PQ v Secretary of State for Work and Pensions

For legacy means-tested benefits, a claimant’s money resources must be classified as either income or capital. Regular payments presumptively have the character of income, but their true characteristics must be assessed in the statutory context. Payments intended to meet pregnancy-related expenditure under a surrogacy arrangement were income because they were periodic payments intended to meet outgoings rather than accumulate wealth.

Surrogacy is not employment, work or a vocation for the purposes of the volunteer-expenses disregard. Surrogacy payments were also not voluntary payments: the intended parents obtained the practical benefit of securing the co-operation necessary to complete the arrangement. The Family Court’s treatment of payments as reasonable expenses for parental-order purposes did not determine their status under social security legislation.

The Appellant was receiving income-based jobseeker’s allowance while acting as a surrogate in two arrangements. She received monthly payments totalling £15,000 for one pregnancy and £10,500 for another. The Secretary of State treated the payments as income, resulting in a recoverable overpayment. The First-tier Tribunal dismissed her appeal.

On further appeal, the Appellant argued that the payments were capital, or alternatively income subject to disregards under Schedule 7 to the Jobseeker’s Allowance Regulations 1996. She also argued that the First-tier Tribunal had acted unfairly by deciding the appeal in her absence. The Upper Tribunal considered the correct income-capital test, the scope of the disregards, and the procedural fairness of proceeding in the Appellant’s absence.

1. Appeal dismissed. The First-tier Tribunal’s decision involved no material error of law and therefore stood.
2. The relevant benefits legislation creates a binary classification of money resources as income or capital. The correct approach is to apply the ordinary and natural meaning of income, while identifying the characteristics of the payment in its statutory context. Regularity is a realistic starting point because regular payments presumptively indicate income, but it is not conclusive. The question is which side of the income-capital divide best fits the payment.
3. The surrogacy payments were intended to meet pregnancy-related outgoings and not to build up assets. Their periodic structure, including the lower total for the shorter second pregnancy, supported their character as regular monthly income rather than capital paid by instalments. The payments’ purpose, restricted use and connection with particular pregnancies did not displace that conclusion.
4. Paragraph 2 of Schedule 7 to the JSA Regulations 1996 did not apply. The provisions concerning volunteers had to be read consistently, and treated volunteering as effectively akin to unpaid work. Surrogacy is a unique status and cannot naturally be characterised as employment, work or a vocation. A surrogate’s 24-hour responsibility could not be rearranged to comply with the availability requirements for employment.
5. Paragraph 15 of Schedule 7 also did not provide a disregard. Applying R v Doncaster Metropolitan Borough Council ex p Boulton (1993) 25 HLR 195, a voluntary payment requires both that nothing be obtained in return and that the payment be benevolent. The intended parents obtained the practical benefit of securing the co-operation necessary for the surrogacy arrangement to work. Their payments were therefore a quid pro quo, not benevolent voluntary payments. The absence of an enforceable legal obligation was not determinative.
6. The First-tier Tribunal was entitled to proceed in the Appellant’s absence. The decision whether to adjourn was a broad, fact-sensitive case-management decision. The Appellant had been notified, had agreed when contacted that the appeal could proceed, and her case was sufficiently set out in the papers. No procedural unfairness resulted.

• Upper Tribunal (Administrative Appeals Chamber): dismissed the appeal under section 11 of the Tribunals, Courts and Enforcement Act 2007; the First-tier Tribunal’s decision stood.
• First-tier Tribunal (Social Entitlement Chamber): dismissed the Appellant’s appeal against the decision treating the surrogacy payments as income for income-based jobseeker’s allowance purposes.