UK Social Security and Child Support Commissioners' Decisions

[2006] UKSSCSC CIS_515_2006 (18 May 2006)

CIS 515 2006

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. I allow the appeals. For the reasons below, the decision of the tribunal is wrong in law. I set it aside. The appeals are referred back to the tribunal from which they came with the directions below.
2. The appeals are by the claimant and appellant (Mrs S) with the permission of a chairman. It is against the decision of the Blackpool social security appeal tribunal on 5 12 2005 under reference U 06 064 2005 00930.
3. DIRECTIONS FOR REHEARING

A These appeals are referred to back to the tribunal chairman who heard the appeals on 5 12 2005 for rehearing in accordance with this decision.

B The rehearing is to be at an oral hearing.

C The Secretary of State is directed to be represented at the hearing, and the

appellant and her representative are to attend.

D The Secretary of State is directed to make a full new submission in connection with all the decisions heard together in these appeals. That submission is to cover the following:

(a) it is to be accompanied in a separate paginated and indexed bundle by all the relevant decisions covered by this appeal, together with copies of the notifications of those decisions to the appellant, copies of the notice of appeal by the appellant against those decisions. This is to include all relevant decisions made by the Secretary of State after the decisions before the tribunal at its first hearing. The bundle shall include a submission made by reference to those documents on the following points:

(i) How, if at all, does section 9(8) of the Social Security Act 1998 apply to the appeals from decisions that have been revised?

(ii) On which decisions ending the entitlement of the appellant to income support does the Secretary of State rely to base the full temporal extent of the overpayment decision of 5 06 2005?

(iii) On what decisions does the Secretary of State rely to refuse the claim of 13 04 2005?

(b) it is to be accompanied by a full schedule, drawn up in accordance with this decision to replace the schedule attached to the decision of 30 03 2005, identifying the capital which it is contended that the appellant had for each relevant week for which a recoverable overpayment is identified. If that schedule is in similar form to the schedule attached to the decision of 30 03 2005, then it is to be in such a form that each credit and withdrawal can readily cross-referenced to the accounts into which and from which the payments were made, or to other identified assets of the appellant. The schedule is to identify the capital that the Secretary of State contends was held by the appellant on 12 04 1995 by reference to the specific assets taken into account in identifying that sum. It is also to identify the capital of which the Secretary of State has evidence that the appellant actually held on 30 03 2005.

(c) it is to deal with the appellant's contention that there should be an offset for child increase not paid.

E This submission is to be sent to the tribunal within two months of the issue of this decision, or earlier if possible. The Secretary of State is at liberty to make any further submission in relation to these appeals at the same time and to produce any further documentary evidence at that time. That submission and any further evidence is to be copied on receipt by the tribunal to the appellant and representative.

F The appellant and representative may make any further submission they wish to make, and may produce any further documentary evidence they wish to produce, within one month of receipt of the copy of the submission of the secretary of state's representative and any further evidence from the tribunal. The appellant and representative are put on notice that if the appellant has any further capital assets relevant to this decision then these are to be disclosed fully in this submission. If there are no further assets then the appellant is to state that fact. She is warned that she may be asked to confirm that statement on oath or affirmation.

G Subject to any further direction by the chairman, this is not to be listed for rehearing until both parties have made, or had time to make, the submissions directed above.

H In rehearing these appeals the chairman is at liberty to take into account any evidence read or heard, or any finding of fact made, in the previous hearing save in so far as it is inconsistent with this decision and these directions.

These directions are subject to any further directions by a district chairman.

REASONS FOR DECISION

The reasons behind the decisions made

4. Mrs S was awarded and paid support from 15 08 1989. She has multiple sclerosis and is accepted to be incapable of work. Since 1997 her claim has also been on behalf of her child her partner. There is very limited detail in the papers about the decisions taken to award income support to Mrs S save in the most general terms, but it is not disputed that she was paid income support during the relevant period.
5. In 2004 Mrs S's records were subject to the standard computer checks of government records by what is known as the Generalised Matching Service. I assume her National Insurance number was checked across the available sources, as the information is not in the papers. When the Department carried out its test of Mrs S's claim, it became aware of a building society account of hers about which she had not informed the Department. As a result, it was suspected that Mrs S had capital she had not declared. Her capital was, after investigation and a series of interviews and disclosures, identified and calculated. This led to decisions calculating her capital, ending her income support award, and claiming repayment of overpayments. Because the information came in a series of disclosures, there was a series of decisions.

