Removing means test on carer's allowance could cost around €260m, independent body finds

A key policy aim of the new Government, which many parties campaigned on during the election, has been the abolition of the means test for the carer’s allowance. 

Abolishing the means test for the carer’s allowance would cost an estimated €259m, the Parliamentary Budget Office (PBO) has said, far less than the €600m a year touted by the Government.

The independent body has published new analysis suggesting that, when factoring in additional interactions in the social welfare system and income tax system, the full net cost would be €266m in 2026.

The PBO said its assumptions on the cost are based on the "best use of available evidence at this time", but "significant uncertainty" remains over the actual number that would take up the payment if the means test was removed.

“Our analysis indicates that previous increases in income disregards in 2022 and 2024 did not lead to substantial surges in uptake, suggesting that incremental relaxations alone may not drive large increases in recipients,” it said.

“While a high-inflow scenario could raise costs considerably, this appears less likely based on a slowdown in recipient growth for the carer’s allowance post-2022.” 

Reduced payment

A key policy aim of the Government, which many parties campaigned on during the election, has been the abolition of the means test for the carer’s allowance. 

Under the current system, the amount a carer can qualify for is affected by their income and can lead to a reduced payment from the full rate if thresholds are exceeded.

The programme for government pledged to significantly increase the income disregards for carer’s allowance in each budget with a “view to phasing out the means test during the lifetime of Government”.

In response to a motion from the Social Democrats in the Dáil last month, minister for social protection Dara Calleary said there was some variation in estimating the cost of the measure.

“My department has conservatively estimated that the cost of removing the means test for the carer’s allowance would be in the region of €600m each year,” he said.

“This is based on our internal administrative data, which tells us that there are some 146,000 care recipients in our country. In the absence of a means test, it is reasonable to assume a carer’s allowance payment could be paid in respect of each of these care recipients.” 

The PBO highlighted in its analysis that, as it acts independently, it is not advocating for or against abolishing the means test, but added it would increase government expenditure and should be considered in that context.

“[Expenditure is] already projected to rise by 8.1% in 2026, the highest in the EU amid strong growth,” it said. 

“This should be viewed alongside revenue volatility risks, particularly around corporation tax.” 

The Department of Social Protection said the PBO's costing of €259 million "is based on an additional 19,561 carers becoming eligible. This could increase to €610 million based on a potential inflow of 45,947 additional carers". 

"The Parliamentary Budget Office acknowledge that a key source of uncertainty in this costing exercise lies in estimating the latent pool of carers who would qualify once the means-test is abolished, as no direct data on this population exists."