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[2008] UKSSCSC CG_607_2008 (30 August 2008)

CG 607 2008

DECISION OF THE SOCIAL SECURITY COMMISSIONER

I allow the appeal. For the reasons below, the decision of the tribunal is wrong in law. It is set aside. I replace the decision with the decision that the tribunal should have taken. This is:

Appeal allowed. The decision of the Secretary of State of 1 03 2006, as revised on 5 04 2006, and as again revised on 30 10 2006, that the appellant was not entitled to, and was overpaid, carer's allowance in the period from 4 06 2001 to 18 12 2005 is set aside.

Accordingly, the decision of the Secretary of State of 26 02 2007 that an amount of the overpaid carer's allowance is recoverable from the appellant is also set aside.

The appellant remains entitled to carer's allowance from 16 10 1989 under the decision awarding her carer's allowance until 1 01 2006, save for any individual weeks in which her weekly amount of earnings, calculated in accordance with this decision, exceeded the earnings limit for those weeks ("excess weeks").

I direct the parties to agree so far as possible which weeks are excess weeks, and the amount of carer's allowance overpaid and recoverable for those weeks. If the parties are unable to agree on the excess weeks, or the sums recoverable because of those weeks, within three months of this decision, then I direct that the parties refer the matter back to me, or to another Commissioner if I am not available, to decide on the identity of the excess weeks, the amount of allowance overpaid in respect of those weeks, and whether all or any of the overpayment is recoverable.

The Secretary of State for Work and Pensions is appealing with permission of the tribunal chairman against the decision of the Colchester appeal tribunal on 20 04 2005 under reference U 42 132 2005 00198. The respondent and claimant for carer's allowance is Mrs C.

I held an oral hearing of the appeal on 6 08 2008 at Procession House in London. Mrs C, who was unrepresented, attended. The Secretary of State was represented by Mr Jeremy Heath of the Office of the Solicitor to the Department for Work and Pensions. Mrs C appealed against two decisions of the Secretary of State. One concerned overpayment of carer's allowance and the other recoverability of a sum overpaid. It was agreed between me and both parties that at this stage I would consider only the decisions of Secretary of State that Mrs C had been overpaid allowance and the decision of the tribunal that this had not occurred. The decision of the Secretary of State that the overpayment was recoverable was not considered by the tribunal because it found no overpayment. It was agreed that if because of my decision there was, or may be, a recoverable overpayment then I would consider the overpayment decision later. I do not need to do that at this stage.

REASONS FOR THE DECISION

The central issue in the appeal

This appeal is about the earnings rule for carer's allowance. Mrs C cared for many years for her disabled child. The child received disability living allowance and she received carer's allowance. Mrs C was aware of the earnings rule that applies to carer's allowance. She thought she was complying with the earnings rule when she agreed to take up a part time job in 2001. She was told in 2006 that she was not complying, and that she owed the Secretary of State about £5,500 in overpaid allowance. She was additionally concerned because this meant she lost several years of home responsibility protection for her National Insurance contribution record.

The earnings rule for carer's allowance is one of the most complex and controversial social security rules. That is starkly illustrated by the fact that, as the appeal came before me, I was offered no less than six versions of how the same set of rules should be applied to the straightforward facts of Mrs C's appeal. Four different and inconsistent answers had been produced by officers acting for the Secretary of State. Both Mrs C's representative and the tribunal had their own different, and again inconsistent, answers. Nor was the Secretary of State's representative prepared to submit which was right. Mr Heath, who was given no instructions about the "right" answer, invited me to consider the matter fully in the light of the confusion that the rules clearly caused in this case.

The tribunal's decision

Mr Heath put that request in the context of a submission that the decision of the tribunal was in error of law for another reason. It was so inadequate that I must set it aside. I can deal with that submission immediately. I agree. The tribunal recorded a brief statement of facts and reasons for its decision that Mrs C had not been overpaid anything. It contained the phrase "all the material facts are therefore agreed". Mr Heath's submission was that this left several factual issues uncertain in the context of the tribunal's decision. I rely on his careful submission on the facts below. For current purposes, I accept his argument that key facts had not been identified adequately. I set it aside. Nonetheless, I record that the tribunal held an oral hearing of the appeal and reached a decision based on reasoning to which I have given full consideration. And I start from the overview taken by the tribunal of the appeal: "it appeared … that whichever approach was taken in applying the regulations a manifestly unfair result ensued."

The facts in the papers

I base this account on Mr Heath's analysis of the documentary evidence and then on the oral evidence given to me by Mrs C. I accept her evidence as conscientiously given although, seven years after some of the events and with minimal contemporary documentation, she cannot reasonably be expected to recall precise details of something not questioned until several years later.

On 5 12 2005, Mrs C told the Disability and Carers Service ("DCS") that she was starting work that day and earning in excess of the then permitted £82 per week. She accepted that this brought to an end her entitlement to carer's allowance. In reply to questions, she supplied further details of her employment. DCS also asked Mrs C's employer ("Employer") for details. Employer (a local registered charity) informed DCS that she had started work on 2 05 2001, and had first been paid on 31 05 2001. Employer stated that Mrs C's earnings had not exceeded the weekly gross earnings limits and that she was paid monthly, normally on the last day of each month. Employer provided details of the monthly sums paid to Mrs C for each month from 31 05 2001 to 1 02 2006 (the day on which Employer returned the form). The list shows dates of payment and amounts paid varying from month to month. Payday was usually one of the last two days of a month but was sometimes as late as the 4^th of the next month. A DCS officer noted internally "the pay date seems to change from the end of the month to the beginning of the month" and some months appeared to be missing. Employer told DCS that dates changed because payments were made by cheque. There were no missing months.