The decisions made

6. A decision was made on 24 09 2004 that there was an overpayment of part of the income support paid between 04 07 2001 and 29 04 2004. Further investigations and disclosures followed, and the decision was overtaken by later decisions. There is no copy of a notice of appeal against that decision in the papers. If those later decisions are subsequently set aside, then this decision may need further consideration. But I do not discuss it in this decision.
7. The first important decision for the purposes of this appeal was taken on 30 03 2005

in the following terms:

"Mrs S is not entitled to income support from and including 25 04 1996. This is because she is treated as having actual capital over £8,000 from this date. Her actual capital as at 25 04 1996 was £8,203.77.

Refer to Excel spreadsheet for details of all accounts held, accounts allowed and not allowed as expenditure, and receipts into the accounts.

Mrs S has not supplied any evidence of her expenditure, nor of her account activity, therefore she is treated as having actual capital of £56,435.05 from 29 11 2004."

Attached to this global decision are 19 pages of an Excel spreadsheet. It is of the intrinsic nature of income support that every line of this table is in reality itself a series of challengeable decisions. Then there are two pages of details of assets. This decision was described as being a reconsideration of the decision made on 24 09 2004, but in reality most of it was an entirely new series of decisions. The schedule gives details of the capital position of the appellant from 12 04 1995, but the decision applies only from 25 04 1996. I cannot see any decision dealing with entitlement before 25 04 1996 although this schedule calls entitlement into question. There is no copy of the notification of this decision to Mrs S in the papers. Nor can I see any notice of appeal against that decision in the papers, although the summary of facts states that Mrs S appealed on 26 04 2005 giving as grounds that her savings reflected saved benefit.

8. In the summary of facts, it is stated that on 13 04 2005 Mrs S reclaimed income support. She stated that her savings were only £125. But the page reference in the summary is to an entirely different document, and I can see no copy of a decision or a notification of a decision in the papers refusing this claim, nor any details of the claim nor any appeal notice about the decision.
9. On 25 04 2005 Mrs S gave notice of appeal of a decision stated to be notified on 31 03 2005 that she was refused income support from 14 12 2004 because she believed that from that date her capital was below the £8,000. There is no decision in the papers with that content, nor any copy of a notification of such a decision. It may be that this is an erroneous reference to the decision of 30 03 2005, but if so there are several inconsistent details.
10. On 5 06 2005 it was decided, and Mrs S was notified, that she had been paid £49,734.51 too much income support between 11 04 1995 and 28 03 2005. The decision included an offset against arrears due between 11 04 1995 and 22 04 1995. There is no notice of appeal against this decision in the papers.
11. On 14 06 2005 the decision of 30 03 2005 was "reconsidered". It was stated that "the decision is not changed." In reality the decision of 14 06 2005 was both a revision of the decision of 30 03 2005 with effect from 25 04 1996 to that date, and a new decision for the period from 11 04 1995 to 24 04 1996. The new decision or element deals with the part of the schedule of 30 03 2005 note previously subject to decision. There is no copy of any notification of this decision, nor of any appeal from it.
12. On 14 07 2005 the decision maker on behalf of the Secretary of State "reconsidered" the decision of 14 06 2005, maintaining that the original decision of 30 03 2005 was currently under another appeal, reciting that Mrs S had given yet further details of her finances, and finding that her actual capital should be revised downwards but that it remained above the limit throughout the period, so leaving the decision of 14 06 2005 unchanged. That decision states that it is a revised decision, but in reality it is not – it is a refusal to revise. There is no copy of any notification of this decision, nor of any appeal from it.
13. The tribunal statement of reasons shows that the tribunal accepted that there had been a further review on 22 07 2005 as a result of which the amount of actual capital held by Mrs S was reduced again to something in the region of £25,000. The tribunal also accepted that there was no evidence of deliberate deprivation and that therefore the notional capital rules were not used. The statement also shows that yet another review was ongoing at the time of the appeal hearing, with yet another decision expected. The tribunal was again told that this was being treated as a question of actual capital only.

