The controversial rule that led to unpaid carers being punished with penalties amounting to thousands of pounds is to be abolished, the Guardian can reveal.

The chancellor, John Healey , is to announce a new digital taper system for carer’s allowance in Wednesday’s budget, effectively ending what is regarded as one of the UK benefit system’s most feared and unfair administrative practices.

The scandal was highlighted in a Guardian investigation that revealed how hundreds of thousands of carers have, through no fault of their own, run up life-changing debts in recent years after overstepping weekly earnings thresholds by just a few pence.

Those hefty debts were then ruthlessly chased down by welfare officials who pursued carers using legislation designed to recover funds from drug dealers and organised crime bosses.…