On 1 03 2006 a DCS officer went through Employer's list of payments and disallowed Mrs C's carer's allowance for selected months. No explanation of the choice of months disallowed is recorded as part of the decision, or in the papers, beyond the meaningless (to me) comment that it was a "520 decision". Nor, as Mr Heath accepted at the hearing, did anyone tell Mrs C at that time. According to an internal note Mrs C was told something on 17 03 2006. I do not know what. Mrs C replied with copies of her pay slips and stated that her earnings per week never exceeded the amount allowable. Included with her letter were timesheets showing, after the first fortnight she worked and with a few other exceptions, a settled pattern of work of two part days a week of five hours each – usually on Mondays and Wednesdays. This was deliberate as she was paid at an hourly rate intended to give her earnings each week equal to the weekly maximum figure she was entitled to earn while receiving carer's allowance.

On 5 04 2006 another DCS officer looked at the information and came up with another list of periods in which Mrs C was not entitled to carer's allowance. The officer states, without further explanation, "I have decided to average the wages". This list bears little resemblance to the list in the previous decision. This decision is said to be a revision of the previous decision. The authority under which the officer revised the previous decision is not identified. Mrs C responded again, accepting that she had earned more than the limit in a few specific weeks, but objecting more generally to the decision. She was invited to, and did, appeal.

On 30 10 2006, a third DCS officer looked again at the information and came up with a third list of periods in which Mrs C was not entitled to carer's allowance. This officer accepted the averaging for part of the period as undertaken by the previous officer, but not for another part of the period. The officer states that the previous decision is revised again because "I have reached a different conclusion about the facts of the case." It is not surprising that that is not one of the reasons for which a decision may be revised under regulation 3 of the Social Security and Child Support (Decisions and Appeals) Regulations 1999.

Finally, on 26 02 2007, a computer generated decision was issued to Mrs C stating that as a result of the decision of 30 10 2006 she had received an overpayment of allowance of £2,613.90 and that this was recoverable. When she objected that she had appealed the other decision some months before, that letter was taken as her appeal and the matter sent to the tribunal.

I add to that account the comment that the submission made for the Secretary of State to the tribunal contains nothing approaching an adequate explanation of how DCS arrived at any of the three decisions, or the reasons for the supersession or revisions. There are a series of inconsistent comments about the rules set against an inadequate and patchy summary of parts of those rules.

As Mr Heath accepted at the hearing, there are grounds for considering if the DCS officers had power to supersede and then revise the decision awarding the allowance to Mrs C in the way they did, and also whether the decisions were properly notified. I return to those issues later.

Mrs C's evidence

No one appears to have asked Mrs C or Employer directly about the terms of her contract of employment, or what the contractual agreements about earnings and payment were between them. Following what I understand to be the usual practice, Employer was asked questions focussed not on Mrs C's earnings but the payments made to her. No one, including the tribunal, spent time clarifying the contractual arrangements. That is one reason why the tribunal decision is inadequate.

I accept Mrs C's evidence that her employment arrangements were largely informal. She was asked to work part time for a new local charity with limited funding and no guaranteed forward funding. She started work in May 2001. Her objective at the time was to receive a level of earnings that did not stop her receiving carer's allowance and also did not affect her contribution record towards her retirement pension. Employer offered to employ her weekly at a level of earnings that was at, but did not exceed, the weekly limit of earnings for carer's allowance. Her evidence was that, so far as she can now recall, this was Employer's suggestion rather than hers. Both had the carer's allowance earnings rule in mind. She understood that both Employer and she agreed that she was working on a weekly basis. This seems, on the records, to have emerged a couple of weeks into her work. It quickly settled down, as noted in contemporary records, to a regular pattern of work that was mainly undertaken in two five-hour periods of work a week, usually on Mondays and Wednesdays. There was some flexibility about which days were worked. From the outside, this looks somewhat like job sharing with the other individual who has also appealed to the Commissioner against similar decisions about her earnings from Employer at the same time.

It may be – I would not expect Mrs C to remember this – that they all focussed on the earnings rule because it had been changed significantly in the month their agreement took effect. The Social Security (Invalid Care Allowance) Amendment Regulations 2001 (SI 2001 No 538) increased the earnings rule significantly from 6 04 2001 from, in cash terms, £50 weekly to £72 weekly and that had been widely publicised. I find support for that assumption in the pay rate quoted in her first month of work (May 2001). It was based on a "unit charge" of £5. This then became a "unit charge" of £7.20 from the beginning of June, when her hours had already settled at 10 every week. She was paid a little over the weekly earnings limit in the weeks starting Monday 30 April, Monday 7 May, and Monday 14 May 2001 but not thereafter, and a clear pattern emerged. I can see no variations from that in the payslips until possibly the end of 2004.

Mrs C did not recall any discussion about when she would be paid. She thinks she was told that they were unable for administrative reasons to pay her weekly and that she accepted this. For the same reasons, payment was made by giving her a cheque in payment for the times she had worked in the previous month. She was given the cheque at work. She would normally receive the cheque on the day she was next in the office after it was issued around the end of the month. So if it fell to be issued on a Thursday she would receive it the following Monday.

Mrs C was confident, because of what she knew and had read about the system, and because of the advice given to her by Employer (a local charity concerned with the disabled and carers), that these arrangements would maximise her earnings without endangering her entitlement to carer's allowance or her contribution record. She knew that entitlement to carer's allowance carried entitlement to home responsibility protection of her retirement pension contribution record, and she was keen to ensure that she benefitted from this. The first information she received to put that in doubt was in March 2006.

Conclusions about pay and payment

There is no written contract of employment or other written correspondence between Employer and Mrs C, or other formal statement about Mrs C's terms of employment. The contractual terms must be found as fact. I am satisfied that the agreement swiftly became, and remained, for weekly work of a set number of hours on agreed days in exchange for weekly pay equal to the maximum weekly level of earnings permitted to those receiving carer's allowance. Mrs C's evidence of that is confirmed by the way in which Mrs C's weekly rate rises from year to year along with that earnings limit. I am also satisfied that the parties reached no formal or clear agreement about payment of those wages. In practice Mrs C received payment by cheque somewhere around the beginning of a calendar month for the hours actually worked in the previous month. The cheque was left for her to collect when she was next in the office. Taking a practical view that she was paid when she received the cheque - rather than either when it was dated or when she cashed it - there was, strictly, no regular or normal pay day. But taking a broader view she was paid at the agreed weekly rate for work at around the end of a month by this informal monthly arrangement. There was no need for more formality as her earnings remained throughout below the levels at which National Insurance contributions and income tax (by PAYE) became payable and she was content to accept this arrangement.