What was under appeal?

14. As this detail indicates, the papers now before me are in some disarray, and key documents are missing. It is worth emphasising that the law requires:

(a) notification of all decisions before they become appealable: Social Security and Child Support (Decisions and Appeals) Regulations 1999, regulation 28;

(b) in the case of each decision, a written notice of appeal identifying the decision and stating the grounds of appeal: Social Security and Child Support (Decisions and Appeals) Regulations 1999, regulation 33;

(c) that if a decision under appeal is revised before the appeal is determined, then the appeal lapses unless set prescribed circumstances apply: Social Security Act 1998, section 9(8);

(d) that an amount of overpaid benefit is not recoverable unless the determination in pursuance of which it has been paid has been reversed or varied on appeal or revised or superseded under the 1998 Act: Social Security Administration Act, section 71(5).

15. These safeguards are individually important to protect claimants, but it is also in the public interest that those who have been overpaid benefit do not escape recovery decisions, or stall them for long periods, because of a failure to observe them or properly to record that they have been observed. Best practice requires that the papers in a case such as this contain copies of all relevant decisions and of the notifications of those decisions, copies of notices of appeal of all relevant decisions, and in cases where there have been revisions some consideration of section 9(8) of the 1998 Act. Attention also needs to be given to identifying the revision or supersession decisions that must exist as a precondition of any overpayment decision.
16. It would be a useful check on these legal requirements, and would make the task of all those involved considerably simpler, if the person preparing the submission for the tribunal marshalled the papers relevant to these points into an indexed bundle of formal papers immediately following the formal submission rather than leaving them randomly distributed through (or omitted from) the papers as in this case. That would quickly reveal, as in this case, that several important documents are not in the papers at all. Those decisions that are included in this appeal bundle are rehearsed in document 1B wrongly, summarised on documents 1C and 1D partially. Some are then to be found at documents 248-271, 272-275, 361-364, and 436-438 of a file now containing about 700 pages, and others are missing. Separation of formal papers from evidence is standard practice in other tribunals in which I sit and would be of considerable help in this case. I make a specific direction on these points for the new hearing.
17. Perhaps as a result of this failure to separate out the formal papers, there has, as far as I can see, been no serious attempt to see how any of these basic rules apply to the decisions under appeal in this case. It is entirely unclear which decisions were properly notified and then actually appealed, on what grounds they were appealed, and how far if at all those appeals lapsed because of subsequent revisions. A superficial examination suggests that the decision of 14 06 2005 was in part a revision of the decisions previously under appeal and in part a new decision. In so far as it was a revision, it lapses the existing appeals unless the relevant regulations protected the appeal. Those regulations are in regulation 30 of the Social Security and Child Support (Decisions and Appeals) Regulations 1999. It requires findings of fact not yet made to decide if, in particular, regulation 30(2)(e) of those regulations (amount to be recovered) is relevant. In so far as the decision of 14 06 2005 is a new decision, it requires a new appeal. It is also not clear whether that decision was notified or, if notified, was appealed. On the same superficial basis, the decision of 14 07 2005 appears to be a decision not to revise, so not affecting ongoing appeals. This may explain the reference to the ongoing appeal from the decision of 30 03 2005.
18. There also appears to have been no section 71(5) check. The supersession decision of 30 03 2005 operates from 25 04 1996 to the date of decision. The decision of 06 05 2005 states that it operates from 11 04 1995. I can see nothing in the papers ending or reducing Mrs S's income support for any period between 11 04 1995 and 25 04 1996 and made before the decision of 5 06 2005. If so, then the condition in section 71(5) is not met for that period, and that part of the overpayment decision fails. It may be argued that a revision of a decision ending entitlement made after the overpayment decision that follows can retrospectively validate what would otherwise be an overpayment decision that extends temporally beyond the underlying entitlement decision. That would not appear to be an obvious conclusion from the primary legislation, but may need resolving in this case unless there are missing papers that make good the assumptions in the decision of 5 06 2005.
19. The papers therefore raise an important series of issues that need resolving by the Secretary of State in the submission to, or by the tribunal at, the new hearing to which for other reasons this appeal must go. The tribunal will, in particular, need to check what is under appeal before dealing with the substantive issues for which permission to appeal was granted. For the purposes of this decision – but for those purposes only – I assume that the tribunal did have jurisdiction to hear all the entitlement and overpayment decisions made for the whole period from 1995 to date.

