UK Social Security and Child Support Commissioners' Decisions

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Cite as: [1997] UKSSCSC CF_3110_1995

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[1997] UKSSCSC CF_3110_1995 (17 June 1997)

R(F) 1/98

Mr. P. L. Howell QC CF/3110/1995

17.6.97

Presence condition - claimant moved to Eire with husband and children and claimed United Kingdom child benefit - whether entitled by virtue of Council Regulation (EEC) No. 1408/71

Council Regulation (EEC) No. 1408/71 - Article 77 - whether armed forces service pension including an invalidity supplement is a "pension for old age, invalidity or an accident at work" or whether entitlement to an invalidity benefit sufficient where claimant in receipt of overlapping benefit

The claimant, who was entitled to child benefit in the United Kingdom, moved with her husband and children to live in the Irish Republic. She qualified for child benefit in the Republic but the rate of the benefit there was lower. Her entitlement to the higher rate under the United Kingdom legislation ceased eight weeks after she and the children moved out of the country. She claimed to be entitled to continue receiving the higher rate by the direct effect of Council Regulation (EEC) No. 1408/71 which provides for continuity of certain social security benefits for employed persons and members of their families moving within the Community. It was common ground that she was entitled to this if either she or her husband was in receipt of a United Kingdom social insurance pension within the scope of Council Regulation (EEC) No. 1408/71. The claimant's husband, a former serviceman, was partly disabled and in receipt of a service pension which included an invalidity supplement. His disability also entitled him to United Kingdom invalidity benefit but by virtue of regulation 6, Social Security (Overlapping Benefits) Regulations 1979; no invalidity benefit was payable to him as the service invalidity supplement was greater.

A tribunal confirmed the adjudication officer's rejection of her claim on the ground that the only benefit being received was her husband's service pension, which was not a benefit within Council Regulation (EEC) No. 1408/71. The claimant appealed to the Commissioner.

Held, allowing the appeal and substituting a decision in favour of the claimant, that:

the claimant and her husband could not rely on Article 73 of the Regulation, which applies where a worker in one member State has his or her family residing in another (para. 16);

war or service pensions are not generally within the meaning of "pensions for old age, invalidity or an accident at work" in Article 77 of the Regulation, since they depend on a particular occupational scheme and form of service and are not part of the general scheme of social insurance benefits within the scope of the Regulation as defined by Article 4 (para. 19) (R(F) 1/94 followed);

however where a person has a present entitlement to a pension for invalidity under the general social security scheme and in fact receives payment equal to or exceeding that entitlement out of public funds under some other scheme which the terms of the social security scheme integrate with itself by making the other payment in effect satisfy the social security entitlement, that person "draws a pension for invalidity" for the purposes of Article 77 (para. 22);

accordingly while the claimant's husband continued to be entitled to invalidity benefit and to receive the amount of that benefit, either out of the national insurance fund or under the overlapping war pension arrangements, she continued to be entitled by the direct effect of Article 77 to have her child benefit brought up to the United Kingdom rate (para. 23).

DECISION OF THE SOCIAL SECURITY COMMISSIONER

My decision is that the decision of the social security appeal tribunal given on 28 April 1994 confirming the refusal of child benefit from 23 November 1992 onwards was erroneous in point of law. I set it aside and substitute my own decision that the claimant continued to be entitled to child benefit from 23 November 1992 notwithstanding that she and her children were not in Great Britain, while they continued to live in Ireland and the other conditions mentioned in para. 23 below continued to be met.

I held an oral hearing of this appeal at which the claimant was represented by Timothy Hayes of Counsel appearing under the Cardiff bar free representation scheme, and the adjudication officer appeared by Stephen Cooper, solicitor to the Department of Social Security.

The claimant is a lady now aged 43 who lives in County Mayo in the Irish Republic. She has four children and has at all material times been entitled to child benefit for at least some of them. Down to the end of September 1992 she lived in the United Kingdom and child benefit was paid to her under the UK legislation initially in Great Britain and subsequently in Northern Ireland, where the awards of benefit originally made to her on the mainland were continued under the reciprocal legislation: Child Benefit (Northern Ireland Reciprocal Arrangements) Regulations, SI 1977 No. 7. At the end of September or beginning of October 1992 the claimant and her family moved to live in the Republic of Ireland and from then on she was entitled to child benefit under the corresponding legislation in Eire, which in this respect provides a lower rate of benefit than the United Kingdom.

Under the relevant national legislation of the United Kingdom it is a condition of entitlement under s. 146(2)-(3), Social Security Contributions and Benefits Act 1992, that the claimant and the relevant children must be in Great Britain, or where the reciprocal arrangements apply in Northern Ireland, in any week for which child benefit is to be payable. By regulations under s. 146(1) this is relaxed so that for a person moving out of the United Kingdom temporarily the benefit continues to be payable for the first eight weeks of absence: reg. 4, Child Benefit (Residence and Persons Abroad) Regulations, SI 1976 No. 963. The claimant in this case was given the benefit of this relaxation and was paid benefit at the higher United Kingdom rate for the first eight weeks after her move. This ran out on 22 November 1992 and it is rightly conceded on her behalf that after that date she had no further entitlement under the national legislation on its own.

