Maternity Allowance and Universal Credit
Current status: High Court judgment handed down 26 October 2020 dismissing the judicial review. Permission to appeal refused by the Court of Appeal at an oral hearing on 23 June 2021. There is no further possibility of challenge of the issue raised in this case.
Overview
On 18 October 2019, CPAG issued judicial review proceedings challenging the treatment of maternity allowance (MA) as unearned income in the calculation of universal credit (UC) awards. A "rolled up" hearing of the case in the High Court took place on 24–25 June 2020, meaning that permission to apply for judicial review and the substantive case were considered at the same hearing. In a judgment handed down on 26 October 2020, the judge found that CPAG's case was arguable on two grounds, but ultimately found in favour of the Secretary of State. CPAG applied to the Court of Appeal for permission to appeal on behalf of the claimants but permission was refused on 23 June 2021.
Background facts
CPAG is acting on behalf of a single mother and her daughter, who changed jobs at around the same time that she found out that she was pregnant, with the intention of having more predictable hours and better career prospects. She stopped working a month before her daughter was born, but did not meet the qualifying conditions for statutory maternity pay (SMP), as she had not been with her employer for the required length of time. She therefore made a claim for MA. After her daughter was born, she was unable to get by on MA alone and so made a claim for UC. Her MA was treated as unearned income and so was deducted from her maximum UC award pound for pound, leaving her no better off than if she had no entitlement to MA. Conversely, if she had been entitled to SMP, this would have been treated as earned income, so she would have benefited from the work allowance and the 63% taper when it was deducted from her UC award This would have left her better off by £419.19 per month.
Wider impact on women
Women in a variety of employment circumstances are affected by this issue and the factors that prevent a woman from being eligible for SMP and therefore having to claim MA can be completely arbitrary. For example, a woman who is made redundant before the 15th week prior to her due date has to claim MA, regardless of the length of time that she has been with her employer. Women who are sick during their pregnancies and whose incomes fall below the lower earnings limit as a result also have to claim MA instead of SMP, as do women on zero hours contracts, or seasonal workers, who have not earned enough during the relevant period. Additionally, self-employed women have no option but to claim MA during their maternity leave, as they are not entitled to SMP. All of these women, if they claim UC alongside MA, will be significantly worse off than if they were instead entitled to SMP.
Legal issues
High Court
The Universal Regulations 2013 classify SMP as earned income (regulation 55), but classify MA as unearned income (regulation 55). SMP and MA are paid for the same purpose - to provide a woman with financial support to enable her to exercise her right to maternity leave.
The claimants first ground of the challenge was therefore that the difference in treatment between women claiming SMP and those claiming MA is unlawfully discriminatory. Women claiming SMP are not only better off financially, but also in terms of quality of family life, as a woman under financial pressure may be less inclined to take her full maternity leave and be more likely to return to work to ease the difficulties. CPAG argued that the difference in treatment of these two groups of women, and its discriminatory effect, is not justified and breaches Article 14, read with Article 8 and Article 1, Protocol 1. The High Court held that, while this was an arguable ground and permission to apply for judicial review would be granted, the difference in the treatment was justified. In reaching this conclusion, Judge Swift looked at the reasons that SMP is treated as income, and the difficulty that would arise in distinguishing such payments from wages, due to how they are reported to DWP by HMRC's Real Time Information system.
The second ground of the challenge was common law unreasonableness. The detrimental effect of this policy on women claiming MA and their children is not necessary in order to achieve the aims of the SSWP and actually harms the aim of ensuring that ‘work pays and is seen to pay’, as a woman claiming MA is no better off by being an employee or meeting the work requirements for MA. Again, the court held that this ground was arguable and that permission to apply for judicial review should be granted. However, the court concluded that the difference in treatment was justified and so there was no unlawful irrationality.
The third ground of the challenge was a failure to exercise the public sector equality duty (PSED), as required by s149 of the Equality Act 2010 when dealing with protected characteristics, which include pregnancy and maternity. In the Equality Impact Assessment carried out in November 2011, the stated intention is for UC to "draw together the approach taken by existing benefits and tax credits", in respect of maternity payments. However, the treatment of MA under UC is significantly different to its treatment under tax credits, where a woman receiving MA was treated as being in remunerative work in order to qualify for working tax credits, but the MA was disregarded in full in the calculation of awards, leaving women claiming MA in a similar position to those claiming SMP. The failure to consider the difference between the tax credit system and the current UC system in their treatment of MA implies that the PSED was not exercised with sufficient rigour. The High Court refused to grant permission to apply for judicial review on this ground, stating that a challenge under s149 of the Equality Act should be brought within three months of the decision that it relates to, rather than when the claimant was first affected by the relevant policy, and so concluded this claim was brought out of time.
Permission to appeal
The High Court refused permission to appeal on 11 November 2020. CPAG renewed the application for permission to appeal on behalf of the claimants to the Court of Appeal on 1 December 2020. The Court of Appeal heard oral submissions on 23 June 2021 before refusing the application for permission to appeal, fully endorsing the approach by the High Court judge.