The tribunal decision

20. Because of the missing papers, it is not entirely clear on what grounds Mrs S was appealing to the tribunal, nor indeed against which decisions. A pragmatic marshalling direction was made by a chairman on 7 09 2004 that appeals on the entitlement and overpayment decisions should be listed together. It may be that some of the missing documents went missing as a result of an unsuccessful attempt to collate the papers following that ruling. The direction is also helpful as it focussed the appeal on specific questions. I do not have Mrs S's own grounds of appeal for some of the appeals in the papers, so I am not clear how far these were her grounds or added grounds. But of course the chairman was acting fully within the investigatory powers of a chairman in raising the points. The points raised were:

(a) what were the amounts of actual capital held during the period and what is the amount of the overpayment based on actual capital?

(b) does the diminishing capital rule apply?

(c) how much notional capital does the Secretary of State submit that the appellant shall be treated as possessing? In respect of each item of notional capital what are the grounds for treating the appellant as possessing it? In particular if the appellant was not disclosing her assets anyway, how can deprivation of capital be with the intention to secure entitlement to benefit?

This last point would appear to relate to the reclaim for income support after 13 04 2005. I assume that the chairman intended this to be dealt with in the current appeal.

21. The decision of the tribunal on 5 12 2005 is that:

"The decision of the Secretary of State issued on 30 03 2005 and 5 06 2005 is revised.

The tribunal acknowledged the initial calculations reached in respect of capital held and amount of overpayment. It also accepted that Mrs S had failed to disclose her capital holdings and that a recoverable overpayment arose in consequence. However the capital deemed to be in the possession has been reduced by a series of reviews of which one is still outstanding. In addition the tribunal finds the ISA capital to have been removed from the accounts of Mrs S and her son […] and this is to be treated as notional capital. Also the diminishing capital principle is to be applied as indicated in the accompanying statement of reasons."

22. The accompanying statement of reasons concludes with the following paragraph:

"Production of the schedules in the appeal has clearly been a complex task – and now further schedules and calculations will need to be prepared. The appellant has leave to return to tribunal in respect of any matter arising from the calculations/interpretation of the tribunal's direction, or to seek clarification of those directions if that is necessary."

That is clearly part of the tribunal's decision.

23. It might be argued from the above that the tribunal heard the case before it should have done, as there was still a review outstanding, and that there should not be an appeal to a Commissioner until the tribunal had resolved any outstanding issues on the further calculations. However, this appeal comes before me with the permission of the chairman of the tribunal on specific grounds seeking guidance, and no one has taken any point about the appeal being too early at either stage. For myself, I would have thought it far better to determine the issues of principle before yet another long set of calculations are undertaken rather than await finalisation of the details of a tribunal decision that may fall for a reason that did not involve any consideration of those details. And there is another practical answer, namely that the matter be returned to a tribunal including the same chairman as the previous tribunal. That is why I have given that direction. I turn to the issues of principle, noting the chairman's comment in granting permission that "this was a complicated matter and it would be helpful if the Commissioner addressed the points raised". It is indeed a complicated matter.
24. The grounds of appeal to the Commissioner raise the following points:

(a) in respect of actual capital, the Secretary of State and tribunal both required actual receipts before allowing for deductions from savings, and set the standard of proof too high;

