Pantellerisco & Ors, R (on the application of) v The Secretary of State for Work and Pensions

The failure to create an adjustment to the Universal Credit benefit-cap rules may be irrational where regular four-weekly pay causes a claimant’s income to fluctuate artificially between monthly assessment periods. The court must assess the disadvantages of leaving the problem unresolved, the disadvantages of a solution, whether the solution is consistent with the Universal Credit scheme, and whether a reasonable balance has been struck. The high Wednesbury threshold remains applicable, but it is not insuperable. Automation, bright-line rules and administrative complexity do not necessarily justify leaving a substantial, predictable and arbitrary disadvantage unremedied, particularly where relevant pay-frequency data already exists.

The claimants sought judicial review of the Secretary of State’s approach to calculating earned income and applying the benefit cap under the Universal Credit Regulations 2013. The first claimant worked 16 hours weekly at the national living wage but was paid every four weeks. Because Universal Credit was assessed monthly, she received two payments in one assessment period once each year and one payment in the remaining periods, causing the benefit cap to apply in most periods.

The claim challenged the construction and rationality of the Regulations and alleged discrimination contrary to Article 14 ECHR. After the Court of Appeal’s decision in R (Johnson) v SSWP [2020] EWCA Civ 778, the statutory-construction ground was abandoned. The central issue was whether failing to make an adjustment for four-weekly pay was irrational and unlawful.

1. The claim succeeded. The court declared that the earned-income calculation was irrational and unlawful insofar as it applied to employees paid on a four-weekly basis. The appropriate relief was to be settled after submissions.
2. The challenge was governed by the Wednesbury standard: whether the Secretary of State’s decision not to include an adjustment was outside the range of reasonable decisions available to the decision-maker. The threshold was very high, but not insuperable.
3. Following R (Johnson) v SSWP [2020] EWCA Civ 778 and the framework in R (Law Society) v Lord Chancellor [2018] EWHC 2094 (Admin), the court considered the disadvantages of leaving the problem unresolved, the disadvantages of a solution, consistency with the nature of Universal Credit, other relevant factors, and whether a reasonable balance had been struck.
4. The existing scheme imposed serious and arbitrary disadvantages. The first claimant was in continuous regular employment, yet the Regulations treated her as earning less in 11 of 12 assessment periods and almost twice as much in the remaining period. This reduced Universal Credit, discouraged work, caused severe budgeting fluctuations and made entitlement depend on an employer’s pay cycle.
5. The asserted advantages of retaining the existing approach did not justify the result. Four-weekly pay was genuinely regular, the problem affected a substantial cohort, and relevant pay-frequency data was already collected through RTI. A solution would be technically more complicated but would make the scheme fairer, reduce disincentives to work and remain consistent with its objectives.
6. The discrimination ground under Article 14 ECHR was not considered because the claim succeeded on rationality.