I now turn to the regulations.

The earnings limit

Entitlement to carer's allowance is subject to an income limit. It is an upper earnings level for the allowance, but between 2001 and 2007 it was defined incongruously by a lower earnings level imposed for other purposes. It is, moreover, a sharp rule of a most unusual nature in British tax and social security laws. If an individual receives 1p in earnings over the limit in an earnings period, she loses all entitlement to the allowance for a later period (not that week itself). Most tax and social security rules operate as offsets. There is a £1 reduction in benefit for £1 additional earnings for benefits such as income support or jobseeker's allowance. That reduction is calculated by similar rules to the rules I examine below, and it was in those contexts that the rules were designed to operate. It is a 70p reduction for each additional £1 of net earnings for housing benefit, and 39p for each £1 of net earnings for tax credits. Similarly, the top rate of income tax is 40p for each £1 of additional earnings, and the employee's National Insurance contribution rate, for which the lower earnings limit was enacted, does not exceed 11p for £1 additional earnings. This rule has the effect that the addition of 1p to earnings over the set limit imposes a marginal offset rate of (currently) over £40 for 1p as it removes all entitlement to the allowance. This explains the sharp nature of the decisions taken in this case compared with equivalent decisions under the rules for benefit such as income support or housing benefit, or for National Insurance contributions.

The earnings limit is in regulation 8(1) of the Social Security (Invalid Care Allowance) Regulations 1976. As applied to Mrs C between 2001 and 2006, and omitting provisions irrelevant to this appeal, it is that:

"a person shall not be treated as gainfully employed on any day in a week unless [her] earnings in the immediately preceding week have exceeded [an amount equal to the lower earnings limit in force by virtue of regulations under section 5 of the Contributions and Benefits Act on the last day of that week] and … shall be treated as gainfully employed on every day in a week if [her] earnings in the immediately preceding week have exceeded [an amount equal to the lower earnings limit in force by virtue of regulations under section 5 of the Contributions and Benefits Act on the last day of that week]"

This is particularly obscure drafting. It adopts and adapts a rule that prevents someone claiming carer's allowance while in gainful employment in order to impose an upper earnings limit rather than, as is usual for social security and tax credits entitlement, a rule based on the number of hours worked. And then, as just noted, it uses a lower earnings limit to define that upper earnings limit. The rule has now been simplified back to the form it took before 6 04 2001. The words in square brackets were added into the rule from that date in place of a cash limit of £50. Those same words were removed from the regulation by the Social Security (Miscellaneous Amendments)(No 5) Regulations 2007 (SI 2007 No 2618), and replaced by the figure "£95" from 1 10 2007. However "the lower earnings limit" was in place throughout the years relevant to this appeal.

The lower earnings limit used to be the weekly earnings level above which employees and their employers were required to pay Class 1 National Insurance contributions. This was replaced from 2000 by a higher weekly figure called the primary threshold. NI contributions are now payable only if earnings exceed the primary threshold. See section 5 of the Social Security Contributions and Benefits Act 1992. Section 6A of that Act, introduced by the Welfare Reform and Pensions Act 1999, deems contributors who have earned more than the lower earnings limit but less than the primary threshold in any week actually to have paid contributions on the earnings between those figures. I mention that because Mrs C made it clear that one reason that she was anxious not to exceed this lower earnings limit was that she did not wish to damage her contributions record for pension entitlement. If she is properly treated as earning more than the lower earnings limit, but not more than the primary threshold, then this suggests that she is to be treated as actually having made contributions. There is a difficulty here that I mention but need not explore. The rules for deciding whether she earned more than the lower earnings limit for the purposes of section 6A are in the Social Security (Contributions) Regulations 2001 (SI 2001 No 1004), not the rules that apply the lower earnings limit to the carer's allowance. It may be that Mrs C is to be treated as earning more than the lower earnings limit so as to lose her benefit (and entitlement to home responsibilities protection) under the one set of rules but at the same time as not earning more than that limit for the purposes of the other set of rules under section 6A, so that she does not benefit from the deeming provision in that section. Little attention has been paid to that potential unfairness, which could arise here if the Secretary of State were correct.

To put the figures and limits in context, the relevant lower earnings levels are: 2000-01 £67 (but the carer's allowance limit was £50); 2001-02 £72; 2002-03 £75; 2003-04 £77; 2004-05 £79; 2005-06 £82. As noted, the carer's allowance limit was increased to £95 from 1 10 2007.

The Social Security Benefit (Computation of Earnings) Regulations 1996

The earnings limit is set as a weekly sum. It is necessary to establish the amount of earnings a claimant for carer's allowance earns, or is treated as earning, in any week. The rules for determining this are in the Social Security (Computation of Earnings) Regulations 1996 ("the Regulations"). The regulations relevant to this appeal are in Part I (General) and Part II (Employed Earners) of the Regulations. Many provisions are specific in their operation, for instance applying only to payments made when employment ends. It is helpful in focussing on this appeal, and given the dense complexity of these Regulations, to strip out all provisions that have no application here.

Definitions

As with all complicated sets of regulations, the place to start is with regulation 2 of the Regulations and the relevant definitions. I stress this because Mr Heath, normally meticulous in his knowledgeable presentation of complicated social security provisions, did not do so. This may be because no attention has been paid to these definitions in any of the decisions on the Regulations, or similar regulations, to which I have been referred. Nor can I see any comment on these definitions either in official guidance (such as the Decision Maker's Guide published by the Department for Work and Pensions) or the standard guidance works published for tribunals or welfare advisers. The failure to note the definitions is important because of two definitions in particular. Both, in different ways, give clues to the proper structure and application of the Regulations, as of course they are intended to do.

