Rachel Reeves must overhaul ‘perverse’ carer’s allowance rule, Martin Lewis says

Rachel Reeves must overhaul the allowance that has resulted in thousands of unpaid carers being saddled with life-changing debt, and in some cases threatened with criminal prosecution, the consumer finance expert Martin Lewis has said.
Lewis has written to the chancellor, identifying four measures that he says are possible to enact without great cost to the taxpayer that would remedy financial injustices, including changes to the child benefit charge and removing withdrawal penalties from lifetime Isas.
In his letter, the founder of MoneySavingExpert also said the low take-up of a 25% government top-up to help with childcare costs was down to its poor branding as “tax-free childcare”.
Lewis said the proposed changes would “improve people’s situations without huge expenditure” and were “sensible non-partisan issues of financial injustice”, many of which had been raised with the previous chancellor, Jeremy Hunt.
The penalisation of unpaid carers who claim benefits for looking after disabled, ill and elderly relatives is an issue highlighted by a long-running Guardian investigation.
The government imposes a strict earnings cap on people who take a job outside their caring responsibilities. Lewis said it was “perverse” that those earning a penny a week more than the £151 threshold lost their entire entitlement to the carer’s allowance, rather than having a taper, as is the case with universal credit.
He highlighted the “terrible disconnectedness and poor benefits systems” that had left many carers unwittingly owing thousands of pounds in back-payments. Liz Kendall, the work and pensions secretary, has already said her department will examine the flaws in the system, which Lewis said was “fundamentally unjust”.
Lewis also asked for the Treasury to further tweak the child benefit rules for single parents. Hunt had already committed to reviewing the way the high-income child benefit charge worked, which meant single parents lost out on the payments while two parents earning almost double with their joint salaries could still claim.
Lewis said he had been lobbied by a single father whose wife died giving birth to twins. He had been struggling to keep up with mortgage payments and because his salary of £60,000 was over the threshold for child benefit, HMRC has asked him for repayments. A family with two parents earning £59,000 each would not be penalised.
Hunt increased the threshold from £50,000 to £60,000 in April but Lewis said that was intended as an “interim measure” and a wider overhaul was needed. “This is an issue I receive an unprecedented volume of correspondence from the public about, it impacts huge numbers of people, and many care deeply about it.”
Lewis said Reeves should also cancel the withdrawal penalty for first-time house buyers using lifetime Isas (Lisas) which were set up by the previous government to help young people on to the housing ladder.
He said: “Many, especially in south-east England, are now finding themselves fined when they use their own savings towards their first property.”
The £450,000 house price limit has been frozen since Lisas launched in 2017, despite house prices rising 27%. To withdraw for a higher cost home, there is a 25% penalty – roughly 6.25% of the saver’s own funds.
Lewis also said the Treasury should rename its tax-free childcare offer, which around 800,000 families do not claim. He said the scheme had nothing to do with tax, was “meaningless and confusing” and should be renamed “help to pay for childcare” or the “working parents’ childcare top-up”.
The TV presenter and financial advice columnist has previously had close relations with chancellors who have acted on issues he has campaigned on, most notably the drive by Lewis for the government to step in to prevent crippling fuel price rises during Liz Truss’ short-lived premiership.
Lewis said he hoped to meet Reeves later and bring up other topics, including the cost of student loans, financial education, and the regulation of buy now, pay later products.
A Treasury spokesperson said: “The number one mission of the government is to get the economy growing so we can make every part of the country better off. That is why we have already begun taking the tough decisions to fix the foundations of our economy so we can rebuild Britain.”