UK Social Security and Child Support Commissioners' Decisions

[2003] UKSSCSC CIB_4621_2002 (31 March 2003)

 


DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. The claimant's appeal to the Commissioner is allowed. The decision of the Llanelli appeal tribunal dated 19 August 2002 is erroneous in point of law, for the reason given below, and I set it aside. The case is referred to a differently constituted appeal tribunal for determination in accordance with the directions given in paragraphs 28 to 31 below (Social Security Act 1998, section 14(8)(b)).
2. The claimant had been in receipt of invalidity benefit, followed by incapacity benefit for many years before the events the subject of this case. He became an elected member of Gwynedd County Council, taking up his duties on 7 June 2001. He had been unable to find any other therapeutic employment. The information before the appeal tribunal was that the claimant received an annual basic allowance at the gross rate of £366.67 per month (£4,400 per year) plus an expenses allowance at the rate of £83.33 per month (£1,000 per year). I shall return below to the proper classification of the amounts received. He did not make any claim to the Council for mileage expenses when attending meetings or seeing constituents. The appeal tribunal was told that on 1 April 2002 the amount of the basic allowance increased to £9,600 per year.
3. The claimant did not inform the incapacity benefit authorities of his taking up office as a councillor or of the payments he received. In March 2002 a general questionnaire was sent out to incapacity benefit recipients asking about work, including therapeutic work. The claimant promptly returned the questionnaire, disclosing that he was a councillor and had earnings of £327 per month (the right net figure after deduction of income tax and social security contributions).
4. Following further investigations, a decision was made on 26 April 2002 that the claimant was entitled to a reduced amount of incapacity benefit from 7 June 2001 and not entitled at all from 1 April 2002. An overpayment was identified and found to be recoverable in relation to the period from 7 June 2001 to 3 March 2002. The claimant appealed. Taking account of information given by the claimant about telephone expenses, the decision of 26 April 2002 was revised on 6 June 2002. That meant that the claimant was found to be entitled to more incapacity benefit down to 31 March 2002 and that the recoverable overpayment was reduced to £246.54. However, the cost of purchasing a car and a computer (on hire purchase or under some finance arrangement) was not allowed as an expense, nor were any other expenses mentioned by the claimant, in particular petrol and mileage expenses. It was said that the claimant could have made a claim for mileage expenses from the Council. The appeal continued against the decision as revised.
5. The Secretary of State's written submission to the appeal tribunal referred to section 30E of the Social Security Contributions and Benefits Act 1992 as laying down the rule that "incapacity benefit is paid at a reduced amount (or not payable) when the councillor's net allowances exceed the prescribed amount (£60.50 and £66.00 from 1/10/01) an amount equal to the excess shall be deducted from the amount of any incapacity benefit".
6. The appeal tribunal, after a "paper hearing", dismissed the claimant's appeal. It stated that his petrol and mileage expenses were not allowable for incapacity benefit purposes as he should properly have claimed them from the Council, since they are properly paid over and above the basic allowance. The claimant now appeals against that decision with my leave.
7. The appeal is supported by the representative of the Secretary of State, who has made written submissions dated 11 December 2002 and 13 February 2003. The claimant has commented on those submissions. He requested (although not very strongly) an oral hearing of his appeal. I refuse that request as I am satisfied that I can properly determine the appeal to the Commissioner without a hearing.
8. Section 30E of the Social Security Contributions and Benefits Act 1992 provides:

"(1) Where the net amount of councillor's allowance to which a person is entitled in respect of any week exceeds such amount as may be prescribed an amount equal to the excess shall be deducted from the amount of any incapacity benefit to which he is entitled in respect of that week, and only the balance remaining (if any) shall be payable.

(2) In this section `councillor's allowance' means--

(a) in England and Wales, an allowance under or by virtue of--

(i) section 173 or 177 of the Local Government Act 1972, or

(ii) a scheme made by virtue of section 18 of the Local Government and Housing Act 1989,

other than such an allowance as is mentioned in section 173(4) of the Local Government Act 1972, or

(b) in Scotland, an allowance under or by virtue of section 49 of the Local Government (Scotland) Act 1973 or a scheme made by virtue of section 18 of the Local Government and Housing Act 1989;

and where any such allowance is paid otherwise than weekly, an amount calculated or estimated in accordance with regulations shall be regarded as the weekly amount of the allowance.