The first is:

""payment" includes a part of a payment".

The noun "payment" is ambiguous out of context. It has the common meaning of "the action or process of paying someone or of being paid". It also has the common meaning of "an amount paid or payable" (New Oxford English Dictionary – Chambers Dictionary reflects the same ambiguity). Which of those two meanings is intended is usually to be determined entirely from context, although it is often assisted by use or omission of the indefinite article - "payment of wages" as against "a payment of wages". This definition adopts and then widens the second of those meanings. The definition is also in the equivalent provisions in the Income Support (General) Regulations and Jobseeker's Allowance Regulations. There is a second ambiguity in common usage of "payment", reflected without comment in the dictionary definition just cited and which this definition does not resolve. "Payment" can mean "paying" or "being paid" - giving or receiving. Clarification may be assisted, but not always resolved, by the extended definition. It is clear from the ambiguities that the definition should be read into every reference to "payment" in the Regulations. I do this below, indicating the inclusion by the use of italics and brackets.

The other significant definition follows in regulation 2:

""pay period" means the period in respect of which a claimant is, or expects to be, normally paid by [her] employer, being a week, a fortnight, four weeks, a month or other shorter or longer period as the case may be".

This can apply only to employees. The phrase is not used in Part I or Part II of the Regulations other than in regulation 10(4)(b) (deduction for pension contributions when calculating net earnings) although it would seem in principle to apply generally to the provisions. Its context in that regulation suggests that it is referential to what are described as "periods" elsewhere. Why is it there? I suspect the answer is that the drafter lifted it from previous forms of the regulation or perhaps from regulation 2 of the Income Support (General) Regulations where the definition also appears. That gives clues to the drafting. It emphasises the common ground between the Regulations and other similar regulations. It is also interesting because it deals with the case of a payment of earnings every four weeks while the Regulations make no other specific mention of that pay pattern. By contrast, the Regulations repeatedly use the term "period" without definition. It is also helpful that the drafter was looking to the employee's receipt rather than the employer's payment – "a claimant is, or expects to be, normally paid". This reflects on the second of the ambiguities in the meaning of "payment" noted above. It suggests that we should look to the receiving not the giving.

Several other definitions are relevant, although most – such as "week" – add little to the process of interpretation. Others – such as "earnings" – raise no points of difficulty in this appeal. The definition of "relevant earnings limit" is relevant. It is:

""relevant earnings limit" means the amount of a claimant's earnings in excess of which the benefit, supplement, allowance, pension or increase in question is not payable".

Earnings at the limit do not affect a benefit. Earnings above the limit do. This is reflected in the terms of the formula in regulation 6(2) below. It stresses the purpose behind the Regulations. They impose an earnings limit, not a payment limit. The definition of net earnings is also relevant:

" "net earnings" means such earnings as are calculated in accordance with regulation 10(4)".

I indicate all defined terms, including these, with italics (and where appropriate square brackets) in the text below.

The substantive regulations

Regulation 3 (calculation of earnings) provides, as relevant:

(1) … the earnings of a claimant shall be calculated by determining in accordance with these Regulations the weekly amount of [her] earnings.

(2) The amount of a claimant's earnings for any period shall be the whole of those earnings …

"Earnings" is defined in regulations 2 and 9. The detail of the definition is not in question here. Regulation 3(2) also provides for deductions from earnings under regulation 10. Again, that is not relevant here, and is omitted. Regulations 4 and 5 are also not relevant and are omitted.

Regulation 6 (calculation of earnings of employed earners) is a complex regulation, most of which is not relevant to this appeal. The relevant parts are:

(1) Earnings derived from employment as an employed earner shall be calculated or estimated over a period determined in accordance with the following paragraphs and at a weekly amount determined in accordance with regulation 8 …

(2) … the period over which a payment [including a part of a payment] is to be taken into account -

(a) in a case were it is payable in respect of a period, shall be a period equal to a benefit week or such number of benefit weeks as comprise the period commencing on the date on which earnings are treated as paid under regulation 7 (dated on which earnings are treated as being paid) and ending on the day before the date on which earnings of the same kind … and from the same source, would, or would if the employment was continuing, next be treated as paid under that regulation;

(b) in any other case, shall be a period equal to such number of weeks as is equal to the number (less any fraction of a whole number) calculated in accordance with the formula –

P

Q + R

Where –

P is the net earnings;

Q is the amount of the relevant earnings limit plus one penny; and

R is the total of the sums which fall to be disregarded or deducted as appropriate under regulation 10(2) or (3) …

and that period shall begin on the date on which the payment [or the part of the payment] is treated as paid under regulation 7 …

Regulation 7 (date on which earnings are treated as paid) provides, as relevant:

"Earnings to which regulation 6 … applies shall be treated as paid –

(b) in any other case, on the first day of the benefit week in which the payment [or part of the payment] is due to be paid."

It is common ground that the benefit week for carer's allowance starts on a Monday. The effect of this regulation is to treat earnings calculated under regulation 6 as paid on Mondays. This applies to all bases of calculation set out by regulation 6. The effect of the two regulations together is to treat the start of any period calculated under regulation 6 as being on the Monday of the week in which a payment is due to be paid.

Regulation 8 (calculation of weekly amount of earnings) provides, as relevant:

"(1) For the purposes of regulation 6…, subject to paragraphs (2) to (4), where the period in respect of which a payment [including a part of a payment] is made –

(a) does not exceed a week, the weekly amount shall be the amount of that payment;

(b) exceeds a week, the weekly amount shall be determined –

(i) in a case where that period is a month, by multiplying the amount of that payment by 12 and dividing the product by 52;

(ii) in a case where that period is three months, by multiplying the amount of the payment by 4 and dividing the product by 52;

(iii) in a case where that period is a year, by dividing the amount of the payment by 52;

(iv) in any other case, by multiplying the amount of the payment by 7 and dividing the product by the number equal to the number of days in the period in respect of which it is made.

