Recent ruling on Universal Credit

15 January 2019 by

R (Johnson, Woods, Barrett and Stewart) v SSWP CO/1552/2018 (11 January 2019) – read judgment

 

This case was brought by four social security claimants contesting the proper method of calculating the amount of universal credit payable to each claimant under the Universal Credit Regulations 2013. Singh LJ and Lewis J concluded that treating claimants as having “earned” twice as much as they do if they happen to be paid twice within one monthly assessment period is “odd in the extreme” [para 54] and “…. could be said to lead to nonsensical situations” [para 55].

The Legal Proceedings

The four claimants are employees who are paid monthly. As they receive their salaries on or around either the last working day or last banking day of the month, there are times when salaries payable in respect of two months are paid during one assessment period. This means that there were occasions on which the claimants were only allowed to retain a single amount of £192 by way of the work allowance from the combined two months’ salary. The work allowance is the amount of earnings claimants with children or with limited capability for work can keep in full before universal credit is reduced by a proportion (63%) of their earned income under Regulation 22 of the 2013 Regulations. This way of calculating the allowance resulted in fluctuating universal credit awards and “severe cash flow problems” [para 4] for the claimants.

The claimants sought judicial review of this calculation method, contending firstly it led to effects that were unfair or irrational or failed to promote the objectives of the Welfare Reform Act 2012 (the “2012 Act”) and so was ultra vires.  Secondly, that it led to unlawful discrimination contrary to Article 14 of the European Convention on Human Rights read with Article 1 of the First Protocol  to the ECHR. One claimant, Ms Johnson, also contended that the defendant failed to comply with the public sector equality duty as required by section 149 of the Equality Act 2010.

The Court observed that the first and logically prior question was whether, as a matter of the proper interpretation of the relevant statutory provisions, including, in particular regulations 22, 54 and 61 of the 2013 Regulations, the defendant was correct in treating the combined salaries payable in respect of two different months but received in one assessment period as earned income for the purposes of calculating the amount of universal credit payable for that assessment period.

The Proper Interpretation of the Relevant Regulations

The Court addressed the proper construction of the 2013 regulations and the meaning of the words used in regulation 54. This required an examination of the wider context, namely the structure created by the 2012 Act and the specific context, which is the calculation of the amount of earned income to be deducted from the universal credit that would otherwise be payable, per regulation 22.

Regulation 54 provides that: 

(1) The calculation of a person’s earned income in respect of an assessment period is, unless otherwise provided in this Chapter, to be based on the actual amounts received in that period. [Emphasis added].

 

Importantly, the words “to be based on” mean that the regulation does not provide that the amount of earned income “is to be the actual amounts” received “in” the assessment period.

This is similar to Regulation 61 which says that where information is supplied by an employer, the amount of

the person’s employed earnings from that employment for each assessment period is to be based on the information provided. [Emphasis added.]

 

This reinforces the view that the calculation cannot be reduced to the “mere mechanical addition of monies received in a particular period’ but is meant to also consider “the period in respect of which the earned income is earned” [para 51]. This requires an adjustment for where the amounts received in an assessment period do not, in fact, reflect the amounts of earned income received in respect of the period of time included within that assessment period. 

This interpretation of regulation 54 is also consistent with regulation 22 which prescribes for the purposes of section 8(3) of the 2012 Act the amount of earned income to be deducted from the maximum amount of universal credit. It does so by setting out the amount “of the claimant’s earned income… in respect of the assessment period” that is to be deducted. That language, too, focusses on the earned income in respect of the assessment period. On a practical level, moreover, this interpretation of regulation 54 accords with the reality of the underlying factual situation in cases where employees are paid on a monthly basis.

The defendant, therefore, wrongly interpreted regulation 54 of the Regulations and wrongly assumed that where two salaries for two different months were received during the same assessment period, the combined salaries from the two months were to be treated as earned income in respect of that assessment period. As the decisions in this case were flawed, the Court contended it was not necessary to consider whether the defendant’s interpretation of the regulations were ultra vires  the 2012 Act. An examination of Article 14 would not be helpful either. However, the claim did involve a claim for damages under section 8 of the Human Rights Act.

A breached public equality duty?

Regarding Ms Johnson’s additional claim under the Equality Act 2010, the Court held that the defendant did comply with her duty under section 149. The general approach to establishing whether a public sector equality duty has been complied with is set out in the decision of the Court of Appeal in R (Bracking) v Secretary of State for Work and Pensions [2013] EWC Civ 1345, especially at paragraph 26. Following Hotak v London Borough of Southwark[2016] A.C. 811 at paragraphs 73 to 74, moreover, the duty under section 149 is to have due regard to the specified matters, not a duty to achieve a specific result. In this case, the defendant had carried out an equality impact assessment in November 2011 which considered the likely impact on groups with protected characteristics including gender. An assessment in August 2015 also considered the revision of work allowances in universal credit. Both invoked the obligations under section 149. The failure to consider a particular situation, associated with a particular group with a protected characteristic does not constitute a failure to have due regard to section 149 (see, e.g. the observations of Elias L.J. in R (Hurley and Moore) v Secretary of State for Business and Skills[2012] EWHC 201 at paragraph 87; and of Sullivan L.J. in R (Zacchaeus 2000 Trust) v Secretary of State for Work and Pensions[2013] EWCA Civ 1202 at paragraph 60). 

In this case, therefore, the fact that the assessments might have overlooked the possible impact of different methods of calculating the amount of earned income to be deducted when calculating the amount of universal credit did not constitute a breach of duty. 

The Court further dismissed the defendant’s claim that the importance of automation to the universal credit system precluded adjustments to the calculation method that would take account of occasions when two monthly salaries were received in one assessment period. While the court acknowledged “administrative inconvenience” [para 59], this was a question of statutory interpretation and the language of the regulations cannot be distorted to give effect to decisions based on a design that erred in law. Secondly, the existing regulations already contemplate manual intervention at some stages of the calculation process, meaning an alteration would not constitute an “insurmountable problem” [para 60].

Sapan Maini-Thompson is an LLM Candidate at University College London.

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