(3) In subsection (1) above `net amount', in relation to any councillor's allowance to which a person is entitled, means the aggregate amount of the councillor's allowance or allowances to which he is entitled for the week in question, reduced by the amount of any expenses incurred by him in that week in connection with his membership of the council or councils in question."

The definitions in subsections (2) and (3) are important and it is the failure to consider their implications which is at the root of where the appeal tribunal went wrong in law. For completeness, I should add that under section 171F of the Social Security Contributions and Benefits Act 1992 any work as a councillor is to be disregarded in determining whether a person is capable or incapable of work and such work is excluded from regulation 16 of the Social Security (Incapacity for Work) (General) Regulations 1995 (persons who work treated as capable of work).

9. In brief, the appeal tribunal erred in law by not investigating whether the claimant's entitlement to the allowances in question was under the particular legislative provisions specified in section 30E(2) and in failing to explain how the petrol and mileage expenses and other expenses incurred by the claimant were properly to be treated under section 30E.
10. It is simplest for me now to explain what seems to me to be the correct position in the light of the evidence produced by the Secretary of State and by reference to the relevant legislation. As will emerge, there is a limit to how far I can reach detailed conclusions without getting further evidence, but I shall leave that to a rehearing before a new appeal tribunal.

The legislation on the payment of councillors' allowances

11. Section 173 of the Local Government Act 1972 provides for the payment of basic and attendance allowances and (under subsection (4)) financial loss allowances, but only to members of parish or community councils. It is therefore not relevant in the present case. Section 174(1) entitles members of certain bodies (including county councils: section 177(1) and section 21(1) of the Local Government and Housing Act 1989) to receive payments by way of travelling allowance or subsistence allowance where such expenditure has been necessarily incurred to enable the person to perform duties as a member. It must immediately be noted that payments under section 174 are not within the definition of "councillor's allowance" in section 30E(2) of the Social Security Contributions and Benefits Act 1992.
12. Section 18 of the Local Government and Housing Act 1989 empowers the making of regulations requiring or allowing certain authorities (including county councils) to make schemes for the payment of basic allowances, attendance allowances and special responsibility allowances to members. The Local Government (Members' Allowances) Regulations 1991 (SI 1991/351) were made under a number of provisions, including section 173 of the Local Government Act 1972 and section 18 of the Local Government and Housing Act 1989. Thus, for county councils, schemes made under the 1991 Regulations are to be regarded as made by virtue of section 18, which is specified in the definition of "councillor's allowance".
13. The 1991 Regulations have been amended several times, but the basic structure has remained intact, at least for England. The overall limit to the amount that could be paid as basic allowances to all members of a council was removed by 1995 Regulations. The 1991 Regulations were revoked in relation to Wales by the Local Authorities (Allowances for Members of County and County Borough Councils and National Park Authorities) (Wales) Regulations 2002 (SI 2002/1895) (the 2002 Regulations), with effect from 9 August 2002. Those Regulations were also made in part under section 18 of the Local Government and Housing Act 1989. They require the making of schemes for the same allowances as mentioned above. In a separate Part of the Regulations regulation 15 gives members an entitlement to travel and subsistence allowances. Regulation 20 provides that section 174 of the Local Government Act 1972 is not to apply to county councils in Wales. I shall come back to some of resulting difficulties below.
14. Regulation 8 of the 1991 Regulations requires a scheme to provide for the payment of a basic allowance of a uniform amount to all councillors. A member may elect not to take some or all of the allowance (regulation 14). There is nothing to specify what the basic allowance is to cover or (now) to control the amount, subject to the requirements for publication of the amounts. The claimant did not receive a special responsibility allowance and the County Council did not pay attendance allowances.

The application of section 30E

15. The position for the claimant, for the period before the 1991 Regulations ceased to have any effect for Wales, is that the only allowance to which he was entitled which could fall within the definition of "councillor's allowance" in section 30E(2) was something which was a basic allowance within regulation 8 of the 1991 Regulations. The appeal tribunal erred in law in not investigating the nature of the expenses allowance of £1,000 per year, as there appeared to be no legislative authority for paying a separate allowance under that label. The letter of 17 June 2002 on behalf of the Secretary and Solicitor to the Council left matters rather obscure:

"The £83.33 on the payslip is the £1,000 Expense Allowance for each member. This, along with the Basic Allowance of £4,400 for each member, were paid in recognition of the general demands on councillors and recognised duties on behalf of the Council, including attending committees, meetings of outside bodies, the need to visit officers on behalf of constituents, meetings of individual political groups and additional costs such as phone, etc, arising as a result of use of their homes. No specific amounts are specified for each expense."

