work will bring in £120, well above the new earnings limit. So again carers will have to choose between Carer's Allowance of £62.70 and Working Tax Credit of around £76.

The 5% of those on Carer's Allowance who are under the age of 25 will not be affected. The minimum wage for 21-14 year olds will rise to £7.05 in April so 16 hours work will bring in £112.80, well below the new limit of £116.

But could it be that the DWP has simply got its sums wrong? The new limit would work if the National Living Wage was not rising in April. Sixteen hours at £7.20 is £115.20, just below the new earnings limit. But with the announcement in the Autumn Statement that the National Living Wage is rising to £7.50 the new limit is £4 too low.

The DWP did not accept a mistake had been made. It told me that the rise in the earnings limit will help 2000 carers. It also says that the limit is kept under review and any increase must be "affordable and warranted".

There are more than 785,000 carers so 2000 is about a quarter of one per cent of them. If all those 2000 get Carer's Allowance that will cost an extra £6.5 million in 2017/18.

There is one possible escape for carers from the trap. By paying £8 a week - about £35 a month - into a personal pension the income that counts towards the earnings limit will be reduced to £120 and carer's allowance can still be claimed. The details are explained in my longer blogpost from May.

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30 November 2016

*The number of hours people need to work to get Working Tax Credit is normally 30. But those responsible for children, disabled people, and anyone aged 60 or more need only work 16 hours to qualify. A couple with children normally need to work at least 24 hours between them as well as at least one of them working 16 hours. But the 24 hour rule is waived if either partner is disabled or over 60 or in some other circumstances.