Select Committee on Deregulation and Regulatory Reform Eighth Report


Reply from the Department for Work and Pensions

Proposal for the Regulatory Reform (Carer's Allowance) Order 2002

1.    Thank you for your letter of 24 January outlining the concerns of the Deregulation & Regulatory Reform Committee after their first discussion of the above Order.

2.    Their main concern centres on the financial protection available to the group of carers who are currently aged under 65, and who will cease to be entitled to Invalid Care Allowance (ICA) on reaching 65 years under the proposed provisions of the Order.

3.    In order to answer the Committee's concerns, and put our response into context, I think it would be useful to outline the overall plan for the benefit.


4.    (a)    The proposal is to remove the age restriction, currently 65, for carers claiming ICA. This will allow older carers to claim ICA, and gain access to the Carer Premium (CP), paid with various income related benefits.

    (b)    Entitlement to ICA rests on a number of conditions, principally that (1) the carer is providing regular and substantial care to a severely disabled person, and (2) that they are not in gainful employment (see section 70 of the Social Security Contributions and Benefits Act 1992).

    (c)    Currently, under the concession, carers continue to have entitlement to ICA (if they qualified before age 65) after age 65 without having to meet these two main conditions. This feature dates from the period before National Insurance credits and Home Responsibilities Protection existed to protect Retirement Pension (RP). It was intended to act as a quasi non-contributory retirement pension for those carers without the necessary paid contributions from employment. ICA will cease if other conditions are breached, eg residence and presence rules. No equivalent concession exists in the rules governing CP which can currently be withdrawn, in certain cases. There are no plans to alter these rules.

    (d)    The existing rules produce obvious and potentially absurd anomalies:

      *    pensioners who become carers cannot claim ICA, or, therefore, carer premium, whereas carers who claimed the day before their 65th birthday can continue their entitlement to ICA indefinitely, even when they cease caring. [Given that many ICA claims are short-lived (65% are for under 4 years), it is likely that many people who have only recently qualified who find themselves with unconditional entitlement for life.]

      *    a carer who has built up entitlement to Retirement Pension would cease to get CP within the income related benefits (IRBs) if the disabled person dies or loses their qualifying benefit, whilst a carer in a similar situation with no RP but with ICA would retain it.

    (e)    If there is to be no age limit to claiming, the same conditions of entitlement without any concession have to be applied to all new claimants regardless of age otherwise anyone over the age of 65 could claim ICA whether or not they were carers.

    (f)    Under the Order transitional protection will apply to all claimants over the age of 65 at the date of change. This ensures not only that older ex-carers are covered but that over 65 year olds currently still caring will be able to continue their entitlement to ICA even if caring ceases later on in life.

    (g)    It should be noted that the concession will not be withdrawn from anyone currently entitled to ICA - carers under 65 will carry on with the terms of entitlement they have now, and transitional protection will apply to those aged 65 or over.


5.    The proposed changes will

      *    allow access to ICA and the CP within the IRBs for older, less well-off carers;

      *    equalise conditions of entitlement for all age groups;

      *    remove the anomalies described above at 4(d).

Carer Premium

6.    You have advised us that the Committee are concerned about the withdrawal of the concession in so far as it would mean that, for those people who cease to be carers after the age of 65, they would lose entitlement to the Carer Premium.

"which would appear to be a significant potential loss to an albeit small group".

    It may not have been made clear to the Committee that there is no exact equivalent to the ICA concession for the CP. CP can be withdrawn now in certain circumstances. Some protection is already offered - there is an 8 week run-on of CP when ICA ceases for any reason so long as entitlement to the IRBs continues to be satisfied..

The significance of this is that, under current rules, in those cases where ICA is no longer payable because of the award of RP, Carer Premium can already be withdrawn - eg when the disabled person dies, or the qualifying benefits cease, perhaps because of a lengthy stay in hospital or admission to publicly funded residential care. It is only in ICA that entitlement can continue regardless of whether key entitlement criteria are still being fulfilled.

7.    The Committee is concerned about the extent to which "losers" are protected by alternative means of financial support. There are two aspects to this - the size of the group, and the alternatives available.

