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Case brief: Successful challenge to the DWP universal credit deductions policy

Posted on 15/04/21

Sophie Earnshaw, a solicitor in Shelter’s Strategic Litigation Team, explains the successful challenge in the High Court to the policy on court fines deductions from benefits and how this case can be used to help people who are in financial hardship. The claim was brought by Shelter on behalf of its clients together with a similar claim brought by Hackney Community Law Centre.

R (Blundell & Ors) v Secretary of State for Work and Pensions
R (Day) v Secretary of State for Work and Pensions

[2021] EWHC 608 (Admin)
17 March 2021

The Department of Work and Pensions (DWP) has a policy of always deducting the maximum set amount of the standard allowance of universal credit (UC) in respect of court fines, regardless of the person’s circumstances. The policy that allows for lowering the amount of deductions in cases of financial hardship does not apply to deductions for court fines. This is despite the fact that the relevant regulations require the DWP to exercise broad discretion in the amount of deductions made.

The facts of the case

The claimants are vulnerable individuals with a history of homelessness and rough sleeping. They suffered from social and financial problems, substance abuse and mental health issues, and had been supported into secure social housing by Shelter’s Entrenched Rough Sleepers Service. The Manchester-based project also provided assistance with benefits, managing finances, sustaining tenancies, and health and wellbeing.

The claimants had incurred court fines for criminal offences which were being recovered directly from their UC awards through a deduction from benefit.

At the time of the court case the DWP was applying the maximum 30 per cent deduction rate without exercising discretion to deduct less, despite the claimants’ financial hardship.

Deducting the maximum amount of 30 per cent from the UC standard allowance left the claimants with as little as £51 per week and unable to cover the cost of food, bills, and travel to medical appointments, the Jobcentre, and work interviews. The deductions had a profound impact on their mental health. The claimants were getting to grips with managing a tenancy after years on the streets and the deductions felt like yet another hurdle they had to deal with at a critical time.

The law and the DWP policy

The Fines (Deductions from Income Support) Regulations 1992 set out rules for deductions from benefits for court fines. Sections 4(1A) and 4(1B) of the Regulations require the DWP to exercise discretion when deducting money from UC. The minimum that can be deducted is 5 per cent of the standard allowance and the maximum amount is £108.35.

The DWP’s policy on deductions does not allow for discretion when money is deducted for court fines, so decision makers must apply the highest threshold. Where there are other debts being deducted, for example rent arrears or advance payments, the composite amount is taken up to the maximum amount. In the claimants’ case, in 2019 the deductions went up from 5 per cent to 40 per cent without a warning. In October 2020 the new policy lowered the threshold from 40 per cent to 30 per cent. The DWP adjusted the level of deductions to the new maximum amount without exercising discretion.

The court case

In November 2019 Shelter sent pre-action protocol letters to the Secretary of State for Work and Pensions (SSWP) challenging the deductions policy as a whole and the decisions to deduct the maximum amount from the claimants’ UC awards. The SSWP refused to reconsider and the case progressed to court.

The claimants applied for a judicial review on the grounds that the SSWP unlawfully fettered its discretion when determining the level of deductions from benefits for court fines, irrationality, disability discrimination and a breach of the public sector equality duty. The High Court allowed the appeal on the ground of fettering discretion.

Fettering discretion: the arguments

Fettering of discretion is an established public law wrong that constitutes grounds to challenge an official decision in court.

The claimants argued that the SSWP had adopted a rigid approach to deductions for fines, instead of exercising discretion as required by the regulations. This is against the law.

The essence of the challenge was not that an individual decision should be made in each case, but that the DWP decision makers ought to consider individual cases on request if there were exceptional circumstances or financial hardship. In the claimants’ case, the decision makers should have considered departing from the default policy of applying the maximum rate of deductions for court fines.

The SSWP argued that discretion had been applied when the fixed rate for deductions had been lowered from time to time, for example from 40 per cent to 30 per cent in October 2019. The SSWP stated that individual cases and financial hardship were considered, and that the claimants could always return to the magistrates’ court and apply to have the fines repaid by a varied repayment plan. The SSWP stated that deductions from benefits ‘duplicated the process’ of that of the role of the magistrates’ court. This conflicted with the SSWP’s acceptance that the power to make deductions was ‘different to a power to enter into a direct repayment agreement’.

The claimants rejected the SSWP’s argument of an ‘alternative route’ via the magistrates’ court and argued that this was not an exercise of discretion with regards to the level of deduction rates, but a reliance on a completely different route and a repayment mechanism outside of the benefit deductions regime.

The decision

The judge rejected the SSWP’s arguments:

I cannot accept that argument. The alternative route to easing financial hardship, via the magistrates’ court, is inferior to what the statutory provisions enact. The court cannot save the debtors from themselves by taking their money at source to pay off their fines.  The deductions regime is paternalistic: the debtor cannot be left to pay off court fines voluntarily; they must be made to do so, for their sake and society’s.  The Secretary of State’s passivity leaves unperformed the duty upon her to make that happen in appropriate cases.

Nor, by similar reasoning, can I accept that the statutory scheme is an overarching unified system harmonising executive and judicial components, as the Secretary of State suggested through counsel. It does not operate properly as such, as shown by the Magistrates’ Association guide of 2020 and by parts of the history of deductions in the case of these individual claimants. As Mr Drabble [claimants’ barrister] demonstrated from the evidence, what the magistrates may give with one hand, the Secretary of State’s policy may take back with the other. (paragraphs 89 to 91)

The judge considered the powers of the magistrates’ court to vary the repayment rates and its role in the statutory scheme and found that, although both approaches were there to enforce social obligations and recover court fines, the means of achieving the purpose was very different:

(...) One involves direct seizure of money from the hands of the debtor; while the other just gives him an opportunity to hand over the money, having failed to do so previously.

That is quite a significant difference. The first is direct enforcement of a debt; the second, mere encouragement to pay it. A creditor requiring security for a debt knows the difference very well indeed.  Managers of reputable banks would guffaw in disbelief at the notion that giving someone time to pay off a mortgage on a property ‘duplicates’ taking a charge over the property. (paragraphs 79 and 80)

The judge went on to find that even where there might be an alternative and parallel route for the repayment of fines, it was not sufficient defence for SSWP to argue that someone else, in this case the magistrates’ court, could ‘un-fetter’ the discretion.

Finally, the judge held that the SSWP’s deductions policy and practice were unlawful:

I conclude that the Secretary of State’s policy and practice are not lawful in their present form. There would be no legal difficulty if the deductions policy admitted of exceptions, even rare exceptions, in individual cases. The claimants themselves accept that.  But it does need revising to enable that to happen. For those reasons, the first ground of challenge succeeds. (paragraph 92)

What next for claimants?

The DWP are not appealing the judgment, meaning that the High Court decision is final. 

This judgment means that the SSWP must change the deductions policy and guidance to include discretion for DWP decision makers to reduce deductions for court fine payments. UC claimants can ask the DWP to lower the amount deducted where there are exceptional circumstances such as financial hardship.

Until the DWP changes its policy and guidance, welfare benefit advisors and claimants should bring the Blundell & Ors case to the DWP’s attention when requesting a lower level of benefits deductions. This will hopefully help people who are already struggling on very limited means.

There is no right to appeal decisions regarding the level of deductions in the Social Security Tribunal. The only remedy is a judicial review in the High Court. Claimants are required to follow the pre-action protocol before applying to court. If the DWP refuses to consider individual requests to lower the deduction amount, claimants should seek specialist assistance to challenge the decision.

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