An appeal court ruled that rigid universal credit payment rules that leave tens of thousands of working benefit claimants out of pocket were irrational and unlawful.
Solicitor Tessa Gregory said: “The secretary of state committed to a ‘test and learn’ approach in rolling out universal credit, yet refused to listen to these four hard-working mums when they raised this issue over two years ago.”
The case revolved around the Department for Work and Pensions’ refusal to change universal credit assessment period regulations, which have the effect of penalising claimants whose salary is paid towards the end of a month, resulting in fluctuating levels of income.
Danielle Johnson, a school catering assistant who brought the original case, had argued that the DWP’s refusal to allow her to adjust the date of her universal credit assessment period meant she was left about £500 worse off each year, and was therefore subject to cashflow problems and put at risk of eviction. Johnson is paid on the last day of each month, and her universal credit assessment period runs from the last day of the month to the penultimate day of the next month. In some months, due to a weekend or bank holiday falling at the end of the month, her wages are paid into her bank account two days earlier than normal. The universal credit system reads this as her having earned twice as much in one month and none in the next, meaning that her benefit payment amount fluctuates wildly, and cancelling her work allowance in several months, leaving her £500 a year worse off.
A court ruling last year found in favour of Johnson and three other single mothers, concluding that it was “odd in the extreme” that the DWP was unwilling to modify universal credit arrangements even when claimants were perversely affected. Currently around 85,000 claimants are estimated to be affected by the rules.
Between them, the four had been forced into rent arrears, and borrowed money and used food banks to make ends meet. One of the mothers was so exasperated by the system that she gave up work to look for another job that had no clash between her pay date and universal credit assessment period.
The government argued at the appeal that to have to change the way the benefit’s online computer calculation system worked in line with the original court ruling would undermine the principle of universal credit, cost at least £7.5m and require thousands of calculations to be administered manually.
Lady Justice Rose said she agreed with the original ruling. The DWP had presented no reason why Johnson and the others should lose money simply because of the date in the month in which they had started their claim. The situation faced by Johnson and others was “perverse”, she said.
She said: “This case is, in my judgment, one of the rare instances where the secretary of state for work and pensions’ 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 minister would have struck the balance in that way.”