Size of the Group

8.    It is important to note that no-one will have their existing conditions of entitlement altered at the date of change of the law. Those under 65 have to continue to meet the conditions of entitlement as now; those 65 and over are protected by the transitional arrangements. A person may seek to argue that they have anticipated having a right to continue receiving ICA after age 65 without meeting the entitlement conditions. The Department's view is that most people would consider that publicly funded benefits are there for a specific purpose, and it would be unusual if any contrary expectations are held.

9.    Information about the numbers of people aged 65+ who cease to be carers, or enter gainful employment, is not available. This is because information can only be sought from a claimant to benefit if it has a direct bearing on their entitlement to benefit. Once a carer reaches 65 such information is no longer relevant. Hence no precise estimates can be made of the amount "spent" on the concession. No savings have been scored up for these measures. The extension of ICA to carers aged 65 and over is expected to cost around £35m a year.

10.  Even for those who use or could use the concession, in very many cases the concession does not lead to financial gain. Carers with a retirement pension which exceeds the rate of ICA, and whose income exceeds the Minimum Income Guarantee (MIG), even were Carer Premium still payable (see para 6 above), gain nothing from the concession and, conversely, lose nothing from its withdrawal.

Loss of entitlement to ICA in this group would cause no financial loss, unless they are on IS/MIG. Even then Carer Premium is not guaranteed and has conditions attached (see above). ICA is taken fully into account in IS/MIG.

11.  The estimate of numbers of people turning 65 who would lose entitlement to ICA and/or CP under the proposals is around 230 to 240 a year, or 5%. This accords with data which suggests that in around 95% of cases, the disabled person still receives the qualifying benefits, suggesting that care is in fact continuing. Annex A refers.

No hardship should ensue. No-one is allowed to sink below the MIG.

Alternative Provision

12.  Income protection is provided by a range of benefits including the following:

(i)    Minimum Income Guarantee The principal financial protection for pensioners is at present the Minimum Income Guarantee (MIG), which was introduced in April 1999 and uprated) in line with earnings (at least) every year. In April 2001, the MIG was raised by more than the planned earnings increase, up to £92.15 for single pensioners and £140.55 for couples; and the lower capital limit doubled from £3,000 to £6,000 and the upper limit increased from £8,000 to £12,000. As a result, half a million pensioners will gain an average of £5.40 a week. Many will be entitled to help for the first time.

It is quite possible that the changes to the ICA rules may alert carers and ex-carers to the existence of the MIG, and indeed to other benefits and tax credits as they develop.

Some examples of financial effect are given in the separate Annex.

(ii)  Carer Benefits An element of protection for changes of circumstances is already built in to the system of carer benefits:

      *    CP already has an 8 week run-on when ICA ceases, so long as entitlement to the IRBs continues.

      *    One of the proposals under the RRO is an 8 week run-on in ICA when the disabled person has died that will run concurrently with the existing CP run-on.

      *    There are generous provisions to continue ICA in cases where care has temporarily ceased, eg hospital admission, holiday etc.

(iii)  National Insurance (NI) Credits/Home Responsibilities Protection (HRP)

    As previously noted, the concession was put into the rules when ICA began in 1976. This was before NI Credits were awarded with benefits such as ICA to help protect the RP entitlement of people unable to work full-time such as carers, and prior to the HRP scheme[30]. Today's carers are not, therefore, in the same position as those when the ICA was designed. Since 1978 ICA automatically gives entitlement to an NI credit for each week, allowing carers to build up entitlement to RP.

    Also, the duration of ICA claims suggests that carers are out of the employment field because of caring responsibilities for relatively short periods of time. Over 65% of ICA claims last less than 4 years.

(iv)  State Second Pension

    The Government is reforming both the state and funded pensions to give more people the opportunity to build up a good second pension. Carers, amongst others will benefit from the reform of State Earnings-Related Pension Scheme (SERPS) through the State Second Pension (S2P) to become entitled to a second-tier pension for the first time.

    In a qualifying year, carers will be treated, for S2P purposes, as if they had earnings of £10,800 (this figure is for 2002/03 and will be uprated in line with increases in national average earnings). Carers will start to build entitlement to an additional pension for the first time - worth about £1 a week extra pension for every full qualifying year at today's rates. Up to 400,000 ICA recipients will start to build up entitlement to S2P from the start of the scheme in April 2002.

