Universal credit, benefit cap and those paid 4 weekly | CPAG

Universal credit, benefit cap and those paid 4 weekly

Date: 
08 October 2021
Issue: 
R (Pantellerisco and others) v SSWP [2021] EWCA Civ 1454

R (Pantellerisco and others) v SSWP [2020] EWHC 1944 (Admin); R (Pantellerisco and others) v SSWP [2021] EWCA Civ 1454

Current status: High Court judgment was given in the claimants' favour on 20 July 2020 and SSWP appealed to the Court of Appeal. The appeal was heard on 15 June 2021 and the Court of Appeal judgment was given on 8 October 2021 allowing the SSWP's appeal. 

Overview

On 12 September 2019, CPAG issued judicial review proceedings on behalf of a single parent and her children challenging the application of the benefit cap to the mother’s universal credit award. The cap is applied to the mother despite the fact that she works 16 hours per week at national living wage, simply because she is paid 4 weekly rather than monthly. Permission to apply for judicial review was granted on 5 December 2019 and the case was heard on 12 May 2020. Judgment was given on 20 July 2020 with the court finding in the claimants' favour.  The SSWP appealed to the Court of Appeal and judgment was given on 8 October 2021, allowing the SSWP's appeal.

Background

Ms Pantellerisco has always worked since she left school when she was 16. Initially she worked full-time but then moved to part-time work following the birth of her first child. As of November 2018 up until March 2020, she had been working as a home-carer for 16 hours per week at national living wage. Her employer paid her 4 weekly. In February 2019, her then relationship broke down and she contacted HMRC as she and her partner had been claiming tax credits on a joint claimant basis. She was told that she would have to claim UC which she did and found herself subject to the benefit cap because the wages she received in each assessment period are for 4 weeks’ work (other than for one assessment period per year in which she receives two lots of 4 weeks’ wages). This amounted to £525.44 (at the 2019/20 national living wage rate of £8.21 per hour) whereas the earnings exemption for the benefit cap, while based on 16 hours work per week at national living wage, was set at £569.23 (again 2019/20 rates) because it is calculated on a monthly basis.

The claimant tried to get her employer to pay her monthly but this was simply not possible. Nor could she increase her hours of work given her childcare responsibilities and her own health (she suffers from fibromyalgia). Being subject to the cap means that she has been forced to rely on a local foodbank and her children’s school for assistance with food, school uniforms and payment of gas and electricity bills.

Legal issues

High Court

The legal challenge was brought on the principal basis that the SSWP has adopted an unlawful approach to the calculation of earned income of people paid on a four-weekly basis rather than a calendar-monthly basis. As a result, for eleven twelfths of the year the claimant is treated as if she earned or worked for less than the required amount, and therefore subjected to the benefit cap.

At the time this case was argued before the High Court, the High Court decision in Johnson and others v SSWP [2019] EWHC 23 had not yet been superseded by the Court of Appeal judgment in that case ([2020] EWCA Civ 778). As such, the claimants relied on the High Court’s interpretation of regulation 54 of the Universal Credit 2013 regulations to argue that the SSWP’s approach to earned income is unlawful.

However, the claimants also argued that, if the SSWP’s approach to earned income calculation is in line with the legislation, it is irrational, at least for the purposes of establishing benefit cap exemption, and creates perverse outcomes. In light of the Court of Appeal judgment in Johnson, which focused on the irrationality of the treatment of the 'non-banking day shift' issue while rejecting the High Court’s interpretation of regulation 54, the court in the present case needed to consider the applicability of that judgment to the claimants’ situation.  

Further, it was argued that the SSWP’s approach is discriminatory in relation to those employees who are paid 4 weekly rather than monthly contrary to Art 14 ECHR, read in conjunction with Article 1 of the First Protocol and Article 8.

In its judgment, the High Court accepted that the Court of Appeal's reasoning in Johnson in relation to irrationality applied equally to, if not more forcefully, to the claimants' situation and that the SSWP's approach of treating the first claimant's earned income in 11 out of 12 assessment periods as only being her earnings for 28 days (even though she worked a full month) and so subjecting her to the benefit cap in those assessment periods was an approach that no reasonable Secretary of State would have taken.

Court of Appeal

The Secretary of State appealed to the Court of Appeal. The appeal hearing was on 15 June 2021 and judgment was given on 8 October 2021, allowing the appeal. (Read the Court of Appeal judgment here.)

The principal argument of the Secretary of State at the appeal hearing was that it was a fundamental feature of the UC system that entitlement should be assessed by reference to actual receipts in a monthly assessment period and, additionally, that the earnings-related threshold for disapplication of the benefit cap should be set by reference to those same features (ie actual receipts in an assessment period).  Using a single yardstick for differing purposes could not be said to be irrational given the high threshold for establishing irrationality.  On behalf of the claimants, it was accepted that the choice of earnings received in a calendar month assessment period to establish benefit entitlement was one that was open to the Secretary of State.  However, it was contended that in so far as an in-work exemption for the benefit cap was concerned, what mattered was the amount of work undertaken not at what intervals a person received payment.  Since the position of people earning the national living wage and working 16 hours per week was identical whether or not they were paid monthly or 4 weekly (or indeed weekly or fortnightly) it was irrational to treat them differently.

In allowing the Secretary of State's appeal, the Court took as its starting point the question whether it was irrational for the Secretary of State not to modify the earings-related exemption to the benefit cap to address what it termed the 'pay cycle effect'.  In answering that question in the negative, the Court considered that the High Court judge had erred in simply seeking to apply the approach in Johnson to the present case.  Unlike Johnson where the claimants were paid on a calendar monthly basis, addressing the 'pay cycle effect' would, in the view of the Court, require a departure from 'the straightforward and fundamental principle of working on the basis of actual receipts'.  This in turn would 'seriously impair the workability and reliability of the assessment of entitlement' for those affected'.  Given such an impairment, the Court found that it was not irrational for the Secretary of State to have not made any modifications.

Permission to appeal to the Supreme Court was refused by the Court of Appeal and the claimants are looking to apply for permission direct from the Supreme Court once they have public funding to do so.

What can a claimant in a similar position do?

We would encourage advisers to request a mandatory reconsideration and subsequently appeal decisions of the kind described above and then request that the appeal be stayed behind any onward appeal by Ms Pantellerisco to the Supreme Court.  (As of 19 October 2021, legal aid has been requested to apply for permission to appeal to the Supreme Court).  In doing so, advisers should not only rely on regulation 82(1)(a) being irrational but also raise Article 14 non-discrimination arguments and the fact that if there can be no justification for subjecting four weekly paid earners who work 16 hours per week at national living wage to the benefit cap in UC.  As such, the reference in regulation 82(1)(a) to earnings of 16 hours per week at national living wage being 'converted to a monthly amount' should be disapplied on the basis that it is irrational and so ultra vires and/or to avoid HRA non-compliance.

Adivisers can use this Filetemplate to request a mandatory reconsideration.

You can read more about the Johnson case here.