R (Nichola Salvato) v Secretary of State for Work and Pensions

The claimant challenged the mechanism by which the childcare costs element (CCE) of Universal Credit is assessed and paid, in particular the requirement that claimants must have paid childcare charges before they can obtain reimbursement (the "Proof of Payment Rule"). The court analysed the relevant provisions of the Welfare Reform Act 2012 and the Universal Credit Regulations (notably regs 31–35, reg 33(1)(za), reg 34 and reg 34A) and compared the CCE with the housing costs element (HCE) (reg 25 and related provisions).

The court held that the Proof of Payment Rule had a materially prejudicial effect on the claimant and other recipients of the CCE and fell disproportionately on women. The Rule was within the ambit of Article 8 and Article 1 of Protocol 1, and therefore engaged Article 14. Applying the relevant tests for justification in welfare-policy cases, the court concluded that the Rule was not objectively justified (it was manifestly without reasonable foundation) and was also irrational in relation to the statutory scheme and its aims. As a result the claim succeeded.

Background and parties: The claimant, a single mother and Universal Credit recipient, sought judicial review of the Secretary of State's refusal to amend or disapply the rule that the childcare costs element of Universal Credit is payable only in respect of childcare charges that have been paid. The defendant was the Secretary of State for Work and Pensions. Permission for judicial review was granted by Mostyn J and the matter was heard at first instance by Chamberlain J.

Nature of application: The claimant sought relief on two grounds: (1) that the "Proof of Payment Rule" amounted to unlawful indirect discrimination on grounds of sex contrary to Article 14 read with Article 8 and/or Article 1 of Protocol 1 (A1P1) of the European Convention on Human Rights; and (2) that the Rule was irrational.

Issues framed:

• How the Universal Credit regulatory scheme operates for the childcare costs element (regs 31–35; reg 33(1)(za); reg 34; reg 34A) and its relationship with the payment-in-arrears architecture of UC (Claims and Payments Regulations reg 47(1)).
• Whether the Proof of Payment Rule has disproportionately prejudicial effects on women and so engages Article 14, and whether that discrimination falls within the ambit of Article 8 or A1P1.
• Whether, if discrimination is established, the Rule is objectively justified as a proportionate measure in pursuit of legitimate aims (simplification, prevention of fraud and error and maintenance of UC architecture), and whether the Rule is rational.

Evidence and context: The court considered documentary material about UC policy formation (including White Paper and impact assessments), expert and lay witness evidence from the claimant and third-party organisations (Save the Children, Gingerbread, NDNA, PACEY), and the defendant's witness evidence about policy aims and administrative considerations. The judgment noted the contrast between the CCE (requiring proof of payment) and the HCE (which compensates for liabilities); it also observed reg 34A which determines attribution of paid charges to assessment periods.

Court's reasoning and subsidiary findings: The court found that: (i) the Proof of Payment Rule produced prejudicial effects for the claimant and a significant number of others entitled to the CCE; (ii) the CCE claimant population is overwhelmingly female (a high proportion are single mothers) and single mothers have lower median earnings, so the Rule disproportionately affects women; (iii) the CCE is a modality by which the state supports family life and the Rule accordingly falls within the ambit of Article 8 and A1P1 for Article 14 purposes; (iv) although reducing fraud and error and preserving the architecture of UC are legitimate aims, the Secretary of State had not shown that making entitlement depend on proof of payment (as opposed to proof of liability to pay, evidenced by an invoice) was objectively necessary or proportionate to those aims; and (v) officials had considered some alternative mechanisms (direct payment to providers, vouchers) and rejected them, but there was no convincing, particularised evidence that a system based on liability (as with the HCE) would be unworkable or inevitably more prone to error or fraud. The court also observed that the Secretary of State's post-hoc administrative-cost assertions were not sufficiently particularised to sustain the Rule.

Conclusion and remedy: The court concluded that the Proof of Payment Rule was unlawfully discriminatory and irrational and that the claim succeeds. The judge invited further submissions on the form of order and remedy, leaving the precise form of relief to be determined after further submissions.

The claim succeeds. The court held that the Proof of Payment Rule for the childcare costs element of Universal Credit is indirectly discriminatory against women and falls within the ambit of Article 8 and Article 1 of Protocol 1; the Rule was not objectively justified (manifestly without reasonable foundation) and, in any event, was irrational. The judge ordered that further submissions be invited to determine the appropriate remedial order.