16. I now have a copy of the Council's scheme of allowances for the year ending 31 March 2003. This was referred to by the representative of the Secretary of State (at page 77), but not produced with her submission of 13 February 2003. I asked for a copy to be sent, and have not needed to get any comments on it from the claimant. Although the scheme apparently relates to the year from 1 April 2002 to 31 March 2003 and should have been made under the 2002 Regulations and not the 1991 Regulations, I strongly suspect that its form has not changed from earlier years. The figures will have changed. Under the heading "Basic Allowances" paragraph 3 provides:

"Subject to paragraph 7 [apportionment for part-years], a basic allowance of £8,900 will be paid to each councillor together with an expenses allowance of £1,000 (£700 for general expenses and £300 for information technology purposes)."

17. It seems to me that, subject to either party submitting evidence that the 2001/2002 scheme was different, it can be assumed that the entitlement to both the £4,400 basic allowance and the £1,000 expenses allowance was provided by the scheme under the statutory power related to a basic allowance (regulation 8 of the 1991 Regulations). The expenses allowance met the condition of being a uniform allowance to all councillors and there was no other statutory power under which the Council could make the payments. It does not matter that for some purposes the Council showed the elements of the overall basic allowance separately. Thus, on that provisional basis it seems to me that the claimant was entitled in 2001/2002 to a basic allowance within the meaning of regulation 8 of the 1991 Regulations at the annual rate of £5,400, £84.61 per week.
18. I should briefly mention here the effect of the Tribunal of Commissioners' decision R(S) 6/86. This decided that the provision then in force meant that earnings in the context of a councillor meant amounts to which the councillor was entitled, not merely payments which were received. Section 30E of the Social Security Contributions and Benefits Act 1992 now makes that explicit by talking of the net amount of councillor's allowance to which a person "is entitled". R(S) 6/86 held that if a councillor did not claim, even if he had never intended to claim, an allowance to which he was entitled, the amount was still part of his earnings because of that entitlement. That result would have to follow under section 30E. I do not have to say what the position would be if a councillor made a formal election under regulation 14 of the 1991 Regulations to forgo any part of his entitlement. In the present case, the claimant simply did not put in any claim for petrol and mileage expenses. That would not stop him being treated as entitled to any expenses to which he was entitled. But, as explained in paragraphs 11 and 13 above, until the introduction of the 2002 Regulations, the entitlement to travelling expenses came under section 174 of the Local Government Act 1972 and not under the 1991 Regulations and the power in section 18 of the Local Government and Housing Act 1989. Thus it fell outside the definition of "councillor's allowance" in section 30E(2). Even if the claimant was treated as entitled to travelling expenses in the form of a petrol or mileage allowance, the amount could not form part of the total of his councillor's allowances.
19. The scheme of section 30E is that, after identifying the allowances to which the claimant is entitled in any week, the expenses incurred by him in that week in connection with his membership of the council are to be deducted (subsection (3)). The result is the net amount which is to be taken into account under subsection (1) and set against the prescribed amount. There are considerable difficulties in working out what amount of expenses is to be attributed to any week, as discussed by Mr Commissioner Jacobs in CIB/2858/2001. I have concluded that I do not need to grapple with all those difficulties. Among the points which do not seem to be in dispute are that the expenses must have been reasonably incurred, to meet the condition of being in connection with membership of the council, but do not have to have been wholly, necessarily or exclusively incurred in that connection (paragraph 18 of CIB/2858/2001). Nor are expenses limited to recurring revenue items, such as fares, telephone calls or postage. They can include, if reasonably incurred, expenditure on items of equipment or clothing, and quite possibly other items of a capital nature, which are then used over a period. There are differences of view expressed in Commissioners' decisions such as CS/7394/1995 (Mr Commissioner Rice), R(IB) 3/01 (Mr Commissioner Williams) and CIB/2858/2001 over how to attribute such expenditure to particular weeks. But there is no disagreement that expenditure on, say clothes, to be used on official occasions, can count as expenses. Income tax and social security contributions do not count (R(IB) 3/01).
