CIPP welcomes the outcome of Universal Credit assessment case
16 January 2019
In a test case victory for a group of working lone mothers, the High Court has found that the way the Department for Work and Pensions (DWP) has been assessing income from employment through its Universal Credit (UC) work assessment periods is unlawful.
In this judicial review case, brought by solicitors Leigh Day and Child Poverty Action Group on behalf of four lone mothers, Lord Justice Singh and Mr Justice Lewis ruled that the DWP has been wrongly interpreting the universal credit regulations. The case challenged the rigid, automated assessment system in universal credit which meant the mothers lost several hundreds of pounds each year and were subject to large variations in their universal credit awards because of the dates on which their paydays and universal credit 'assessment periods' happened to fall.
The mothers all had monthly paydays that ‘clashed’ with the dates of their monthly universal credit assessment periods, with the result that if they were paid early some months, because their payday fell on a weekend or bank holiday, for example, they were treated as receiving two monthly wages in one assessment period - which in turn dramatically reduced their UC award - and as receiving no wages at all the next month. This is a problem which has affected many working claimants and has been widely reported in the media.
In addition to creating wildly fluctuating universal credit awards, when the mothers received two pay cheques in one assessment period, they lost the benefit of one month’s work allowance. The work allowance is the amount of earnings claimants with children or with limited capability for work can keep in full before universal credit is tapered away at a rate of 63p per pound, worth hundreds of pounds each year.
This flaw in the system has denied working parents the additional financial support that they are entitled to so as to help them in work and ensure that work always pays. The severe fluctuations in their universal credit awards and therefore their total monthly income has also caused major cash flow difficulties for parents on very low incomes, leading to them falling into debt and, for some, having to choose between paying their rent or paying their childcare costs.
The DWP refused to adjust the mothers’ assessment periods or to attribute monthly wages paid early to the actual assessment period in which they were earned, so as to enable them to avoid varying awards and cash losses. During the court proceedings, the Secretary of State argued that despite the hardship being caused, the way in which income was being assessed was lawful, it made sense given the automated nature of Universal Credit and that this was an issue which employers should remedy rather than the DWP.
All of these arguments were rejected by the Court who found that correctly interpreted, the regulations mean the DWP can and should adjust its calculation of universal credit awards when “it is clear that the actual amounts received in an assessment period do not, in fact, reflect the earned income payable in respect of that period”. In other words, wages are to be allocated to the month in which they were earned, rather than to the assessment period in which they were received.
Although the DWP also sought to justify its lack of action on the basis that there would be extra costs involved in making adjustments to its systems, the court was clear that it must nevertheless comply with the regulations as correctly interpreted, stating:
"If the regulations, properly interpreted, mean that the calculation must be done in a particular way, that is what the law requires. We do not belittle the administrative inconvenience, or the cost involved but the language of the regulations cannot be distorted to give effect to a design which may have proceeded on a basis which is wrong in law."
Tessa Gregory, a solicitor from Leigh Day said:
“…It is extraordinary that when this issue was first raised, the Secretary of State did not act quickly to remedy the problem, instead choosing to fight these four women in court arguing that the system was fit for purpose despite the hardship being caused to working families. This is yet another demonstration of how broken Universal Credit is and why its rollout must be stopped.”
“…In light of the judgment, Amber Rudd must take immediate steps to ensure that no other claimants are adversely affected and she should also ensure all those who have suffered because of this unlawful conduct are swiftly and fairly compensated.”
The CIPP provided expert testimony on this case about the payroll practices around pay dates falling on non-banking days and we welcome the outcome. Given that Amber Rudd, the Work and Pensions Secretary, has said that she will be looking into resolving many of the issues surrounding UC, we are hopeful that the DWP will amend their processes to make the system fit for purpose and workable around common payroll practices.