Proposed repeal of Section 70(6)

13.  The Committee have asked why section 70(6) is being repealed rather than repealing the existing regulations made under the subsection. The Department does not intend to use these powers again it would be an unusual use of a power to leave it on the statute book if there was no intention to exercise it. The Government is not persuaded by the comments of respondents to the consultation mentioned in your letter, that the section should not be repealed because:

(i)    Concern over hardship

    The Department is of the view that it is not necessary to retain section 70(6) to prevent hardship. The MIG offers a safety net to prevent hardship (as did Income Support, prior to MIG), so that no ex-carer who loses entitlement to ICA will sink below the relevant MIG level, as indicated by the examples in the Annex.

(ii)  Why not introduce the concession at a later age?

    Introducing the concession at an age later than 65 would reintroduce the anomaly, outlined at para 4(d), whereby two carers of the same age were treated differently depending on the age at which they became entitled to ICA. If, for example, the limit was set at 70, new claims made after that age would have to be subject to the caring conditions, (otherwise any 70 year old could claim the benefit). At the same time, another person who claimed the day before their 70th birthday and immediately ceased caring could invoke the concession and ICA entitlement would continue to an ex-carer indefinitely. No matter where the age limit is set there will continue to be inequality.

Drafting Suggestions

14.  *  Thank you for pointing out the omission in the recital. This will be amended.

    *  With respect to the reference to subsections 1(a) to (c) in Article 4 of the Order, it was considered that, as paragraph (c) stands and falls with paragraph (a) (which is being referred to), there is no reason not to mention paragraph (c). If the reason for not mentioning paragraph (c) is that it cannot be satisfied, there would equally be no reason to mention paragraph (a) as the preceding words in article 4 ("...notwithstanding that he is not caring for a severely disabled person...") must mean that paragraph (a) cannot be satisfied either. However, the Department will be happy to substitute a reference to subsection "1(a) or (b)" if the Committee considers it preferable to the current reference.

Reference to the Social Security Advisory Committee

15.  Finally, the issue of whether the Order should have been referred to SSAC has been raised. Section 172 of the Administration Act 1992 requires the Secretary of State to refer regulations being made under relevant enactments to SSAC. The relevant enactments are listed in section 170 of that Act and do not include the Regulatory Reform Act 2001, so referral of the draft order to SSAC is not required. There will be regulations consequential upon the RRO and these will be referred to SSAC for consideration in due course. The Committee may like to know that, although the Order does not require SSAC referral, SSAC was included by the Department in the consultation process on the Order. SSAC did not comment on the proposals at that stage.


16.  The Committee has raised a number of issues surrounding the introduction of changes to the ICA rules allowing people aged 65 and over to claim for the first time. The main point of contention is the repeal of section 70(6) of the Contributions and Benefits Act 1992 which removes the concession whereby carers aged 65 or over no longer have to meet certain conditions to continue their entitlement to ICA.

17.  The Department's view is that the benefits to be gained by relaxation of the age limit to allow older carers to claim ICA for the first time (and thereby gain access to CP) will greatly outweigh any loss to carers caused by removal of the concession. All those aged 65 or over at the date the law changes will be protected and will be able to continue to use, or begin using these concessions until the end of their claim. The anomaly referred to at paras 5 and 6 will also be removed. Moreover, the structure and integrity of ICA as a benefit will be strengthened, to the general advantage of carers, because it will from now on have a uniform set of entitlement conditions at all ages above 16, which will provide greater clarity and certainty about its purpose.

18.  In proposing to extend entitlement to new carers aged 65 and over, the need to address the anomalies created by S70(2) is an essential consequence. Not to do so could potentially result in anyone aged 65 or over being able to claim a carer benefit, irrespective of whether they had any caring responsibilities.

19.  For those carers, aged under 65 at the changeover, their conditions of entitlement will not be changed, merely that they will have to continue to meet them throughout their claim.

20.  For carers who cease caring and whose ICA and/or CP thereby ceases, there is a range of benefits to act as a safety net, or in the case of working carers, to provide in-work assistance, eg Working Families Tax Credit. With this in mind, the Department feels that adequate alternative provision is in place.

Marion Hutt
Disability and Carer Benefits 4

30   The HRP scheme reduces the number of years of contributions necessary to establish title to RP for, amongst others, non-ICA recipients providing care to disabled people. Back

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