20. It also seems to me that section 30E requires its particular arithmetic to be carried out. There is no restriction on the type of expenses to be counted. It does not matter, subject to the proviso below, that the expenses incurred are for a purpose which is covered by the allowances to be taken into account. Thus it does not matter in the present case that the County Council regarded the purpose of some elements of the basic allowance as to cover expenses. It seems to me that the scheme of section 30E is to set a councillor's actual and reasonable expenses off against his income from the carefully defined sources, so that only the excess is taken into account. If that is unduly generous to councillors, the remedy is to amend the legislation. The proviso mentioned above is that if a councillor has received direct reimbursement of specific expenses (particularly by an allowance outside the definition in section 30E(2)) it might be said that the expenses were then no longer incurred by the councillor. On the other hand, such a rule might be said to contrary to the basic scheme of section 30E. However, the issue is not before me and I do not have to reach a conclusion.
21. On applying the principles above to the present case I conclude that too narrow a view has been taken of the claimant's expenses. He had not claimed reimbursement of his petrol and mileage expenses. There has been no dispute that those expenses were reasonably incurred in connection with his duties as a councillor, in travelling to attend meetings, see constituents etc. Contrary to the Secretary of State's submission of 13 February 2003, the mere fact that the claimant might have been entitled to be reimbursed by the Council for those expenses (under section 174 of the Local Government Act 1972) did not mean that the expenses were not incurred by him. He did initially incur the expenses and nothing had happened to alter that situation. Therefore, the appeal tribunal erred in law in failing to take account of the claimant's petrol and mileage expenses, at least down to 31 March 2002.
22. However, the problem goes further. In his letter of 16 May 2002 (page 17) and the document starting at page 19, the claimant mentioned expenses on stamps, biros and envelopes for doing his council work, which he estimated at £5 per week. He also mentioned the costs of buying a car, which he did shortly before 7 June 2001, in anticipation of taking up his duties. These included monthly hire purchase repayments, insurance and road tax. Finally, he mentioned having had to buy a computer, because documents and messages were sent to councillors by e-mail, and the monthly payment which he was making under a finance arrangement of some sort.
23. I see no reason, subject to any investigation as to the precise amount, not to take into account the claimant's expenses on stationery and postage. Nor do I see why the expenses of acquiring a computer and a car should not be taken into account, subject to a judgment about the reasonableness of the particular expenses. The claimant has put forward what on the face of it are sensible explanations for acquiring those items, but questions might still be asked about the exact cost and whether cheaper alternatives might have been available. Since the claimant was making regular monthly payments towards the financing of the cost of the car and the computer, I see no difficulty in taking those payments into account on a weekly basis. But there must also, as well as a general judgment about reasonableness, be a judgment about how much of the expense is to be attributed to the claimant's duties as a councillor and how much to private use of the car and the computer. And double counting must be avoided. If, for instance, mileage expenses have already been taken into account on a scale which is designed to cover not only petrol but also the overall costs of maintaining and running a car (including depreciation), the same items cannot count again in taking into account the costs of finance, insurance or road tax.
24. Whether or not the appeal tribunal of 19 August 2002 went wrong in law in failing to consider the categories of expenses just mentioned (as the claimant did not challenge their treatment by the decision-maker), those categories must be considered when the claimant's appeal is reheard. Both parties must have the opportunity to put forward further evidence and submissions on the matters mentioned in the previous paragraph. I therefore cannot substitute a decision. There will have to be a rehearing by a new appeal tribunal.

