Raise Carer’s Allowance by GBP 20

Policy baseline

Lib Dem costings allocate GBP 1.45bn to unpaid carers by 2028-29. The policy raises payments and eases earnings limits.

• Targets unpaid carers receiving or near Carer’s Allowance.
• Take-up and earnings behaviour drive costs.
• Some carers gain work flexibility.

Core trade-offs

The direct beneficiaries are unpaid carers and cared-for people. The costs fall mainly on taxpayers funding higher transfers. The main economic question is earnings rules may still distort work decisions.

• Unpaid carers and cared-for people gain most directly.
• Costs fall mainly on taxpayers funding higher transfers.
• Key risk: earnings rules may still distort work decisions.

Fiscal impact by 2028-29

+GBP 1.0bn to +GBP 3.5bn. Central estimate: +GBP 1.5bn.

• Positive numbers mean net fiscal cost; negative numbers mean Exchequer savings.
• Main channel is the scored tax, spending or delivery change.
• Offsets depend on tax receipts, behaviour and pass-through.
• Range reflects uncertain implementation and economic response.
• This is not an official costing.

Economic impact by 2028-29

• Jobs: Work incentives may weaken or strengthen depending on taper design and childcare constraints.
• Wages: Household incomes rise for recipients; wages change only if labour supply shifts.
• Prices: Extra demand can lift local prices slightly; national inflation effects should be small.
• GDP / productivity: Long-run gains depend on child outcomes; near-term output effects are mostly demand-side.

Assessment

This is a real trade-off, not a free gain. Unpaid carers and cared-for people benefit, while taxpayers funding higher transfers bear most costs. Overall output depends on behaviour, capacity and pass-through.

Confidence: Medium-low. Higher on the policy target and fiscal channel; lower on behaviour, pass-through and economy-wide effects.

Main risks

• Work incentives: Higher payments can weaken work incentives unless childcare and taper design are careful.
• Take-up uncertainty: Costs rise if eligible households claim more than expected.
• Poverty persistence: Cash support helps, but does not remove housing, childcare and health constraints.

Safeguards

• Protect work incentives with taper analysis.
• Publish take-up and poverty impacts.
• Pair cash support with childcare and housing supply.

Academic evidence

UK government evidence

Sources

• PolicyLens illustrative scenario methodology for raise carer’s allowance by gbp 20 Internal - PolicyLens, 2026
• Moral Hazard versus Liquidity and Optimal Unemployment Insurance Academic article - Chetty, Journal of Political Economy, 2008
• Why Don’t Markets Insure Long-Term Risk? Academic article - Cutler, Harvard working paper, 1996
• Funding a Fair Deal: Liberal Democrat Manifesto Costings Party costing - Liberal Democrats, 2024
• For a Fair Deal: Liberal Democrat Manifesto 2024 Party policy source - Liberal Democrats, 2024

Other Liberal Democrats policies

• Introduce free personal care
• Create a Carer’s Minimum Wage
• Scrap two-child and benefit caps
• Recruit 8,000 more GPs
• Guarantee urgent NHS dentist access
• Put counsellors in schools
• Extend free school meals
• Introduce a Tutoring Guarantee