High Court deals huge blow to welfare ‘reform’

Judges say relevant regulations on Universal Credit have been “wrongly interpreted” at Secretary of State level.

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High Court judges have dealt a huge blow to welfare ‘reform’, saying relevant regulations on Universal Credit have been “wrongly interpreted” at Secretary of State level.

Released this morning (11th Jan) the ruling means four working single mothers have won a long-running benefits battle with the DWP at Judicial Review.

The women successfully argued that their monthly benefit payments from the DWP varied ‘enormously’, with the basis of the legal challenge lying  in the method used by the DWP when calculating the amount payable under the 2013 Universal Credit Regulations.

Lord Justice Singh and Mr Justice Lewis gave their ruling following a hearing in November, when they were told the women were struggling to manage their household budgets and some had fallen into debt or had to rely on food banks.

The judges said they had concluded that the “secretary of state had wrongly interpreted” the relevant regulations.

Lawyers for Danielle Johnson, Claire Woods, Erin Barrett and Katie Stewart said the problem was likely to affect tens of thousands of people claiming Universal Credit, with problems arising when claimants were paid by employers on a date that “clashes” with their assessment period for Universal Credit.

The four maintained that if a claimant were paid early because of a weekend or bank holiday, for example, the system would count them as having been paid twice in one month and they would receive a “vastly reduced” universal credit payment.

BACKGROUND

Each of the claimants is a single parent caring for a child or children, works and is paid monthly, and eligible to receive Universal Credit.

In the Judicial Review, the claimants challenged the method used by the Secretary of State when calculating the amount of Universal Credit payable under the Universal Credit Regulations 2013.

That amount is assessed by reference to a fixed monthly period, known as an assessment period.

In determining the amount of Universal Credit payable, the Regulations require the calculation of the maximum allowance payable to a claimant.

The Regulations then require that some of a claimant’s earned income is deducted from the maximum allowance so that the amount of Universal Credit payable is accordingly reduced.

Some claimants are allowed to retain a certain amount of their earned income (a figure known as the work allowance which, at the relevant time, was £192 for each assessment period) without that affecting the amount of Universal Credit the claimant receives.

The amount of universal credit payable is then reduced by 63% of earnings above £192.

As each of the claimants received her salary on or around either the last working day or last banking day of the month, there were times when salaries payable in respect of two different months were paid during one monthly assessment period.

The Secretary of State claimed that, under the Regulations, she was required to treat the two months of salary as paid in that single monthly assessment period (irrespective of the fact that the salaries are referable to two months).

The Secretary of State then allowed each claimant to retain only a single amount of £192 by way of the work allowance from the combined two months’ salary before calculating the amount by which universal credit is to be reduced by a proportion (63%) of their earned income.

Had the defendant attributed each of the two months’ salary to different assessment periods, each claimant would have been able to retain £192 of each month’s salary before her universal credit was reduced.

The court concluded that the Secretary of State had wrongly interpreted the relevant regulations.

In particular, the Secretary of State was wrong to treat the combined salaries for two different months as the amount of earned income received in respect of a single monthly assessment period simply because both salaries happened to have been received within that assessment period because of the dates on which they were paid.

The Judges also concluded that Secretary of State was wrong to allow each of the claimants to retain only one amount of £192 from the combined amount of the two months’ salaries.

Properly interpreted, the regulations required the amount of universal credit payable “in respect of an assessment period” to be calculated “on the basis of” the amounts received in an assessment period.

To the judges, while the calculation will be based upon the actual amounts received, there may need to be an adjustment where the actual amounts received in an assessment period do not,  in fact, reflect the earned income payable in respect of that period.

In this case, the two monthly salaries were paid in respect of different monthly assessment periods and the calculation of the universal credit payable to the claimants had to reflect that fact.

The Court will hold a further hearing, at a date to be confirmed, to consider outstanding matters including the form of its order, costs and any application for permission to appeal.

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