(2) Where a payment [including a part of a payment] of earnings from a particular source is or has been paid regularly and that payment [or part of a payment] falls to be taken into account in the same benefit week as a payment [or a part of a payment] of the same kind and from the same source, the amount of those earnings to be taken into account shall not exceed the weekly amount determined under paragraph (1)(a) or (b), as the case may be, of the payment which under regulation 7 … is treated as paid first.

(3) Where the amount of the claimant's net earnings fluctuates and has changed more than once, or a claimant's regular pattern of work is such that she does not work every week, the application of the forgoing paragraphs may be modified so that the weekly amount of her earnings is determined by reference to her average weekly earnings – …

(b) in any other case, over a period of five weeks or such other period as may, in the particular case, enable the claimant's average weekly earnings to be determined more accurately.

(4) Not relevant

Regulation 9 (earnings of employed earners) is not in issue, save that earnings does not include any expenses wholly, exclusively and necessarily incurred in the performance of the duties of the employment (regulation 9(3)). Regulation 10 (calculation of net earnings of employed earners) is not in issue. The claimant did not have any childcare costs deductible under this regulation. She did not pay income tax or National Insurance contributions on her earnings. Any reference in this appeal to net earnings is therefore also to gross earnings, and this is what Employer paid.

Analysis of the Computation of Earnings Regulations

The Regulations have the primary purpose of identifying the weekly amount of a claimant's earnings. They provide answers to the questions necessary for the conversion of actual earnings of an employee into weekly amounts of earnings by which to test those earnings against the earnings limit. They are the same essential questions that must be asked in any exercise of assessing earnings for the application of any social security or tax rate or limit. There must be defined periods with defined start and end dates and defined rules for attributing actual earnings to those periods. The key questions are:

(1) Are earnings included when received, or when entitlement arises, or on some other basis?

(2) When are specific earnings received or earned?

(3) How are specific earnings linked to specific periods of assessment or benefit?

The use of deeming provisions in the Regulations means that the answers provided to those questions for carer's allowance purposes are not findings of fact about what happened, but are questions of law about how the deeming provisions in the Regulations are to be applied to those facts.

The focus is further shifted from the facts to what is treated as happening by the varying focuses of the Regulations. There is no consistent answer to the first question (earnings on entitlement or receipt or some other basis). Regulation 6 defines the period of the payment by reference in paragraph 2(a) to the period for which a payment is payable. Under paragraph (2)(b) the payment to be used is not further identified and the rule is ambiguous in its focus. Regulation 7 deals with when a payment is treated as being received. It deals with the date when the earnings are due to be paid, which is not the same as when they are paid, or when they are payable, or when they are received. I take that as meaning "due to be received" if there is a difference, as the focus should be on earnings. Regulation 8 links a payment to the period in respect of which it is made. So the focus shifts from payable to due to be paid to made.

The Regulations therefore use three links to bring a payment of earnings into account. The practical result is a time shift forward for attribution of earnings from the period for which they are earned or paid to a later period. There is also a shift from earnings to payments. Take for example earnings payable fortnightly for a two-week period of work (weeks 1 and 2) and due to be paid the following week (week 3) but actually paid in week 4. Under regulation 7 the earnings are treated as being paid in week 3 (as due to be paid then). Under regulation 6(2)(a) if the payment is payable for the two week period, it is taken into account for weeks 3 and 4 (as payable then). Under regulation 8(1)(b)(iv), the weekly amount of the payment is taken as 7/14 of the amount of the payment (as it was made for a two-week period). The result is that the earner is treated as earning in each of weeks 3 and 4 half the sum she earned for weeks 1 and 2 together.

That example shows how the rules operate for non-standard periods of earnings. It conceals other drafting problems. Regulation 6(2) provides alternatives that do not operate equivalently. Paragraph (2)(a) provides rules for the start and end of the period to be defined by the paragraph, while paragraph (2)(b) provides a rule for the start of the period only. Further, neither alternative deals expressly with the position where two payments from the same source are made at the same time, despite the clear inclusion of a definition that allows a payment to be broken down into part payments. That creates a difficulty when the focus is on the date on which a sum is paid/received that does not exist when the focus is on the period for which the sum is payable/receivable.

There are other problems hidden in the Regulations that are caused by the erratic nature of the calendar. The Regulations make no provision for what the Income Tax (Pay As You Earn) Regulations 2003 call "week 53". A year is more than 52 weeks. The result is that someone who is paid weekly at exactly the weekly earnings limit for a year may be treated for these purposes as exceeding that limit when the year is taken as a whole simply by the way the calculation for the year is done. For similar reasons, at the margin the operation of the averaging rule in regulation 8(3) may itself force a weekly amount of earnings over the earnings limit where other calculations would not have that effect. A further problem is created, but not cured, by regulation 7. By treating everything as happening only on Mondays, it produces the result that some months contain four weeks, while others contain five. Similarly, some years contain more weeks than others. If regulation 8(1)(b)(i) is applied on the basis that a pay period exceeds a week, but where the weekly rate of pay is set at exactly the earnings limit for carer's allowance, then the result is that in the "five week months" the deemed earnings exceed the limit while in "four week months" they do not. That happens for the fortuitous reason that there are five Mondays in some months and not others. If the same thing is done on an annualised basis the result is that there are 53 weeks in some years and 52 in others.

Both problems surface in this appeal, as does the problem of the leap year's additional day. It is those problems, and the failure of the Regulations (as applied by the DCS officers) to deal with any of them, that cause the erratic decision making in this appeal. These shifts, ambiguities, and failures to deal with common problems make it particularly important to keep any interpretation of these provisions focussed on the purpose of the Regulations. It is to identify a weekly amount of earnings, not a weekly amount of cash receipts. The test is being applied to establish, by reference to earnings, whether someone is or is not in gainful employment. While irregular and erratic patterns of earnings must be dealt with, the Regulations should be interpreted to give straightforward answers to straightforward situations. None is more straightforward than a pattern of regular weekly earnings.

