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Cite as: [1991] UKSSCSC CIS_131_1989

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[1991] UKSSCSC CIS_131_1989 (02 September 1991)

R(IS) 6/92

Mr. D. G. Rice CIS/131/1989
2.9.91

Income - earnings of employed earner – whether local councillor's expenses deductible

The claimant was unemployed and in receipt of income support. He worked as a local councillor and received attendance allowances plus expenses in respect of this work. The tribunal confirmed the adjudication officer's decision that the claimant's income as a councillor should be taken into account as earnings in calculating his entitlement to income support. The claimant appealed to the Commissioner.

Held that:

as a local councillor the claimant was an "employed person" within the meaning of regulation 2 of the Income Support (General) Regulations. The word "employed" looked at in isolation from the phrase "employed earner" must in accordance with the glossary of expressions in Schedule 20 of the Social Security Act 1975, be construed "in accordance with 'employment' below" and the term "employment" is defined there as including "any trade, business or profession, office or vocation". The holding of an office is clearly an employment and as the claimant received payment by virtue of this office he was gainfully employed in such employment (para. 5);

payments for travelling expenses and subsistence allowance could only have been made under Section 174(1) of the Local Government Act 1972 where they had to be "necessarily incurred
. . for the purpose of enabling him to perform any approved duty". They were payments "in respect of expenses wholly, exclusively and necessarily incurred in performance of the duties of the employment" within regulation 35(l)(f) and 35(2)(c) of the regulations and are not to be treated as part of the claimant's earnings (CIS/89/1989 affirmed) (para. 8);

expenses in relation to the claimant's need to purchase note paper and stationery and the cost of telephone calls are undoubtedly expenses wholly, exclusively and necessarily incurred in the performance of the duties of his office, but the local authority made no payment in respect of them. Therefore there is nothing to disregard under regulation 35. The language of that regulation is severely restrictive. In contrast the language employed in regulation 2 of the Social Security (Computation of Earnings) Regulations 1978 clearly allows deduction of all expenses reasonably incurred from earnings of any kind received by the claimant from this employment or office (R(U) 5/83 distinguished) (para. 8).

Compare R(FC) 1/90 (para. 11).

DECISION OF THE SOCIAL SECURITY COMMISSIONER

My decision is that the decision of the social security appeal tribunal given on 30 January 1989 is erroneous in point of law and accordingly I set it aside. As it is expedient that I give the decision the tribunal should have given, I further decide:

(i) that the claimant's income in any week as a local councillor (subject only to a deduction of £5) must be taken into account as earnings in the calculation of his entitlement to weekly income support as from 11 July 1988, and

(ii) that there shall be no deductions from any payment made to the claimant by way of attendance allowance pursuant to section 173 and 175 of the Local Government Act 1972 in respect of expenses wholly, exclusively and necessarily incurred in the performance of his duties as a local councillor.

This is an appeal by the claimant, brought with the leave of the tribunal chairman, against the decision of the social security appeal tribunal of 30 January 1989. An oral hearing of the appeal was directed and at that hearing the claimant was present, although not represented, whilst the adjudication officer appeared by Mr. J. Reid of the Chief Adjudication Officer's Office.

On 12 July 1988 the claimant applied for income support. He declared that he was a local councillor, and that he received attendance allowances in respect of this office, plus expenses. On 2 August 1988 the adjudication officer decided that the claimant's income as a councillor should be taken into account as earnings in the calculation of his entitlement to weekly income support as from 11 July 1988. In due course the claimant appealed to the tribunal, who in the event upheld the adjudication officer.

The claimant's contention before the tribunal was that the payments he received for attending council meetings should not be regarded as earnings for the purposes of computing his entitlement to income support. They were to be treated as expenses and as such disregarded. The particular regulation relevant to this issue is regulation 35 of the Income Support (General) Regulations 1987 [SI 1987 No. 1967], which provides as follows:

"35. (1) Subject to paragraph (2) 'earnings' means in the case of employment as an employed earner, any remuneration or profit derived from that employment and includes -

(a)-(e) ...

(f) any payment made by the claimant's employer in respect of expenses not wholly, exclusively and necessarily incurred in the performance of the duties of the employment ...

(g)-(h) ...

(2) 'Earnings' shall not include -

(a)-(b) ...

(c) any payment in respect of expenses wholly, exclusively and necessarily incurred in the performance of the duties of the employment;

(d) ..."

Regulation 2 of the aforesaid regulations provides for "employed earner" to be construed in accordance with section 2(1)(a) of the Social Security Act 1975. That section provides as follows:

"2. (1)(a) 'employed earner' means a person who is gainfully employed in Great Britain under a contract of service, or in an office (including elective office [my emphasis]) with emoluments chargeable to income tax under Schedule E."

Manifestly, the claimant was, in his capacity as a local councillor, an "employed earner" within the definition contained in regulation 2 and in consequence his earnings fell within regulation 35. For clearly he was "gainfully employed" in an office (including elective office) and it is not in dispute that the emoluments received therefrom were chargeable to income tax under Schedule E. Moreover, the word "employed", looked at in isolation from the phrase "employed earner", must, in accordance with the glossary of expressions contained in Schedule 20 to the Social Security Act 1975, be construed "in accordance with 'employment' below" and in accordance with that glossary the term "employment" is defined as including "any trade, business, profession, office [my emphasis] or vocation". Accordingly, the holding of an office is clearly an employment and as the claimant received payment by virtue of his office, he was gainfully engaged in such employment. Moreover, to complete the qualification his emoluments were chargeable to income tax under Schedule E.