(b) the only income paid into the savings accounts was from her benefits and some windfall payments from building society flotations;

(c) as a result of (a) withdrawals of income from savings have been ignored and have been treated as withdrawals of capital;

(d) as a result of (c) no allowance has been made for everyday living expenses for which the appellant has been unable to provide receipts over a ten year period;

(e) had the appellant deprived herself of the capital, and produced evidence of expenditure, then the diminishing capital rule would have applied, and her notional capital would have been reduced by the amount of income support she received;

(f) the net effect of the above is that the appellant is expected to live on nothing because all amounts spent are treated as still being her capital;

(g) putting capital into her son's name was not deprivation of capital by her, nor were the other actions she took with reference to her son's ISA account.

(h) the overpayment should be reduced by the amount of child increase that Mrs S should have received, but did not receive, with her severe disablement allowance for her son.

25. In a submission for the Secretary of State made at my direction, the secretary of state's representative supported the appeal. The following points were made:

(a) The Secretary of State agreed with the claimant's first ground of appeal that the standard of proof had been pitched too high in requiring actual receipts: R(SB) 38/85;

(b) The tribunal should have decided whether it was probable that the appellant no longer possessed the money shown as withdrawals in the various accounts;

(c) Sums transferred from one account to another were not spent, and remained capital; but most of the other sums disallowed in the decisions should have been allowed as day-to-day expenses;

(d) The tribunal did not err in its decision about deprivation of capital;

(e) There were questions still requiring answers about the savings put into, and taken out of, the son's name.

How the decisions were taken

26. The decision of 30 03 2005 is set out in full. It is a decision about actual capital. So is the decision made on 14 06 2005, and also the decision on 14 07 2005. Elsewhere in the papers, as the grounds of appeal suggest, there was a lack of clarity about whether decisions are referring to actual capital or notional capital. But the chairman's direction led to the matter being clarified. In so far as the decisions relate to capital held by Mrs S, then the issue is contended to be about actual capital only. In so far as the appeal concerns money that was in or went from the son's accounts, then notional capital may be relevant.
27. The papers behind these decisions include hundreds of pages photocopied from pass books and bank accounts together with photocopies of hundreds of different receipts for a wide range of expenditures presented in no particular order.
28. The approach taken to this information is summarised in the submission to the tribunal as follows. Schedules have been drawn up of "credits" and "withdrawals". Details of credits and withdrawals (including transfers) are itemised individually. All credits have been added in, save those to one specific account to which some benefit payments were paid direct. The withdrawals from that account have been ignored also. All other withdrawals have been looked at to see if there is evidence of expenditure to explain them. If there is no evidence, then the withdrawals have been ignored. The result is that the decision makers have required specific independent evidence of matching expenditure for any withdrawal before it is treated as a deduction. If there is no matching evidence, then the withdrawal is disregarded. As a result, the withdrawal then becomes actual capital.
29. The submission to the tribunal is that arrears of benefit become capital 52 weeks after payment, and any savings from benefit become capital after the end of the period for which the benefit is paid. The tribunal was told that the schedule was drawn up on this basis. I cannot, however, see anything in the schedule taking this into account and, because of the way in which the schedule has been drawn up, am unable to check if it is consistent with that approach. My own view after a short audit detailed below is that payments appear to have been added to capital on payment in without regard to the source of the payment in, and that therefore the schedule is not based on that approach. I must in any event return below to the question whether the contention is good law.
30. While the stated approach of the decision maker on behalf of the Secretary of State might sound simple in principle, its practical application over a ten year period has proved the opposite. Mrs S, in common I suspect with just about everyone else in the country, has not kept all her receipts since 1995. So she cannot meet the evidential burden that this approach imposes on her during the earlier years covered by the decision, as is obvious from the later schedules of allowed expenditures. Even for tax purposes, records are only required for five years. The approach also lacks any sense of proportionality or materiality. It is surely absurd to expect an income support claimant to keep a record of everything she or he spends throughout all periods of award in case the award is later questioned, and then also requires in the event of a dispute that the individual justify every single expenditure and that an official has to take a judgment about every single item.
31. An added complication in this case is that the decisions about disallowing withdrawals appear to have been taken in two stages: (a) all withdrawals have been ignored in the schedule (I think – I have not checked every one). This led to a schedule showing at the end a large sum of capital far removed from the actual balances in Mrs S's accounts. This is because there is a running total of all the credits but with most of the debits (withdrawals or transfers out) ignored; (b) there is then a separate series of lists of amounts accepted as expenditure, which items are deducted from the amounts of capital shown without any cross-references between withdrawals and deductions. This process is made opaque by a failure of the individual drawing up the schedules to indicate at any stage to what asset or account an amount is credited or from what it is debited. As Mrs S had more than one account running for some of the periods, the result is that it is impossible to follow an audit trail from the information to the decisions in the schedule without repeating much of the analytical work. No tribunal should be expected to have to consider a schedule drawn up in this way, and no appellant should be expected to have to rebut such unstructured information in an appeal.

