Arathoon v Secretary of State for Work & Pensions

Under paragraph 7 of Schedule 3 to the Income Support (General) Regulations 1987, transitional add-back protection is reduced by increases in existing housing costs measured against the amount applicable in the second benefit week, when the new scheme began. A later rise which remains below that level does not reduce the add back. The relevant comparison is not with the immediately preceding week. Each qualifying increase may nevertheless reduce the add back, including a repeated increase after a subsequent fall. Once reduced to nil, the add back cannot be restored.

The Secretary of State appealed against a Social Security Commissioner’s decision dated 5 July 2004, which had dismissed an appeal from the Chester Appeal Tribunal’s decision of 30 November 2003. The dispute concerned the interpretation of paragraph 7 of Schedule 3 to the Income Support (General) Regulations 1987.

The claimant’s mortgage pre-dated 2 October 1995. The new Schedule 3 replaced calculation by reference to her contractual interest rate with calculation by reference to a prescribed standard rate, and paragraph 7 provided transitional add-back protection. The central questions were whether increases in the standard rate were measured against the second benefit week or the immediately preceding week, and whether a repeated increase could cause a further reduction.

1. Appeal dismissed. The Commissioner had correctly held that an increase under paragraph 7(3) of Schedule 3 means an increase in existing housing costs compared with the amount applicable in the second benefit week, disregarding the add back.
2. The wording “increases after the second benefit week” naturally refers back to the housing costs payable in that week. This construction also gives paragraph 7 a rational operation. An increase above the second-week amount prevents unjust enrichment, whereas a rise which remains below that amount merely alleviates part of the continuing or increased shortfall caused by the new scheme and was not intended to reduce the limited transitional protection.
3. Paragraph 7(4), including the words “Any increase”, does not enlarge the relevant kind of increase. It makes clear that every qualifying increase, rather than only one future increase, reduces the add back, and that the add back cannot be reinstated once reduced to nil.
4. The Department of Social Security memorandum was neutral on the comparison required and did not assist the Secretary of State. The court also agreed with the Commissioner’s view on the main question expressed in relation to CIS/16769/1996, while treating the question of a duplicate increase as unnecessary to the decision but expressing disagreement with the Commissioner. A repeated qualifying increase would cause a further reduction.
5. Costs were awarded against the Secretary of State, subject to agreement or referral on paper to Buxton LJ if necessary.

• Court of Appeal (Civil Division): appeal from the Social Security Commissioners dismissed. The court upheld the Commissioner’s decision dated 5 July 2004.
• Social Security Commissioner: dismissed the Secretary of State’s appeal from the Chester Appeal Tribunal.
• Chester Appeal Tribunal: decision made on 30 November 2003.