Application to Mrs C's earnings

The starting point in applying the Regulations to Mrs C's earnings is with the contract of employment. In the absence of any written terms, I find as fact that the agreement was for weekly earnings equal to the earnings limit in each relevant year. I have also found that these weekly earnings are paid, for reasons of convenience, somewhere around the end of each month.

The required calculation of weekly amounts of earnings is dictated by regulation 6(1). We must find the period over which the earnings are treated as being received from that regulation and the weekly amount from regulation 8. The temptation is to start with regulation 6 and to follow the numerical order of the regulations. That is, in my view, where errors can start to creep in. There is no requirement in regulations 3 or 6 that we start by defining the period to which payments are attributed. In my view it is better to start with the provisions defining weekly amounts of those earnings in regulation 8.

If we start with regulation 8, the answer in this case emerges very simply from regulation 8(1)(a):

"For the purposes of regulation 6 … where the period in respect of which a payment [including a part of a payment] is made …does not exceed a week, the weekly amount shall be the amount of that payment…"

Mrs C receives payments, each part of which is based on her weekly earnings entitlement. So, as a matter of fact, her weekly amount is the amount of the part payment to her for a week.

If that is read into regulation 6, the application of that regulation also emerges very simply from regulation 6(2)(a):

"… the period over which a payment [including part of a payment] is to be taken into account … in a case where it is payable in respect of a period shall be a period equal to a benefit week…"

Mrs C received part payments that, under regulation 8, were equal to the weekly amounts, so they are, using the regulation 6 test, payable for a week.

If that is correct, then, save for individual weeks where Mrs C earned more than the agreed normal weekly figure, her earnings did not exceed that figure. Where her earnings did exceed that figure, then she is not entitled to the carer's allowance for the weeks to which the earnings for those weeks are attributed under the Regulations. At this remove we need not spend too long identifying specific weeks for attribution if the relevant year is clear. Mrs C loses entitlement to a week's carer's allowance for each week in which she earned over the earnings limit. She has accepted that.

That interpretation solves most of the problems of applying the Regulations in this appeal. It leaves one potential problem. The text of regulation 6(2)(a) provides for both a start date and an end date for the period to which a payment is attributed. But on closer examination, the subparagraph presents two rules, not one, as shown by the break as set out below:

"(2) … the period over which a payment [including a part of a payment] is to be taken into account -

(a) in a case were it is payable in respect of a period, shall be a period equal to

a benefit week or

such number of benefit weeks as comprise the period commencing on the date on which earnings are treated as paid under regulation 7 (date on which earnings are treated as being paid) and ending on the day before the date on which earnings of the same kind … and from the same source, would, or would if the employment was continuing, next be treated as paid under that regulation"

The grammar of the paragraph is obvious when presented this way. The text after "or" is a self-contained rule that does not apply to the reference to benefit week. In this case we saw that regulation 8(1)(a) applies to the earnings weekly, so it is the first of the two rules that applies. We are not concerned with the operation of regulation 7. However, I accept that the second of the rules in paragraph (2)(a) presents a problem where two or more payments are made at the same time and those part payments are for periods are not weeks but multiples of weeks. As the payment of earnings falls under regulation 6(2)(a) and not 6(2)(b) it falls within the provision defining the end of the period to which the payment of earnings is attributed as well as the start of the period.

I need not solve that problem. It does not arise here. If regulation 6(2)(a) is applied to periods of a week, then each week is applied to a benefit week by the rule. It is only if the periods are longer than a week that the period defined as "the period commencing on … and ending on …" applies. It is a matter of straightforward further application here to apply the rule consecutively to each weekly part payment and link it to the appropriate benefit week.

That reading obviously achieves the intention of the regulations. And it avoids the injustice that the tribunal felt occurred in this case, and which other commentators, including Commissioners, have felt in other cases cited to me. But it is not the interpretation by which the tribunal or any of the officers were working. This interpretation must be tested against the other suggested interpretations.

The DCS decisions

The original supersession decision seems to be based on the assumption that Mrs C's earnings were to be taken into account monthly, not weekly. The officer then did the exercise, even if not intentionally, of finding all the months that contained more than four Mondays and Wednesdays. He or she noted the months in which Mrs C received more than four weeks' payments in the month. The error here is that this pays too much attention to the pattern of payment and not enough to the pattern of earnings. It ignores the reality that each payment was in fact a series of weekly payments paid together. The result was to switch from regular weekly earnings to fluctuating monthly payments. At the same time the official made no adjustment for those fluctuations.

The second and third DCS officers noted the fluctuations and started from the other end. They went to the averaging provision in regulation 8(3). Both decided that averaging should be applied, though they did not agree how. In my view they were both wrong in applying this provision at all. It applies only if "the amount of the claimant's net earnings fluctuates". Mrs C's net earnings did not fluctuate, even if payment did. They were, with a few exceptions and the annual upward adjustments, the same week after week. So the answer to the calculation of Mrs C's earnings cannot be found by using that paragraph. It must come from within regulation 8(1) or (2). The revisions cannot stand.