The effect of the revocation of the 1991 Regulations

25. There are some potentially very tricky problems stemming from the revocation from 9 August 2002 of the 1991 Regulations as they affected Wales (paragraph 9 above). In the present case, the decision under appeal was made on 26 April 2002, before the revocation took effect. But the 2002 Regulations have effect to require the making of schemes by Welsh councils for the year from 1 April 2002 to 31 March 2003 (as regulation 20(1) only saves allowances for duties performed before 1 April 2002 from the revocation of the 1991 Regulations). The decision under appeal included the decision that no incapacity benefit was payable to the claimant from and including 1 April 2002 because of the projected increase in the amount of the basic allowance. I do not know when Gwynedd County Council made its scheme for the year to 31 March 2003, purporting to exercise its powers under the 1991 Regulations. I do not propose to pursue here any question of whether the reference to the revoked 1991 Regulations made the 2002/2003 scheme invalid, as I consider that, by virtue of sections 17(2)(b) and 23 of the Interpretation Act 1978, the scheme has effect under the 2002 Regulations. There was a revocation and re-enactment of the duty and power to make a scheme, so that anything done under the 1991 Regulations power which could have been done under the 2002 Regulations power is to have effect as if done under the latter.
26. I am satisfied that the making of a scheme which, by force of legislation, is to have effect retrospectively within the period before the date of the decision under appeal makes its terms part of the circumstances obtaining at the date of the decision (Social Security Act 1998, section 12(8)(b)). The main effect of that is that the annual amounts specified in paragraph 3 of the 2002/2003 scheme are to be taken into account as from 1 April 2002. From the same date, the claimant's entitlement to travel and subsistence allowances was given directly by regulation 15 of the 2002 Regulations, not by section 174 of the Local Government Act 1972. But that makes no difference to the conclusions in paragraphs 18, 20 and 21 above. Regulation 15 of the 2002 Regulations is not authorised by section 18 of the Local Government and Housing Act 1989 on the making of schemes for specified allowances. It can only be authorised by section 100(1) of the Local Government Act 2000. Thus, the allowance under regulation 15 is not within the definition of "councillor's allowance" in section 30E(2) of the Social Security Contributions and Benefits Act 1992 from 1 April 2002, as well as down to 31 March 2002.

The Commissioner's decision and directions

27. For the reasons given above, I set the appeal tribunal's decision aside as erroneous in point of law. The claimant's appeal against the decision of 26 April 2002, as revised, is referred to a differently constituted appeal tribunal for determination in accordance with the following directions.
28. There must be a complete rehearing of the appeal on the submissions made and evidence produced to the new appeal tribunal, which will not be bound by any findings made or conclusions expressed by the appeal tribunal of 19 August 2002. An oral hearing will be arranged and I am sure that the new appeal tribunal would be greatly assisted if the claimant were able to attend to give evidence in person and to answer questions.
29. There seems to be no dispute that there was a relevant change of circumstances when the claimant took up office as a councillor and became entitled to councillor's allowances, creating a ground to supersede the latest decision awarding him incapacity benefit. Nor does there seem to be any dispute (subject to any new point put forward by the claimant) that, if there was an overpayment from 7 June 2001 to 3 March 2002, it was the consequence of a failure by the claimant to disclose those material facts under section 71 of the Social Security Administration Act 1992. Although the new appeal tribunal must make a decision dealing properly with the issue of supersession and (if it arise) the recoverability of an overpayment, the real dispute is over what the superseding decision should be. That depends, in relation to each week within the period from 7 June 2001 to 26 April 2002, on whether the amount of the claimant's net entitlement to councillor's allowances exceeded the prescribed amount and, if so, by how much.
30. On that issue the new appeal tribunal must apply the legal approach to section 30E of the Social Security Contributions and Benefits Act 1992 set out above. On the conclusions of law I have reached above, there would seem to be little difficulty in identifying the amount of the claimant's entitlement to councillor's allowance for the purposes of section 30E, unless he wishes to put forward any argument that what the Council has called the expenses allowance of £1,000 does not fall within the meaning of a basic allowance under the 1991 or the 2002 Regulations. The area of dispute is over the amount of expenses that are to deducted under section 30E(3) to produce the net amount to be set against the prescribed amount. There, the legal approach in paragraphs 19 to 24 above is to be followed.
31. The claimant may well wish to put forward further evidence about the period down to 26 April 2002, with, for instance, details of his stationery expenses, the mileages done on Council work and for private use, whether he wishes to claim for the costs of buying and running his car separately or to incorporate an element for those costs in a mileage allowance, the kind of and extent of Council work for which a computer was required or helpful and the extent of private use, and documentary confirmation of hire purchase or financing payments. I direct that as soon as the file in this case is returned to the Appeals Service it is to be referred to a district chairman to consider whether to give specific directions to the claimant and/or the Secretary of State about the production of any further evidence or written submissions in advance of the oral hearing.

(Signed) J Mesher

Commissioner

Date: 31 March 2003