It follows from what has been said above that the payments made to the claimant for attendance at council meetings constituted earnings within regulation 35 (cf. R(U) 5/83), although it should be mentioned, they were subject to a £5 disregard. Admittedly, the tribunal reached this conclusion, but, in my judgment, they failed to give sufficient explanation for their decision. In consequence, I must set aside their decision as being in breach of regulation 25(a) of the Adjudication Regulations. However, it is unnecessary for me to remit the matter to the new tribunal for a rehearing. I can conveniently substitute my own decision.

For the reasons set out above, the claimant is caught by regulation 35 and his earnings must be taken into account in computing his entitlement to income support. However, this is not the end of the matter. For the claimant in his appeal to me went on to contend that, even if the payments received by him for the discharge of his duties as a councillor had to be treated as earnings within regulation 35, he was at least entitled to deduct therefrom any "expenses wholly, exclusively and necessarily incurred in the performance of the duties of the employment". He pointed out that, in order to represent properly the people who elected him to office, he necessarily incurred expenses. He had, for example, to buy notepaper, books, stationery, use the telephone and wear suitable clothing. He argued that at least the cost of these and similar items should be deducted from any payments received by him.

As regards any payments made to the claimant in respect of travelling expenses or subsistence allowance, these could only have been made under section 174(1) of the Local Government Act 1972 where they had to be "necessarily incurred ... for the purpose of enabling him to perform any approved duty." It follows that they were payments "in respect of expenses wholly, exclusively and necessarily incurred in the performance of the duties of the employment" within regulation 35(l)(f) and (2)(c), and in consequence were not to be treated as part of the claimant's earnings (see CIS/89/1989). But was this disregard of relevant expenses to apply to other payments? The specific payment in question in the present instance was the payment to the claimant of attendance allowance. However, this was not a payment in respect of expenses; it was a payment for the claimant's attendance at authorised meetings. In the words of Section 173(1), the authorising provisions of the Local Government Act 1972:

"Section 173(1). Subject to subsection (6) below [not applicable], any member of a local authority who is a councillor shall be entitled to receive a payment by way of attendance allowance, this is to say, a payment for the performing of any approved duty, being a payment of such reasonable amount, not exceeding the prescribed amount, as the local authority may determine ..."

Accordingly, as this payment is not a payment to meet expenses, but a payment to recompense a councillor for his attendance at authorised meetings, it is not a payment falling within regulation 35(1)(f) or 35(2)(c). Although the expenses referred to by the claimant, namely his need to purchase such things as notepaper and stationery, and to incur the cost of telephone calls, are in my judgment, undoubtedly expenses wholly, exclusively and necessarily incurred in the performance of the duties of his office, the local authority have made no payment in respect thereof. Therefore there is nothing to disregard under regulation 35.

It will be seen from the foregoing that the language of regulation 35 is severely restrictive. It is to be contrasted with that employed in the Social Security Benefit (Computation of Earnings) Regulations 1978 [SI 1978 No. 1698], regulation 2 of which provides as follows:

"2. - (1) For the purposes of any provision of the Act [i.e. the Social Security Act 1975] and of any regulations made thereunder which relates to benefits under the Act, the amount of a person's earnings for any period shall be calculated or estimated in the manner set out in these regulations.

(2) The amount of a person's earnings for any period to be taken into account shall be the whole of his earnings ...

(3) ..."

Regulation 4 goes on to deal with deductions and provides as follows:

"4... in calculating or estimating for the purposes of any provision of the [Social Security Act 1975] and of any regulations made under the Act which relates to benefit the amount of a person's earnings for any period, there shall be deducted from the earnings which he derives from employment in that period -

(a) ...

(b) ...

(c) any other expenses (not being sums the deduction of which from wages or salary is authorised by or under any enactment) reasonably incurred by him without reimbursement in connection with and for the purposes of that employment."

Here, clearly all expenses reasonably incurred are deductible from earnings of any kind received by the claimant from his employment or office. Expenses deductible are not linked to payments made by the local authority specifically in respect of such expenses. Accordingly, the claimant can derive no advantage from such cases as R(U) 5/83, which depend for their conclusion on the operation of the Social Security Benefit (Computation of Earnings) Regulations 1978.

I am aware that regulation 35, by virtue of its stringent language, operates harshly on the claimant. He is unemployed and in no position to defray the expenses associated with the proper discharge of the functions of his office. He suggested that I should interpret the regulations so as to remove this injustice. It cannot be over-stressed that I have no power to waive or modify the legislation as enacted. It is for the legislature, and the legislature alone, to make any necessary amendments.

As explained earlier, it is unnecessary for me to remit the matter to a new tribunal for rehearing. I can conveniently substitute my own decision. That decision is as set out in paragraph 1.

Date: 2 September 1991 (signed) Mr. D. G. Rice
Commissioner