A recent Court of Appeal decision has important implications for claimants of Universal Credit. James Coen, a trainee solicitor in our Pro Bono team, summarises the issues involved in the case and the finding of the Court of Appeal and concludes with some comments regarding the importance of Universal Credit to injured and disabled claimants.
Most of us know what day we get paid on without a second thought. Who has not internally exclaimed at some point during their career: “Thank goodness it’s pay day!”? Most of us also know what will happen with our money when pay day falls on a Saturday or a Bank Holiday. This information is useful to know so that we can make our financial plans, but the day of the week upon which pay day falls is not disadvantageous to our incomes.
Not so for some working claimants of Universal Credit until the recent decision of the Court of Appeal in Secretary of State for Work And Pensions v Danielle Johnson and others  EWCA Civ 778 (“Johnson”).
Background: the rules of assessment
When applying for Universal Credit, your earned income is taken into consideration: those with no earned income will receive more Universal Credit than those who have some. The assessment period for Universal Credit is monthly, calculated from the first day of entitlement (ie from the date you applied), with the calculation made on a rolling basis. Any change in the amount you earn month-to-month can have a significant effect on how much Universal Credit you will receive month-to-month.
This is not a problem if you are paid the same earned income amount every month, right? Well, not right in all cases, as Johnson has demonstrated.
The computer says “No”
Imagine you get paid on the last working day of each month. Looking forward, you will receive your September 2020 income on Wednesday, 30 September and your October income on Friday, 30 October.
Imagine too that your assessment period for Universal Credit runs from the last day of each month to the penultimate day of the next month: your upcoming assessment period will be 30 September to 30 October.
This means that in your upcoming assessment period, you will receive two tranches of earned income.
Why might this be a problem? Surely the benefits system could discern easily enough that one tranche relates your September earnings, and the other to your October earnings? Well, it might be a problem if the computer system that calculates your Universal Credit entitlement does so automatically and exclusively according to your assessment period. If it does, what it notices is the fact that you will earn twice as much in your upcoming assessment period than you did in your most recent assessment period, and will lower your pending Universal Credit payment accordingly.
So, while your monthly earnings are uniform and stable, your Universal Credit payments are lumpy. And this lumpiness is aggravated by the fact that Universal Credit is paid in arrears.
This was the situation that Danielle Johnson (school dinner lady, recipient of Universal Credit and first respondent in Johnson) found herself in. She and her fellow respondents were caught by this problem, which the Court of Appeal has now called the “non-banking day salary shift problem”.
It is tempting to think that the non-banking salary shift problem is theoretical rather than practical: that any Universal Credit payments will (indeed must) balance out in the end.
In Johnson, the respondents argued against this and submitted that the significant monthly fluctuations in income made it difficult for them to budget for stable monthly outgoings. This caused them to incur additional costs that they otherwise would not have had (overdraft fees, high interest payments on short term loans, court fees to prevent evictions).
Ultimately, the Court of Appeal found that the respondents were correct in their challenge of the Secretary of State of Work and Pensions’ decision-making, with Lady Justice Rose stating in her leading judgment:
“The threshold for establishing irrationality is very high, but it is not insuperable. This case is, in my judgment, one of the rare instances where the SSWP’s refusal to put in place a solution to this very specific problem is so irrational that I have concluded that the threshold is met because no reasonable SSWP would have struck the balance in that way.”
On this basis, the judges agreed that the government had acted unlawfully in making Universal Credit regulations that failed to take into account the occurrence, in some cases, of the non-banking day salary shift.
Via the Legal Service, Stewarts often assists working family members of injured patients, and the patients themselves, navigate the benefits system and claim Universal Credit. Where a person has sustained life-changing injuries Universal Credit may well be an absolutely vital source of income, to them personally and to their household – and it is on the basis of household that Universal Credit eligibility is assessed. So it is often the case that a patient’s injury and rehabilitation might prevent their return to work, to the extent that their household suddenly becomes eligible for the benefit, notwithstanding that other family members are still continuing to work.
Indeed, where a patient’s disability is serious enough they might also be eligible for the ‘limited capability for work and work-related activity’ element of Universal Credit – which they can receive alongside any Disability Living Allowance and Personal Independent Payment they might separately be awarded.
In such life-altering circumstances as a traumatic brain injury or a catastrophic spinal injury, financial precariousness will often not be too far away. It is therefore very helpful to injured ordinary people that the government has accepted that it needs to iron out the lumps and bumps of the non-banking salary shift problem. Hopefully, this will make lives of disabled and rehabilitating Universal Credit claimants that bit easier.
The Legal Service – We are here to help
The Legal Service, delivered by our pro bono team, provides patients with advice without obligation, for however long it takes to resolve the issue. Our support is available regardless of the circumstances of an accident and regardless of whether a patient has a personal injury claim.
In these difficult times, the concerns of our pro bono clients are likely to be more stark than those in more fortunate circumstances. The Legal Service will be available throughout the crisis to help in any way we can to ease the burden on our clients.
To get advice from The Legal Service, please contact Kara Smith by phone on 020 7822 8000 or by email at email@example.com.
You can find further information regarding our injury expertise, experience and team on our Personal Injury pages.