The tribunal's approach

It seems that at the hearing the presenting officer offered to drop the DCS decisions and adopt another solution. The tribunal rejected this offer. It took a different approach. It applied regulation 8(1)(b)(iv). In the tribunal's view the periods for which the payments to Mrs C were made exceeded a week, but were not made for a month, three months, or a year. So they must be made for "any other case". The rule is then to find the weekly equivalent of the payment by multiplying the payment by 7 and then dividing by the precise number of days in respect of which it is made. On the facts, that requires each payment to be identified and calculated separately. But, the tribunal observes, in this case it is not necessary to do that, because the result comes out at the weekly amount. This was attractive as it provided a simple answer. That simplicity is deceptive. It arose because Mrs C had weekly earnings. And in practice this solution requires a calculation in respect of each payment. That is not necessary if we look through the payments to underlying weekly earnings. The Secretary of State's representative argued that that approach was both inconsistent with the rules and with established authority. As I am not supporting the tribunal's approach, I do not need to deal in full with that response. I agree with the tribunal that as a ready answer to the unfairness the tribunal felt it faced in this case, it is attractive. It arrived at the right answer. But it did so for the wrong reason. It failed to note, as all the other solutions failed to note, that payments could be broken into their constituent parts. If that happens, this is not "any other case".

The authorities

Does authority prevent me reaching the conclusion set out above? The Secretary of State's representative relied on R(IS) 10/95, CIS 3737 2003, R(JSA) 2/03 and CG 4016 2005. In particular, the Secretary of State's representative relied, from R(JSA) 2/03, on the principle that "where a person is paid monthly, the earnings are paid "in respect of" a month."

Reference should also be made to CG 4941 2003 where regulation 8 is discussed in some detail.

The bedrock for these decisions is in R(IS) 10/95. Notwithstanding the reliance placed on that decision elsewhere, I have formed the clear view that it is not to be followed in the context of the earnings limit for carer's allowance. I have not looked at the precise wording of the regulations on which Deputy Commissioner Judge Hague reached that decision, but I do not consider that it can be applied, as it stands, to the Regulations I consider here.

I agree with the Deputy Commissioner that the starting point is an analysis of the contractual arrangements between the employer and employee concerned. That is where I started this analysis. I also agree with that decision, and with CG 4941 2003 below, that the rules need to work in a practical way. In R(IS) 10/95 the Deputy Commissioner was dealing with the application of similar regulations to a contract of daily employment for the purposes of identifying the entitlement of a supply teacher to what would now be jobseeker's allowance. The practical outcome of the work was a level of earnings that fluctuated unpredictably both weekly and monthly. The Deputy Commissioner took the strong view that in this context the weekly amount of earnings was to be determined by reference to the amounts paid monthly by the education authority to the teacher.

The critical part of his reasoning rests on the phrase "payable in respect of a period". At paragraph 15 he states:

"In my view, however, regulation 29(2)(a) [the regulation equivalent to regulation 6(2)(a) of the Regulations] clearly only envisages and provides for a payment in respect of a single period. Its wording is wholly inapt to cover the possibility of there being two or more periods covered by a single payment. Similar remarks apply to the words at the end of regulation 29(2) "and that period shall begin on the date on which payment is treated as paid under regulation 31 (date on which income is treated as paid)". It is true that section 6(c) of the Interpretation Act 1978, which is applicable to the General Regulations by virtue of section 23(1) of that Act, words in the singular normally include the plural. But that is only "unless the contrary intention appears" and in my judgment a contrary intention clearly appears in the case of regulation 29(2)."

The Deputy Commissioner goes on to identify practical problems in operating the rule in a situation where a single payment could be in respect of two or more periods. And he draws implicit support from a number of earlier authorities.

With respect, that reasoning cannot apply to this case and these regulations. This is because no account was taken in that reasoning of any provisions equivalent to the definitions in the Regulations. In this case – I have not considered whether that was so for R(IS) 10/95 – those definitions reverse the Deputy Commissioner's reasoning. It is the stated intention of the drafter of the Regulations that the singular should include the plural in so far as "payment" is concerned. That is unmistakeably clear from the definition of that term. If "payment" includes a part of a payment, then a single "payment" can be, for the purpose of the Regulations, payment for more than one period. The argument from the Interpretation Act operates to reinforce, not remove, the application of the Regulations on the basis that payments are divisible.

The other point on which the Deputy Commissioner relies is the definition of the end as well as the start of the period. The Deputy Commissioner considered this because he was concerned about practical effects. He considered he had achieved the practical answer. As I have already indicated, that problem does not arise on the facts of this appeal. More generally, the problem with his approach to practicality is that in giving a practical answer to provisions that deal clumsily with fluctuating non-weekly, non-monthly payments (such as the intermittent daily payments in that case) his solution forces an awkward interpretation on the far more usual case of weekly earnings. It is better to test practicality against the straightforward case not the obscure one. That is particularly so when the rules themselves provide, through the definitions, the means to do that. The adoption of the approach that payments are divisible so as to identify the underlying earnings may give rise to practical problems in some cases, but in this case it undoubtedly both solves those problems and removes what the tribunal perceived as injustice.

The Deputy Commissioner's therefore works to the reverse effect of that which he identifies when tested by the facts of this case. The practical effect of R(IS) 10/95 here is to turn a weekly earnings rule into a monthly payments rule. And the effect of the calendar then turns regular equal weekly earnings into fluctuating monthly payments. In other words, far from keeping things simple, his interpretation serves to add both direct and indirect complexity to the operation of the rule in what ought to be a straightforward case. Indeed, if he is right, and both I and the tribunal chairman are wrong, I cannot see any way in which someone can earn at the earnings limit weekly, while being paid monthly or part-annually, without unintentionally finding themselves "earning" over the weekly limit in some weeks. That is unavoidable because of the absence in the Regulations of any mechanism to deal with months containing five Mondays or the "week 53" problem.

I also conclude, without setting out lengthy citations about decisions to show something that is not in any of them - but after a careful reading of all the cases to which my attention is drawn, and others - that I cannot see any consideration being given to the crucial definition on which I rest this view in any authority cited by Judge Hague or in which his views are relied on, or in any of the commentaries. It may be that this is because in those other cases, or some of them, that definition is not present in the relevant Act or regulations. It is enough for this case that it is present here. I decline for these reasons to follow that authority, or those adopting it. I therefore do not accept the submission of the Secretary of State's representative.

