Ministers were warned three years ago that unpaid carers were being treated unfairly and forced to repay huge sums for minor benefit breaches, a long suppressed government report has revealed.

A Department for Work and Pensions document presented to politicians in 2021 detailed how carers – the majority of whom were on low incomes and spending 65 hours a week caring for loved ones – endured financial hardship, stress and anger after being heavily penalised for falling foul of strict carer’s allowance eligibility rules.

Ministers at the DWP sat on the report until this week when it was finally made public after repeated lobbying from campaigners and a series of Guardian reports into the carer’s allowance scandal.

The release came as renewed political pressure was put on ministers to tackle longstanding problems with the benefits system.

Stephen Timms, the chair of the Commons work and pensions committee, said: “The government has known for years about flaws that have plagued the payments system for carer’s allowance but has just allowed many unpaid carers to unwittingly rack up unmanageable levels of debt.”

The committee published an eight-page letter it sent on Wednesday to the welfare secretary, Mel Stride, asking the DWP to introduce wholesale changes to the carer’s allowance to ensure people “were no longer subjected to the distress that such overpayments can cause”.

The DWP report was commissioned in 2019 after a parliamentary inquiry heavily criticised the department’s failure to understand the distress and hardship inflicted on tens of thousands of unpaid carers by its management of the allowance.

Although it was finished in 2021, ministers repeatedly blocked its publication.

The study brings to often vivid life the frustrations of hard-pressed carers with the arcane rules and often insensitive administration of the allowance. It concludes the rules were not universally well understood by carers and poorly communicated by officials.

It reveals that when carers did inadvertently breach the rules they often struggled to comprehend why the DWP had allowed them to run up overpayments, often running to thousands of pounds, and were angered by officials treating them as “cheats” over what they considered to be genuine misunderstandings.

The Guardian has revealed that more than 150,000 unpaid carers are repaying penalties, in some cases as as high as £20,000, because of the DWP’s failure to notify them when they had inadvertently breached carer’s allowance earnings rules.

Overpayments happen when a carer breaches a government-imposed cap which states they cannot earn more than £151 a week in a paid job while receiving the £81.90 allowance. Instead of asking carers to pay back the amount that exceeded the threshold, the DWP claws back the whole £81.90 for each week that was in breach.

This means a carer who earned £1 more than the £151 threshold for 52 weeks would typically have to pay back £4,258.80, rather than £52.

The problem is compounded by the DWP failing to act in a timely fashion when it receives electronic alerts that a carer’s income has potentially breached the earnings threshold, allowing carers to rack up thousands of pounds’ worth of overpayments over months and years.

The latest official figures show 156,000 carers are paying back overpayments incurred in recent years, 11,600 of them paying back sums greater than £5,000. There were 34,500 overpayments last year alone, suggesting one in five unpaid carers with a part-time job fell foul of the rules.

Graph showing annual number of carer’s allowance overpayments

A National Audit Office investigation in 2019 found only a small minority of overpayments were fraudulent, and an inquiry later that year by MPs concluded most of the breaches were “honest mistakes” by carers for which they were disproportionately penalised.

Although ministers routinely refer to unpaid carers as “unsung heroes”, the DWP report shows carers felt undersupported and undervalued. While they regarded their caring duties as a labour of love, there was frustration at the meagre value of the carer’s allowance given they were saving the state money.

“As an unpaid carer you don’t get much recognition for what you do. If I was not here she [the person I care for] would be in a care home and that would be costing a small fortune,” one carer told researchers.

The work and pensions committee’s letter calls on the government to scrap the “cliff edge” that forces unpaid carers to pay back the whole week’s allowance for every week they breach the earnings limit. They suggested instead a taper rate “when work on its IT system allows”.

Ramzi Suleiman, the Carers Trust’s policy manager, said the report showed the allowance was failing on its own terms. “It’s no surprise these errors are made when the benefit is so overly complex, outdated and in dire need of reform.”

Helen Walker, the chief executive at Carers UK, said: “We are really pleased to see the DWP’s research on carer’s allowance finally in the public domain so we can begin to have constructive discussions with decision-makers and officials about the future of carer’s allowance.”

A DWP spokesperson said: “Carers across the UK are unsung heroes who make a huge difference to someone else’s life and we have increased carer’s allowance by almost £1,500 since 2010.

“We are progressing an enhanced notification strategy as part of our ongoing commitment to customer engagement, which will help ensure customers fulfil their obligations to inform DWP when changes in their circumstances have occurred, building on existing communications.

“We are committed to fairness in the welfare system, with safeguards in place for managing repayments, while protecting the public purse.”

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