Johnson & Ors, R (On the Application Of) v Secretary of State for Work And Pensions

For universal credit, earned income for an assessment period is based on the amounts actually received, but it is not necessarily identical to those amounts. The calculation must identify the income earned in respect of the period covered by the assessment period. Where two monthly salaries are received in one assessment period but relate to different months, an adjustment is required so that each month’s income is treated in the appropriate period. The statutory scheme does not require a purely mechanical aggregation of payments received. Administrative inconvenience or the intended automation of the system cannot justify an interpretation inconsistent with the Regulations. The public sector equality duty requires substantive, fact-sensitive regard to the statutory equality matters, but it does not require the decision-maker to identify every possible consequence for a protected group.

Four working single mothers sought judicial review of decisions calculating their universal credit. Because their monthly salaries were paid on or around the last working or banking day of the month, two salaries sometimes fell within one monthly assessment period. The Secretary of State treated both payments as earned income for that period, allowing only one work allowance.

The claimants argued that this misconstrued the Universal Credit Regulations 2013, and also relied on statutory purpose, Convention rights and the public sector equality duty. The central issue was whether the Regulations required income to be attributed solely by reference to when it was received, or by reference to the period for which it was earned.

1. Claims allowed in substance. The Secretary of State had wrongly interpreted regulation 54 of the Universal Credit Regulations 2013 by treating two salaries received in one assessment period as earned income in respect of that single period.
2. Regulation 54 requires earned income in respect of an assessment period to be based on actual amounts received in that period. It does not provide that earned income is necessarily the same as the amounts actually received. Regulation 61 similarly requires earnings to be based on PAYE information, rather than mechanically to equal the amount reported.
3. The relevant question is the period in respect of which the income was earned. For employees paid monthly, salaries referable to two separate months do not constitute earned income in respect of one assessment period merely because both payments were received during it. An adjustment is required where the payments received do not reflect income earned in respect of the time covered by the assessment period.
4. This interpretation accords with regulation 22, under which a claimant may retain a work allowance in respect of each assessment period. It also reflects the statutory purpose of enabling persons with limited means to meet basic needs and encouraging work. The automated design of universal credit and the administrative cost of manual intervention cannot alter the meaning of the Regulations. Regulation 61 already contemplates manual intervention and reallocation of payments in appropriate cases.
5. The court declined to determine the alternative ultra vires and Convention arguments because they did not arise on the correct construction of the Regulations.
6. The challenge under section 149 of the Equality Act 2010 failed. The duty is substantive rather than formal and highly fact-sensitive. The evidence showed that equality assessments had considered the effect of universal credit proposals on women and other protected groups. Failure to anticipate the particular problem did not establish a breach.
7. The claims for judicial review succeeded on the statutory interpretation ground. The question of remedies and consequential applications was adjourned for a further hearing.

Not stated in the judgment. The claims were first-instance judicial review proceedings, with the four claimants joined or permitted to proceed by orders dated 13 June, 6 July and 2 August 2018.