I must also refer to CG 4941 2003, a decision of Commissioner Howell QC. That examines regulation 8 as it applies to fluctuating earnings. I find that it does not apply here, save at the very end of the period covered by this case where it applies directly. But I draw more general support from its reasoning. The Commissioner stresses that the:

"overriding purpose of the exercise, in the context of a weekly benefit such as [carer's allowance] which is there to provide assistance with current weekly living expenses for people without sufficient weekly earnings of their own, is the relatively short term one of producing a working week by week figure so as to know as quickly as possible whether benefit is payable or not."

The Commissioner also stresses that the purpose of the averaging provision in regulation 8(3) is to "enable the claimant's average weekly earnings to be determined more accurately".

He rejected the use by officials of that provision in that case to "ignore a step change in the rate of working and earning such as shown here in the later summer of 2001, and pretend that the claimant's work and earning had carried on at one uniform rate all year."

That case is distinct from this on its facts. There was, as just noted, a sharp change of earnings during the year covered by the appeal. Attempts by officers to produce an average level of earning over the year from those changing earnings were dismissed as inconsistent with the purpose both of regulation 8(3) and of the Regulations as a whole. Here there was an entirely consistent level of weekly earnings throughout each year. This turned into what appeared to be fluctuating earnings because of the way the rules applied. Averaging then made matters worse. In my view, the Commissioner's approach in CG 4941 2003 confirms the general view I take that the aim of these rules is to determine the weekly amount of earnings accurately. I see nothing here that detracts from that reasoning.

Summary

My judgment is therefore that the tribunal and the officers were wrong. Mrs C reached agreement that she was to have weekly earnings at the earnings limit for carer's allowance. Save for specific weeks where she earned more than that weekly amount, that is what she earned and that is what she was paid. The fact that she was paid those weekly amounts in somewhat erratic monthly payments does not alter the essentially weekly nature of her contract of employment and rate of pay. The payslips in evidence show that for most of the period in question each of those monthly payments was made up of, and can readily be broken back down into, the underlying weekly earnings. There is no evidential problem in identifying the constituent elements of any of the payments.

Accordingly, applying regulation 6(2)(a) and regulation 8(1)(a), read with regulation 2, my decision is that the weekly amount of earnings of Mrs C from her employment with Employer are to be calculated by reference to her weekly earnings. Further, I find that those weekly amounts of earnings did not exceed the earnings limit for carer's allowance save for those individual weeks when the earnings for a specific week atypically exceeded the limit.

The end of Mrs C's entitlement

When did Mrs C's entitlement to carer's allowance end? Both parties accept that Mrs C stopped being entitled to carer's allowance when she had the "step change" in earnings notified immediately by her on 5 12 2005. That was a Monday. She stated that she would be starting work on that day and earning over the weekly earnings limit. In reply to standard questions, she stated that she would be earning £1450 a month, that her earnings would not vary, that this replaced her previous work, and that she would get her first payment on 4 01 2006, paid in arrears. This is confirmed by the payslip produced later. It shows a pay date of 3 01 2006 and confirms the monthly earnings. It also shows PAYE and National insurance contributions being deducted in the normal way. The evidence is of a pattern of monthly employment, in contrast to the previous weekly employment. The weekly amount of earnings is clearly well in excess of the weekly earnings limit, however calculated. She accepts that. The first payment is treated under regulation 7 as being paid on the Monday of the week in which it is due to be paid (and was in fact paid). This is Monday 2 January 2006. Regulation 6 takes the payment forward, not backward, from that date. So her entitlement to carer's allowance stops on Sunday 1 January 2006 by reason of that letter and the step change. Because it is a step change, CG 4941 2003 applies directly to stop any application of the averaging rule to the earnings and payments across both sides of that change.

Weeks in excess of the weekly amount

It remains to be decided whether there are any individual weeks within the period from 30 04 2001 (the Monday of the week in which she first earned from this employment) to 1 01 2006 for which Mrs C is not entitled to carer's allowance. This is because her weekly earnings, calculated in accordance with the approach adopted in this decision, exceed the relevant weekly earnings limit for that week. I commented (at paragraph 17 above) that the payslips indicated that Mrs C appeared to have exceeded the carer's allowance limit for the first two or three weeks of work, before her steady weekly pattern of work and earnings emerged and continued for several years. See document 45 in the papers (her timesheet for the first month).

The pattern is less clear when the payslips change format and then the hours changed somewhat from 1 11 2004 9 (see from document 74 in the papers). It appears to be common ground now that the limit was also exceeded in some of the final weeks of this work before the step change occurred. I have not sought evidence about these weeks or discussed them with either party. Mrs C and her then representative accepted at the tribunal hearing that there were excess payments in some weeks. But the tribunal identified none. It is expedient at this stage to refer this back to the parties with the direction that they reach agreement if possible about which weeks are "excess weeks" in which she received more than the weekly amount of earnings as calculated in accordance with the approach set out in this decision. If the parties are unable to agree, then I give either party liberty to refer the matter back to me (or if I am not available another Commissioner) to decide that question and any decision about recoverability that then arises. Mrs C fully accepts that she should repay the carer's allowance received for some weeks. Indeed, I understand that she has already repaid some of them and did not receive the allowance for the final weeks of her potential entitlement under this decision. So no useful purpose is served by holding another hearing or considering the decision about recoverability of overpaid allowance further at this stage.

Procedural matters

I need spend no time on the questionable procedural correctness of the decisions taken for the Secretary of State in this case as none of them now stand.

My decision

My formal decision is to allow the appeal. Having done so, my effective decision is to set aside not only the decision of the tribunal but also those of the Secretary of State and to substitute my own decisions in their place. The broad conclusion is that Mrs C owes nothing to the Secretary of State and remains entitled to carer's allowance and therefore home responsibility protection for the full period of her work from 2001 to 2006 for every week in which her weekly earnings did not exceed the weekly limit. The five year period must now be checked to identify any "excess weeks" in which she was paid over the limit for the week.

David Williams

Commissioner

30 08 2008

[Signed on the original on the date stated] `