How should the decisions be taken

32. As with all complicated issues, it is best to start with basic principles. First, we are looking at actual capital. That means the whole of the capital and any income treated as capital: Income support (General) Regulations 1987. But that does not mean that every £1 put into a building society account in the name of the individual is automatically converted into capital, as the person who drew up the schedule to the decision of 30 03 2005 appears to have assumed.
33. There are a series of fundamental mistakes in the way that the schedules have been drawn up. One is that they have treated every credit as becoming capital when paid into an account, regardless of the source of the payment in or the nature of the account. This is inconsistent with the approach on which the tribunal was told that the schedule was drawn up.
34. I must also consider if the approach of the schedule, or that of the submission, is good law. The secretary of state's representative recited regulations 29 and 32 of the Income Support (General) Regulations 1987 and paragraph 7(1) of Schedule 10 to those Regulations as authority for the approach to be taken to the payments in of benefit. The relevance of Regulation 29 is limited to the signposting in regulation 29(5). Regulation 31 states, so far as relevant, when benefits are treated as paid. Regulation 32 adds to the rules about the weekly amount of income. There is nothing in those regulations dealing with the time at which past income becomes capital. Schedule 10 lists exclusions from the general rule in regulation 46 that all capital is to be included. Neither define capital. Nor would I expect them to. Paragraph 7(1) provides that arrears or concessionary payments of benefit are excluded from capital for 52 weeks from receipt. In other words, lump sum payments of benefit fall to be treated as capital if the claimant still has them 52 weeks later. There is no other express guidance in the Regulations relevant to the approach taken by the secretary of state's representative to the conversion of unspent benefit from income to capital. The regulations cited do not support the proposition in the submission to the tribunal.
35. How is saved benefit to be identified as capital? The standard way of approaching a similar question in a business or tax context is by looking, as all proper commercial accounts do, at the "balance sheet" at the end of each year or other period. It is the difference between one year and the next that is to be treated as capital. (That is, indirectly, the approach of paragraph 7(1)). In this case, it could be approached by asking what the actual capital held is at the end, say, of each calendar year or tax year. If this discloses totals that are clearly above the capital limits, then that would be clear evidence of excess capital. If not, then a closer look may be needed.
36. Test it this way. A claimant has her pension or benefit paid into a building society account monthly, as the government now encourages. She is in credit in her account by a small amount, but one rather larger than her monthly benefit income. She withdraws or transfers out various sums for her living expenditure over the course of the month. She is good at keeping her expenditure broadly within her income. So at the end of the average month she has about the same sum in credit at the end of the month as at the beginning of the month. How much capital does she have: the day to day floating balance, the sums left over at the end of each month, or the amount in her account when it is checked, say, at the end of each tax year?
37. The answer is clearly not the day to day floating balance. Her benefit cannot become capital on the day it is paid into the account, unless it is clear that the account is one for long term savings (such as an ISA account). That is not true of most of the accounts relevant to this case. In the ordinary way, the money she receives and then spends within the month cannot be regarded as capital.
