Secretary of State for Work and Pensions v LM

The actual-receipts method in the Universal Credit Regulations 2013 is not irrational merely because a claimant paid fortnightly may receive six weeks’ pay in one assessment period and two weeks’ pay in another. R (Johnson) concerned a specific distortion affecting monthly-paid claimants whose pay dates occasionally fell within one assessment period. Its reasoning does not extend to claimants whose pay cycle fundamentally differs from the calendar-month assessment period. General rules in a complex benefits scheme may produce harsh results. Changing them involves policy, administrative and technical judgments for the Secretary of State and Parliament, unless the failure to do so crosses the high threshold of irrationality.

The claimant received Universal Credit on monthly assessment periods running from the 18th of one month to the 17th of the next. She was paid every 14 days and received payments on 18 September, 2 October and 16 October 2020. The Secretary of State treated all three payments as earned income for the assessment period ending on 17 October 2020.

The First-tier Tribunal, relying on R (Johnson) and R (Pantellerisco) (High Court), held that the regulations were irrational and unlawful insofar as a fortnightly-paid claimant could be treated as receiving six weeks’ pay in one month. The Secretary of State appealed. The central issue was whether the reasoning in Johnson, particularly in the light of the Court of Appeal’s subsequent decision in Pantellerisco, applied to fortnightly-paid claimants.

The appeal was allowed. The First-tier Tribunal’s decision of 5 March 2021 was erroneous in law, was set aside under section 12(2)(a) and (b)(ii) of the Tribunals, Courts and Enforcement Act 2007, and the decision was remade.

1. Regulation 21 of the Universal Credit Regulations 2013 establishes monthly assessment periods, calculated by calendar month. Regulation 54 provides the general rule that earned income is based on the actual amounts received during the assessment period.

2. Johnson concerned monthly-paid claimants whose claims began on or around their normal pay day and whose consecutive monthly pay dates occasionally fell within one assessment period. Its declaration of unlawfulness had no wider application. The claimant was not a monthly-paid claimant and was not a “Johnson lookalike claimant”.

3. The Court of Appeal’s decision in Pantellerisco was binding. It established that the Secretary of State was not irrational in declining to modify the actual-receipts principle to eliminate or mitigate fluctuations caused by a pay cycle that did not correspond with the assessment period. The threshold of irrationality was high. The pay-cycle effect reflected policy choices embodied in the regulations, and general rules in a complex scheme could produce harsh individual results.

4. Any alternative solution would raise significant questions about the workability, reliability and automation of the scheme, and would require a policy balance falling principally to the Secretary of State and Parliament. The similarity with Johnson was superficial because the present problem arose from a fundamental mismatch between the claimant’s pay cycle and the calendar-month assessment period, rather than a specific banking-day anomaly.

5. There was no dispute about the facts. To avoid further delay, the Upper Tribunal remade the decision: the appeal was refused, the Secretary of State’s decision of 18 October 2020 was confirmed, and the claimant’s net entitlement for 18 September to 17 October 2020 was £529.13.

• Upper Tribunal (Administrative Appeals Chamber): allowed the Secretary of State’s appeal and set aside the First-tier Tribunal’s decision under section 12(2) of the Tribunals, Courts and Enforcement Act 2007.
• First-tier Tribunal (Social Entitlement Chamber): on 5 March 2021 under reference SC287/20/00412, held that the calculation of fortnightly earnings under the Universal Credit Regulations 2013 was irrational and unlawful and revised the Secretary of State’s decision.