The Queen (on the application of Salvato) v The Secretary of State for Work and Pensions
| Jurisdiction | England & Wales |
| Judge | Lady Justice Andrews,Underhill LJ,Warby LJ |
| Judgment Date | 13 October 2021 |
| Neutral Citation | [2021] EWCA Civ 1482 |
| Docket Number | Case No: C1/2021/0344 |
| Year | 2021 |
| Court | Court of Appeal (Civil Division) |
[2021] EWCA Civ 1482
Lord Justice Underhill
(Vice President of the Court of Appeal (Civil Division))
Lady Justice Andrews
and
Lord Justice Warby
Case No: C1/2021/0344
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
MR JUSTICE CHAMBERLAIN
Royal Courts of Justice
Strand, London, WC2A 2LL
Clair Dobbin QC and Ruth Kennedy (instructed by the Government Legal Department) for the Appellant
Chris Buttler QC and Jessica Jones (instructed by Leigh Day) for the Respondent
Hearing dates: 27, 28 and 29 July 2021
Approved Judgment
Introduction
Universal Credit (“UC”) was introduced by the Welfare Reform Act 2012 (“the 2012 Act”), replacing a range of existing benefits with one holistic benefit. The 2012 Act, and the detailed regulations which implemented it, the Universal Credit Regulations 2013 (SI 2013/376, as amended by SI 2014/2887) (“the UC Regulations”) revolutionised the benefit system, giving effect to a number of statutory aims and policy imperatives. This was a radical reform, intended to simplify the benefits system and make it fairer, and to remove the financial and administrative barriers to work inherent in the legacy welfare system which it replaced.
Although one of the fundamental aims of UC is to make work pay to the fullest possible extent, and thereby to encourage more people to see work as the best route out of poverty, any suggestion that the purpose of the reform could be distilled into the single aim of making work pay is apt to oversimplify. Other important aims include the more efficient targeting of financial support to those who most need it, the encouragement of claimants to take personal responsibility for their finances, the achievement of a fairer overall financial burden on the taxpayer, the reduction of fraud and error, and the simplification of the administrative process.
The amount of UC received by a claimant will depend on a number of factors which will vary from case to case, depending on individual circumstances. UC is a single payment which comprises a standard allowance (s.9 of the 2012 Act), plus (where applicable) various other elements, such as an amount in respect of responsibility for children (s.10); an amount in respect of housing costs (s.11); and amounts for “other particular needs or circumstances” (s.12), which include a need for payment of childcare costs whilst a single parent or both parents are at work. UC is not a full indemnity. If the claimant is working, it operates as a supplement to their earnings. If the claimant's earnings increase, the amount of UC will be reduced, and vice versa. It is designed to operate flexibly to meet the wide variety of needs and circumstances of those who claim it, including claimants whose earnings fluctuate, and can be adjusted to meet changes in those circumstances as and when they arise.
Payment of UC is made in arrears on a monthly basis, in the same way as a monthly salary would usually be paid. It will normally be made within seven days of the last day of the relevant monthly assessment period, which will be fixed by reference to the date on which the individual first makes a claim. That approach applies irrespective of whether the claimant is in or out of work, or moves between the two, and whether his or her earnings are from employment, self-employment, or both. The calculation of entitlement and payment each month creates certainty about what will be received and when. This encourages the recipient to budget on a monthly basis, and is seen as a means of fostering their independence.
The system is designed around the core principle of using monthly assessment periods and making a single monthly payment in arrears, after taking into account the claimant's actual earnings received in that period. This means that different elements of UC that feed into the overall calculation of what is due to a recipient cannot be separated out or paid before the end of the assessment period without upsetting the system and reintroducing the complexity and scope for error that it was designed to overcome.
This is an appeal by the Secretary of State for Work and Pensions (“the Secretary of State”) against the decision of Chamberlain J that the requirement imposed by the UC Regulations on a person claiming the childcare costs element (“CCE”) of UC to have already paid for the relevant childcare (i) subjected the claimant, Ms Salvato, and single mothers like her, to unlawful indirect discrimination on grounds of sex, contrary to Article 14 read with Article 8 and/or Article 1 of Protocol 1 to the ECHR, (“A1P1”) and (ii) was irrational. The requirement was referred to in the judgment below as “the Proof of Payment Rule” and I will adopt the same terminology, although it is more accurate to describe it as a fact of payment rule.
The complaint in this case is not about a rule concerning qualification for entitlement to a particular welfare benefit, or limiting the recoverable amount, but rather, about the mechanism adopted for payment of an element of the benefit, as part of their UC award, to someone who is entitled in principle to claim it. As the Judge explained in paragraphs [2]–[4] of his judgment:
“2. … 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…
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 it 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.”
When the claimant reduced her working hours to minimise the amount of childcare costs, thereby reducing her monthly income, her UC award became higher than it would have been if she had been able to continue working full-time. Her complaint was that the Proof of Payment Rule created a “Catch-22” situation in which she could not claim the element of the benefit that would enable her to pay for necessary childcare that she was otherwise unable to afford, without first making the payment that she could not afford to make without receiving the benefit. That argument, of course, assumes the absence of alternative financial resources. The Rule was said to be irrational because it undermined the key objective of getting people back to work and decreasing their dependency on benefits.
The Judge himself granted permission to appeal on four grounds, namely:
i) The Court erred in finding that the proof of payment rule was indirectly discriminatory;
ii) The Court erred in its approach to objective justification;
iii) The Court ought not to have made a finding that the application to the claimant of Regulation 33(1)(za) of the Universal Credit Regulations 2013 was incompatible with Article 14 (read with Art 8 and/or A1P1 ECHR) and
iv) The Court erred in determining that the choice of a proof of payment rule was irrational.
Subsequently Lewis LJ granted the Secretary of State permission to appeal on a fifth ground, namely, that the Court erred in considering that the Rule fell within the ambit of Article 8 and/or A1P1 so that Article 14 was engaged. He also directed expedition of the appeal.
Although there are five grounds of appeal (the first three of which are different facets of the same complaint), the issue at the heart of this case is whether the Proof of Payment Rule is objectively justified in the sense that it is proportionate to the legitimate aims of reducing/eliminating the scope for fraud or error, and achieving a simple, easily workable scheme. The Judge decided that it was not, because although it met the first of the four criteria set out by Lord Reed JSC in Bank Mellat v HM Treasury (No 2) [2013] UKSC 39 [2014] AC 700 at [54], it did not meet the others, which he considered together. His reasoning was based on the premise that a proof of liability rule, akin to that used for the HCE, might meet those aims without requiring claimants to incur debt in order to pay for childcare charges. The Judge's finding that there was a lack of objective justification also fed into his conclusion that the Rule was irrational.
I found some of the criticisms that Ms Dobbin QC, on behalf of the Secretary of State, made of the Judge's approach to be misplaced. Much of the Judge's legal analysis is exemplary, and he plainly gave careful consideration to the arguments presented to him. Nevertheless, I have concluded that the Judge did fall into material error when he sought to apply the principles he identified to the evidence in this case, and that there are deficiencies in the reasoning which led him to conclude that the Rule was indirectly discriminatory and irrational.
How the system works
The Proof of Payment Rule is set out in Reg 33(1)(za) which provides...
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