Nichola Salvato v Secretary of State for Work and Pensions

JurisdictionEngland & Wales
JudgeMr Justice Chamberlain
Judgment Date22 January 2021
Neutral Citation[2021] EWHC 102 (Admin)
Docket NumberCase No: CO/00165/2020
CourtQueen's Bench Division (Administrative Court)
Date22 January 2021

[2021] EWHC 102 (Admin)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMINISTRATIVE COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Chamberlain

Case No: CO/00165/2020

The Queen on the application of

Between:
Nichola Salvato
Claimant
and
Secretary of State for Work and Pensions
Defendant

Chris Buttler and Jessica Jones (instructed by Leigh Day Solicitors) for the Claimant

Clair Dobbin (instructed by Department Work and Pensions Legal Services) for the Defendant

Hearing dates: 10 and 11 November 2020

Approved Judgment

Mr Justice Chamberlain

Introduction

1

Universal Credit (“UC”) was introduced by the Welfare Reform Act 2012 (“the 2012 Act”) to replace a range of existing benefits. One of its main aims was to incentivise and encourage recipients to work. An award of UC has a number of “elements”. Section 12 of the 2012 Act provides that the calculation of an award of UC is to include amounts in respect of “such particular needs and circumstances of a claimant as may be prescribed”. The Universal Credit Regulations 2013 (SI 2013/376: “the UC Regulations”) prescribe the needs and circumstances. One of these is “childcare costs”. The element of the UC payment referable to childcare costs is known as the “childcare costs element” or “CCE”. This case is about the mechanism for assessing and paying the CCE.

2

The mechanism uses monthly “assessment periods” and, in general, makes payments in arrears. The effect of the UC Regulations is that a claimant is entitled to be paid the CCE as part of her UC award only if she has already paid the charges, rather than merely incurred them. Claimants therefore have to find ways of paying the charges from their own funds. They will only be reimbursed several weeks afterwards. The Claimant calls this the “Proof of Payment Rule”.

3

There is no such rule in relation to another element of UC – the housing costs element (“HCE”). There, provision is made for payment of “an amount in respect of any liability of a claimant to make payments in respect of the accommodation they occupy as their home” (s. 11 of the 2012 Act and reg. 25ff of the UC Regulations). Guidance makes clear that housing costs can be paid in various different ways, depending on the needs of the claimant, including by direct payment to the landlord.

4

The Claimant is a single mother who wishes to work but would be unable to do so without help to cover childcare charges. She is in principle eligible to receive the CCE. She wants to work full-time, but says that, because of the Proof of Payment Rule, she cannot afford to pay the fluctuating costs of childcare and as a result has become indebted and ultimately had to reduce the number of hours she works. She contends that, by failing to provide for payment of childcare charges which have been incurred but not paid, the Secretary of State has:

(a) subjected her to unlawful indirect discrimination on grounds of sex, contrary to Article 14, read with Article 8 and/or Article 1 of the First Protocol (“A1P1”) to the ECHR (ground 1); and

(b) acted irrationally in the sense described by the Court of Appeal in R (Johnson) v Secretary of State for Work and Pensions [2020] PTSR 1872.

5

The Defendant contends that the Proof of Payment Rule is an integral part of the architecture of UC, resulting from deliberate policy decisions with which the court should not interfere. As respects the grounds of challenge, she submits that the Proof of Payment Rule:

(a) does not engage Article 14 at all because it: (i) has not been shown prejudicially to affect either the Claimant or women in general and (ii) does not fall within the ambit of Article 8 or A1P1; alternatively, and in any event, is not “manifestly without reasonable foundation” and so is justified; and

(b) is not irrational.

6

Permission to apply for judicial review was granted by Mostyn J on 25 February 2020. I heard oral submissions at a remote hearing using video-conferencing over two days from Chris Buttler (leading Jessica Jones) for the Claimant and from Clair Dobbin for the Defendant.

How the UC Regulations work

The regulation-making power

7

The UC Regulations were made under powers conferred by the 2012 Act. By s. 43 of that Act, the statutory instrument containing the first regulations made under specified provisions (including those at issue here) are subject to what is now known as the “draft affirmative” procedure, i.e. they may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament. Subsequent regulations are subject to the “made negative” procedure, i.e. they come into force before any Parliamentary scrutiny takes place, but are subject to annulment in pursuance of a resolution of either House of Parliament.