38. I also reject the proposition that if she holds over some benefit from one month to another (perhaps saving for a holiday two months ahead) that those short term savings left over at the end of each month become capital. A longer view must be taken than that. A good practical rule may be the 52 weeks allowed in paragraph 7(1). Or the matter may be looked at by identifying total capital from time to time as suggested above, with a view to identifying increases in sums held from one date to another for which there is no clear explanation. So if the sums are paid into accounts such that they cannot be withdrawn without a penalty in the short term (such as fixed term or tax privileged savings) then they may become capital on payment in. If the sums accumulate in an account over a period, but for a specific reason (such as saving over a longer period to afford an overseas trip to see relatives) and the expenditure is made for that purpose, then that would not be capital. But if sums accumulate from one year to the next, and the claimant has no specific plans to spend them in the short term, then they will at some point become capital. When precisely that point occurs is a question of fact.
39. It follows equally that payments from an account are not payments away of capital just because they are withdrawals from such an account. The example above shows this. And the broader look indicated in the previous paragraph would avoid that fallacy also. Alternatively, a close look could be taken at a few specific periods, and the position generalised from them.
40. I test this by reference to the schedules in the decisions in this case by taking a random example: May and June 1999. (I emphasise that I took this example from the middle of the period without any view about the out turn: I merely did a random short audit of the information to test its reliability).
41. At the beginning of May, according to the schedule to the decision of 30 03 2005, Mrs S's capital was £29,532.08. During the two months, she paid in £350. She paid out £500. The capital at the end of the two months is taken as £29,712.08. That was the formal decision of the Secretary of State. In other words, despite spending £150 more than she paid in, her capital went up by £350. On what did she live during those two months? The decision maker's answer (in the submission to the tribunal) was that Mrs S's benefits were paid into a named specific account, and that payments into and withdrawals from that account were both ignored. I find (to my surprise) that this is just not correct in fact. Each of the entries for May and June 1999 in the schedule to the decision of 30 03 2005 is drawn directly from the very building society account that the Secretary of State's submission to the tribunal said was ignored in order to take account of living expenses. (Compare document 50 with document 259). The evidence simply does not support the schedule when read with the submission. The terms of the decision of the Secretary of State converted the whole of her payments into her accounts in those two months into capital as they were paid in, and no deductions were allowed for any payments out. As Mrs S's representative strongly contended, the effect was that she was not allowed any living expenses at all for those two months. She was in effect treated as saving the lot simply because she used a building society account to handle her affairs. There was no assistance for her in the decision of 14 06 2005. Later, she was able to find one receipt for a telephone bill paid on 1 June 1999 of £79.99. That was allowed, so her capital went down by that sum, but only that sum. Nothing else was allowed.