What is at issue in the appeal is whether she is nevertheless entitled to continue having her child benefit topped up to the United Kingdom rate after expiry of the eight weeks from the move to the Republic, by virtue of the direct effect of Council Regulation (EEC) No. 1408/71 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community. There is no dispute that the regulation is capable of having direct effect to override the national law in this area, and the only question is whether the claimant's case falls within any of its provisions.

She and her husband are both British nationals, who formerly resided in Great Britain and then for some years in Northern Ireland before moving south of the border. He was previously employed by the Royal Navy, in virtue of which he now draws a war pension that includes an invalidity element for an arthritic condition which developed in the course of his service.

This appeal arises out of a claim she made on 10 November 1992 to have her child benefit continued at the United Kingdom level after the initial eight weeks under the direct effect of the Community instrument. The claim was rejected on 11 February 1993 on the grounds that this could arise only if she or her husband remained compulsorily liable for national insurance contributions in the United Kingdom (which they did not) or was in receipt of a United Kingdom national insurance benefit (which her husband's war pension was not considered to be), see page T13.

The claimant appealed on the ground that the invalidity element in her husband's war pension, called an "unemployability supplement", replaced the United Kingdom invalidity benefit he had previously been awarded and would otherwise still have been getting. Since invalidity benefit is a national insurance benefit and her husband was still getting national insurance contribution credits because of it, she contended that his connection with the United Kingdom social security scheme was still sufficient for him to count as the recipient of a national insurance benefit for the purpose of getting the protection of EEC Regulation 1408/71.

The adjudication officer's submission to the tribunal on the appeal (p. T17) also included a formal reference for review of the question whether she had any continuing entitlement to child benefit after 22 November 1992, as it had in the mean time emerged that the original indefinite award of child benefit made to her before she left Great Britain had never been formally terminated by the authorities in Northern Ireland when she left, and this needed to be tidied up.

Details of the war pension being received by the claimant's husband are set out in a note from the War Pensions Agency at page 51. It is a non-contributory benefit (p. T40), but includes a supplement on account of his disability which equals or exceeds the rate of invalidity benefit that would otherwise have continued to be payable to him for the same disability under the insurance based part of the United Kingdom social security scheme. He continued to be an insured person under that scheme, with contributions paid or credited to his account. There is no dispute that he remained entitled to invalidity benefit under it, and the only reason he was not receiving payments of that benefit out of the national insurance fund in the normal way was the existence of a regulation in the general scheme which caused the payments of his war pension to "frank" his national insurance entitlement.

That regulation, reg. 6, Social Security (Overlapping Benefits) Regulations, SI 1979 No. 597, provides that a war pension unemployability supplement and invalidity benefit are not to be cumulative. Instead, although the underlying entitlement to each of them continues, the invalidity benefit is adjusted by deducting from it the amount of the unemployability supplement so as to limit the total payable to whichever is the higher. The unemployability supplement payable to the claimant's husband always equalled or exceeded his invalidity benefit, so that the result of the regulation was that while he was receiving the supplement nothing was being paid to him out of the national insurance fund in respect of his invalidity benefit entitlement.

It is common ground that had the claimant's husband actually been receiving payments of his invalidity benefit out of the national insurance fund at the time the family moved south of the border and thus from one member State of the European Union to another, this would have been sufficient to found a continued entitlement to child benefit at the UK rate under EEC Regulation 1408/71. The principal issue for the tribunal was therefore whether the adjudication officer was right to say that the receipt of the war pension supplement was not good enough to meet the required conditions.

I accept the submissions of both sides that the decision of the tribunal on 28 April 1994 failed to address all the relevant issues of European Union law or state the tribunal's reasons with sufficient particularity, and was thus erroneous in point of law. In addition as Mr. Cooper rightly pointed out it made no mention of the question referred to them by the adjudication officer about the review of the earlier award of child benefit in Great Britain which needed to be dealt with. For those reasons, I set it aside.

The two issues that were argued on the appeal before me were first whether the claimant's husband could claim the benefit of Art. 73 of EEC Regulation 1408/71 about employed or self-employed persons with families residing in a member state other than the "competent State"; and second whether he could be said to be a person "who draws a pension" under the social security legislation of the United Kingdom. If the second was true it would bring him within the terms of Art. 77, under which family allowance benefits are required to be provided by member States for people drawing such pensions under their own legislation. wherever in the Community the pensioner or children may reside at the time. This is the provision that would apply if invalidity benefit was paid.

It is common ground that UK child benefit is a family allowance benefit for the purposes of Arts. 73 and 77, and that the claimant's husband, and so far as material she herself and the children as members of his family, fall within the scope ratione personae of Regulation 1408/71 so as to be able to claim the benefit of its direct effect by virtue of Art. 2, his former employment in the United Kingdom and his continuing status as an insured person under the UK social security scheme.

