Benefit cap exception in universal credit: Court of Appeal judgement | CPAG

Benefit cap exception in universal credit: Court of Appeal judgement

Published on: 
08 October 2021

The Court of Appeal has today overturned a High Court decision that the DWP's approach to the disapplication of the benefit cap in universal credit (UC) on the basis of earnings received in a monthly assessment period is irrational and unlawful. High Court case was brought by a working single mother on UC who was benefit-capped – and left up to £5,000 worse off per year – purely because her employer paid her four-weekly rather than by calendar month.

Ms Pantellerisco, worked 16 hours a week for the ’national living wage’ (‘NLW’). Her earnings were supplemented by UC. With three dependent children in the household, her total amount of benefits was over the benefit cap limit. However, an exemption to the cap exists for those in work. To qualify for this exemption a claimant must be both earning and receiving in an assessment period the equivalent of 16 hours a week at NLW calculated as a monthly amount. Pantellerisco, while working and earning 16 hours a week at NLW per month, was paid four- weekly so that the amount she actually received in eleven out of twelve monthly assessment periods per year fell just short of the amount needed to qualify for the exemption. Had she earned exactly the same amount over a year but been paid by calendar month rather than four-weekly, she would have been recognised as receiving sufficient earnings to be exempt from the cap.

Ms Pantellerisco was represented by Child Poverty Action Group (CPAG). It argued that the DWP’s approach to basing the benefit cap exemption on actual earnings received rather than worked for in an assessment period is irrational and so unlawful.

In his judgment today, with which the rest of the court agreed, Lord Justice Underhill recognised that the reliance in the UC system on pay received in a calendar-month assessment period results in the benefit cap being applied to a significant number of claimants in the same circumstances as Ms Pantellerisco, with serious consequences:

Even if it affects only a very specific class, the numbers are substantial and the effect serious. At first sight it seems anomalous that so much should turn on the pay-cycle operated by the employer, and it is not difficult to see why the Work and Pensions Select Committee believed that a solution should be found.

The fact that Ms Pantellerisco’s four-weekly pay cycle does not correspond to UC calendar monthly assessment periods. “... is a real and fundamental mismatch,” Lord Justice Underhill said.

But, noting that the DWP is “...considering reforms in relation to pay cycles,” Lord Justice Underhill concluded that it is for the Secretary of State to decide on changes to the principle of basing the benefit cap earnings exemption on pay received (rather than pay earned) in an assessment period.

Commenting on today’s decision, CPAG’s head of litigation Carla Clarke said:

“Today’s decision recognises the considerable hardship caused to working families by the government’s approach. It cannot be right that our client was forced to use foodbanks simply because of a pay pattern completely outside of her control. The court took notice that the government is considering reform to this area – and to avoid further injustice to low-income families the DWP must bring forward such reforms now.”

Notes to editors:

* The benefit cap was designed to limit how much social security support is paid to people out of work or with very low earnings. In UC, it restricts total benefit awards for claimants who receive earnings below the equivalent of working 16 hours per week at the ‘national living wage’ calculated as a monthly amount (currently £617.76 a month). Claimants who receive earnings above that threshold are exempt from the cap. In legacy benefits, claimants were exempt from the benefit cap if they were in receipt of working tax credits which depended on the number of hours for which they worked rather than earnings.

Today’s judgment is here

More information on the case is here

The c​ase was brought by Ms Pantellerisco and her three dependent children. Anonymity orders are in place for the children.

UC assessment periods run for a calendar month, starting from the date on which UC is claimed. At the end of each month-long assessment period, claimants' circumstances and income are assessed to determine their entitlement to UC and how much UC they should receive, with payment made a week later in arrears.

People who are paid four-weekly receive 13 pay packets in a year: for those on UC that means they have eleven monthly UC assessment periods in which they get one pay packet and one assessment period in which they receive two pay packets.

If UC claimants, like Ms Pantellerisco, earn at or just over the earnings exemption threshold for the benefit cap on a monthly basis, they will nevertheless be paid slightly under that threshold in eleven assessment periods each year, but will be above the threshold in the one assessment period when they receive two pay packets. Therefore, they can be capped in eleven assessment periods out of twelve.

Note to editors:

CPAG press contact: Jane Ahrends 07816 909302