The CCE

8

By reg. 31 of the UC Regulations, an award of UC is to include an amount for childcare costs in respect of an assessment period in which the claimant meets both (a) the work condition and (b) the childcare costs condition.

9

The work condition is set out in reg. 32. In broad terms, it is that the claimant is in paid work or has an offer of paid work due to start before the end of the next assessment period and, if she is in a couple, the other member is in paid work or is unable to provide childcare. This claim is about one particular aspect of the childcare costs condition, which is set out in reg. 33.

10

In its original version, reg. 33(1) provided in material part as follows:

“The childcare costs condition is met in respect of an assessment period if—

(a) the claimant pays charges in that period for relevant childcare.”

11

This part of reg. 33(1) was amended by the Universal Credit (Digital Service) Amendment Regulations 2014 (SI 2014/2887) with effect from 26 November 2014. The amending instrument was subject to the made negative procedure. The regulation as amended now provides in material part as follows:

“The childcare costs condition is met in respect of an assessment period if

(za) the claimant has paid charges for relevant childcare that are attributable to that assessment period (see regulation 34A)…”

12

Regulation 34(1) caps the amount of the CCE for an assessment period at “85% of the charges paid for relevant childcare that are attributable to that assessment period”. The amount varies up to this cap depending on the claimant's earnings in the relevant assessment period.

13

Regulation 34A(1) (also inserted by SI 2014/2887) provides as follows:

“Charges paid for relevant childcare are attributable to an assessment period where—

(a) those charges are paid in that assessment period for relevant childcare in respect of that assessment period; or

(b) those charges are paid in that assessment period for relevant childcare in respect of a previous assessment period; or

(c) those charges were paid in either of the two previous assessment periods for relevant childcare in respect of that assessment period.”

14

Regulation 34A(2) contains the formula for working out, in a case where a claimant pays for relevant childcare in advance, the amount paid in respect of any assessment period.

15

“Relevant childcare” is defined in reg. 35. It includes care provided in England by a person registered under Part 3 of the Childcare Act 2006, by the proprietor of a school out of school hours or where the child has not reached compulsory school age or by a domiciliary care provider registered under the Health and Social Care Act 2008. There are similar provisions in relation to childcare provided in Wales and Scotland, which make reference to the regulatory regimes applicable there.

16

The UC Regulations have to be read with the Universal Credit, Personal Independence Payment, Jobseeker's Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 (SI 2013/380: “the Claims and Payments Regulations”), reg. 47(1) of which provides as follows:

“Universal credit is payable monthly in arrears in respect of each assessment period unless in any case or class of case the Secretary of State arranges otherwise.”

17

The default mechanism of payment monthly in arrears was explained in the Explanatory Memorandum which accompanied the original version of the UC Regulations, at para. 7.9, as follows:

“At present, existing income-related benefits are assessed weekly and paid weekly, fortnightly or four weekly. A key difference with Universal Credit is that it will be assessed and paid monthly. This approach is intended to reflect the world of work where around 75% of people receive their wages monthly. Paying in this manner will encourage and support claimants to budget on a monthly basis, which will help smooth the transition into monthly paid work. The monthly approach, together with the collection of earnings details via the new Real Time Information system being implemented by Her Majesty's Revenue and Customs, will help ensure that benefit assessments are accurate and reflect the current needs of the household.”

The housing costs element

18

The HCE is governed by reg. 25 of the UC Regulations. Regulation 25(1) provides for an award of UC to include “an amount in respect of any liability of a claimant to make payments in respect of the accommodation they occupy as their home” (emphasis added). Thus, the HCE – unlike the CCE – compensates for amounts which claimants are liable to pay, rather than amounts they have actually paid.

19

Under reg. 25(2)(a), “payments in respect of accommodation” which are covered include “rent payments” as defined in para. 2 of Sch. 1. These include, among other things: (a) payments of rent; (b) payments for a licence or other permission to occupy accommodation; (c) mooring charges payable for a houseboat; (d) in relation to accommodation which is a caravan or mobile home, payments in respect of the site on which the accommodation stands. Mr Buttler...

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