Evidence

42. The next issue, as illustrated by that random example, is the question of evidence of expenditure. The question is put in this form: how is it to be shown that a payment out is properly made as a deduction from capital? But the assumption behind the question is wrong. In an ordinary account into which someone pays earnings, pensions or benefits, the routine payments out are not payments out of capital at all. They are payments out of income. Once the error in the current approach in the schedules is realised, much of the substance of this problem disappears. It is a complete waste of time chasing every single receipt of a claimant in order to see if this is a justified payment out of capital if it was not paid out of capital at all. The papers in this case reveal the absurd detail into which the case has gone because of these errors. The receipts – each of which has been copied into the papers and has been the subject of an individual decision on behalf of the Secretary of State - vary from till receipts from ASDA for salad bought cheap for 15p, from Macdonald's for a double cheeseburger, and from Tesco for groceries totalling £1.79 (and many other small receipts of those kinds) to a diamond solitaire ring bought for £875 and one or two other large expenses, with items in between such as taxi receipts from Tenerife, items of clothing and household goods, a theatre ticket for the Grand Theatre, Blackpool, the account for a holiday in Presthaven Sands, and a course of Spanish lessons for Mrs S's son.
43. Someone has at some stage gone through all these and several hundred other receipts, making individual decisions about whether each expenditure was or was not a reduction of capital. But there is no correlation between the hundreds of pages of photocopied receipts and the individual decisions allowing deductions. There is no easy way to see what was or was not allowed, or the principles on which those decisions were taken. There is no attempt to look for patterns, or to estimate the appellant's actual living expenses, or to take account of anything for which there is no piece of paper. They are not even presented in date order in the papers, although someone at some time has put them in date order for decision purposes. Nor is there any attempt to correlate between the withdrawals from accounts, the available receipts, and the likely expenditure of the claimant and her son and partner. The tribunal was presented with a surfeit of information that it is not an exaggeration to say was presented little better than randomly. The tribunal chairman's description of the case as difficult savours of the British habit of understatement.
44. Again, we must turn to basic principles. A practical starting point is to see whether Mrs S's income exceeds expenditure in the short term. In May and June 1999 it did not, on the information in the papers. She spent more than she received. Assuming – and this is a matter of fact that needs to be determined – that the way in which those sums were drawn out and the absence of any transfer to any other account are such that the tribunal considers all the payment out to be payments out of income, not capital, then she has no savings from those two months. So there is no need to adopt the lengthy process followed by the decision makers in the various schedules.
45. The nature of an item of expenditure as from income or capital is a question of fact. This must be determined on the balance of probabilities. It is in my view inherently improbable that a claimant such as Mrs S will be able to produce receipts for day to day expenditure for a period several years in the past. She is under no legal duty to keep receipts, or accounts, for past years or at all. She can be asked to produce the records she has, and she can be expected to keep the sort of records reasonable people in her position actually keep. (Were she under a specific duty, as with value added tax, the answer would be different). And she can be asked if she can explain any large and unusual payments out. But to demand actual receipts for all expenditures, however small, over a ten year period is not reasonable, and places the practical burden of proof not only on her rather than the Secretary of State but also places it far too high. She is fully entitled to ask that general conclusions be drawn from her oral evidence and from the actual amounts she holds in all her assets at any particular time, and from time to time.

Conclusion

46. The schedule attached to the decision of 30 03 2005 is both wrong and unsafe. It is not drawn up consistently with the principles on which it is said to have been drawn up, and it is impossible without unreasonable effort to identify how each item in it was treated as it was. It is wrong in principle in the way it treats income as becoming capital when it is included in the schedule without reference to the account into which the sums were paid or the amounts or sources of the sums. And it is wrong in principle in not allowing any deduction from the running total for any withdrawal without reference to the account from which it was withdrawn, or the amount of withdrawal, or any information about why it was withdrawn.
47. Further, in the decision of 30 03 2005 as explained to the tribunal in the submission to it, the Secretary of State relied on the schedule on a basis that is contradicted by the hidden detail of the schedule itself. It does not show what the Secretary of State says it shows. The appellant and representative raised a number of these arguments with the tribunal. The tribunal, in so far as it relied on that schedule without dealing with those points erred in law in not dealing with any of these problems. That error arises in part because of the wrong principles on which the decisions by the Secretary of State were put together and in part because of the opacity of the decisions and of the submission to the tribunal.
48. I have dealt with this case on its facts, and not attempted to draw broad conclusions from it. The evidence in the papers is in such a state that it does not warrant that. Much of the detail, including the line between income and capital, is a question of fact not law. The errors of law are in repeatedly setting the burden of proof at the wrong standard, failing to base the decisions and the schedule on the actual evidence, failing to produce the schedule in a form in which its reliability can be tested, and repeatedly failing properly to consider what is income and what is capital and when income becomes capital on the facts.
49. I refer the matter back to the tribunal from which it came, as that is in my view appropriate in this case. I am conscious that the appellant and representative, and the chairman, raised other issues. But I have no papers before me on which to consider the issue of notional capital as all the decisions in the papers are rested on actual capital. And the other issues may not arise once the evidence is considered properly.
50. I have given full directions for the new hearing because of the complexity in the case and the amount of work that needs to be done to get both the papers and the evidence in good order. They are intended to assist the parties and the tribunal. But those directions are of course subject to any further directions by a chairman if they are inappropriate.

David Williams

Commissioner

18.05.2006

[Signed on the original on the date stated]