Mr. Hayes' argument based on Art. 73 is in my judgment clearly misconceived. For the reasons given by the Commissioner in case R(F) 1/94, this Article applies only where an employed or self-employed worker in one member state (the competent State) has his family residing in another member state at the relevant time. Here the claimant, her husband and their family all reside in Ireland which has been the competent State since they became resident there: cf. para. 6 of the decision in that case. It follows that Art. 73 can have no application.

The argument on Art. 77 depends on the wording of the article itself. This provides so far as material:

"Article 77

Dependent children of pensioners

The term 'benefits', for the purposes of this Article, shall mean family allowances for persons receiving pensions for old age, invalidity or an accident at work or occupational disease, and increases or supplements to such pensions in respect of the children of such pensioners, ...

Benefits shall be granted in accordance with the following rules, irrespective of the Member State in whose territory the pensioner or the children are residing:

(a) to a pensioner who draws a pension under the legislation of one Member State only, in accordance with the legislation of the Member State responsible for the pension; ..."

By the general definition provision in Article 1(t):

"'benefits' and 'pensions' mean all benefits and pensions, including all elements thereof payable out of public funds, revalorisation increases and supplementary allowances, subject to the provisions of Title III, as also lump sum benefits which may be paid in lieu of pensions, and payments made by way of reimbursement of contributions."

Title III comprises "Special Provisions Relating to the Various Categories of Benefits", divided into chapters dealing with each of the branches of social security benefits within the scope of the Regulation and listed in Art. 4.

In R(F) 1/94 the Commissioner held that a fire brigade pension did not fall within these definitions. I respectfully agree, as although a fire or police service pension may be said to derive from public funds in the sense of ultimately having to be provided for out of local or general taxation it is something dependent on a particular occupational scheme and not part of the general scheme of social insurance benefits which fall within the scope of the regulation: cf. Art. 4.

The same principle must in my judgment lead to the conclusion that the war service pension payable to the claimant's husband is not per se a "pension" within the scope of Article 1(t), since it is payable under a scheme restricted to those in or formerly in a particular form of service. That form of pension or benefit appears to me outside the scope ratione materiae of the Regulation as defined by Art. 4. I therefore reject the contention that just because the war pension the claimant's husband is receiving includes benefits for invalidity and is paid out of public funds of the United Kingdom, it counts for those reasons without more as a "pension for invalidity" so as to make family benefits payable under Art. 77.

Mr. Cooper argued that there was no more to the case than that. While conceding that if invalidity benefit was actually being paid to the claimant's husband out of the national insurance fund she would be entitled to UK child benefit under Art. 77, he pointed out that the expression used in Art. 77.2 is "who draws a pension". Therefore Art. 77 could not apply because he was drawing only the war pension which did not count for this purpose, instead of the invalidity benefit which would have counted, but was not being drawn because under the overlapping benefits regulations he was getting the war pension supplement instead.

In my judgment this result, which might be thought worthy of catch 22, is not a necessary result of the wording used in the English text of the EEC Regulation, and I do not think it necessary to go to other language texts as an aid to its interpretation even though I was told there might be room for argument on the expressions with which "draws a pension" was intended to correspond. I think it highly unlikely that the EEC legislator had in mind the overlapping benefits regulations, or that the draftsman of those had in mind the possible effect of making the payment of one benefit "frank" entitlement to the other rather than vice versa. It is even more unlikely that there could have been any intention on the part of either set of legislators to create an anomaly whereby a person entitled to a pension for invalidity under the general social security legislation of a member state, and in fact receiving payment of its full amount out of public funds by a pound for pound equivalent, should be penalised because the provisions of subordinate national legislation happened to provide for the "flanking" to be one way round rather than the other. The Community instrument should in my view be construed so as to avoid such an irrational and unfair result.

In my judgment therefore, a person "draws a pension for invalidity" for the purposes of Art. 77 so long as he has a present entitlement to it and in fact receives payment equal to or exceeding the amount of that entitlement, either by means of the general arrangements for payment of such benefit under the national social security scheme, or by receiving payment out of public funds under some other scheme which the terms of the social security scheme integrate with itself pro tanto by making the other payment in effect satisfy the social security entitlement. Whether this is viewed in strict analysis as the person "drawing" the social security pension by another means or as the scheme that actually pays him being brought within the scope ratione materiae of the EEC Regulation to the limited extent to which it thus becomes integrated with the national social security scheme, does not seem to me greatly to matter.

In consequence, in my judgment the claimant continued to be entitled by virtue of the direct effect of Art. 77 of Council Regulation (EEC) 1408/71 to receive payments topping up her child benefit to United Kingdom levels from 23 November 1992 while all the other conditions for child benefit under Part IX Social Security Contributions and Benefits Act 1992 apart from presence in Great Britain continued to be satisfied, and while she and her children continued to live in Ireland and her husband continued to be entitled to invalidity benefit, and to receive the amount of that entitlement or its equivalent either out of the national insurance fund or under the war pension arrangements which have the effect of satisfying that entitlement under the overlapping benefits regulations.

The appeal is therefore allowed and the claimant's entitlement is to be reviewed and revised accordingly by the adjudication officer, including adjusting or replacing any previous or continuing award of child benefit so far as necessary.

Date: 17 June 1997 (signed) Mr. P. L. Howell QC

Commissioner