UK Social Security and Child Support Commissioners' Decisions

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[2008] UKSSCSC CH_51_2008 (25 September 2008)

CH/51/2008

DECISION OF THE SOCIAL SECURITY COMMISSIONER

The decision of the Social Security Commissioner

This appeal by the claimant succeeds.

The decision of the Fox Court appeal tribunal on 27 September 2007 under file reference 242/07/07687 is wrong in law and must be set aside. I substitute my own decision, as set out in paragraph 23 below, as the decision that the tribunal should have made.

The issue at the heart of this case

This case concerns the proper interpretation of the law and its application to facts that are not themselves in dispute. The issue relates to the assessment of the claimant's income for the purposes of establishing entitlement to council tax benefit. In particular, the question is the basis on which his incapacity benefit, as part of that income, should be calculated. Is it the usual rate – what the claimant describes as the "notional rate" – or is it the actual amount he is paid once a reduction has been made in respect of his occupational pension?

The background to this appeal

The claimant receives a local government pension as well as incapacity benefit. Although incapacity benefit is a contributory benefit, it has also been means-tested since April 2001 where an occupational pension is in payment. The basic rule is that where the claimant's pension exceeds £85 a week, then his or her incapacity benefit is reduced by half of the amount of the pension payments above that threshold (section 30DD of the Social Security Contributions and Benefits Act 1992). In other words, the reduction is 50 pence in the pound for every pound in pension payments over £85 a week.

Section 30DD does not specify whether it is the gross or the net amount of the occupational pension which must be taken into account in making that assessment. However, a Commissioner's decision establishes that the claimant's gross occupational pension payments before tax must be taken into account (R(IB) 3/05).

This appeal raises a different problem about gross and net payments. The question is whether, in assessing entitlement to council tax benefit, the claimant's income from incapacity benefit should be regarded as the normal gross amount of that benefit or the net amount actually paid after the operation of the section 30DD reduction.

The local authority at one stage took the view that the net amount of incapacity benefit actually paid was all that was taken into account. So in 2003/04, when the claimant was receiving £141.70 a week in pension income, £56.70 over the £85 a week threshold, his incapacity benefit entitlement was reduced by £28.35 a week (being half of £56.70). In November 2004 the local authority accordingly acknowledged (using the following year's rates) that the claimant's incapacity benefit was not the then standard rate of £74.15 but rather the reduced rate payable to him of £45.30. I note in passing that in 2004 the local authority took into account only the claimant's net occupational pension payments. This was before Mr Deputy Commissioner Paines decided R(IB) 3/05.

The decision of the local authority which was before the tribunal

On 22 May 2007 the local authority had a change of heart. It reassessed the claimant's entitlement to council tax benefit back to April 2004. Although it is not entirely clear from the correspondence, it appears that the local authority now took into account the gross rather than net occupational pension payments. This would be consistent with the decision in R(IB) 3/05. However, in doing its calculations, the local authority now used the standard or normal rate of incapacity benefit, rather than the actual amount paid to this claimant following the section 30DD reduction. The result was a decision that the claimant had been overpaid council tax benefit and was no longer entitled to that benefit.

In doing so the local authority purported to rely on regulation 30(5) of the Council Tax Benefit Regulations 2006 (S.I. 2006 No. 215). Regulation 30 itself governs the calculation of income other than earnings. Regulation 30(1) makes it clear that the starting point is the claimant's "gross income" and regulation 30(5) provides further that:

"(5) Where the payment of any benefit under the benefit Acts is subject to any deduction by way of recovery the amount to be taken into account under paragraph (1) shall be the gross amount payable."

This is in the same terms as regulation 40(5) of the Housing Benefit Regulations 2006 (S.I. 2006 No. 213). The same provision also appears elsewhere in the benefits system (see for example regulation 40(3) of the Income Support (General) Regulations 1987 (S.I. 1987 No. 1967) and now regulation 104(3) of the Employment and Support Allowance Regulations 2008 (S.I. 2008 No. 794)).

The local authority therefore concluded that the gross amount of incapacity benefit, before deductions, should be taken into account as income. The local authority decided that the overpayment of council tax benefit since 2004 was not recoverable as it was solely the result of official error. However, it maintained its position that there was no ongoing entitlement to council tax benefit.

The decision of the appeal tribunal

The claimant appealed to a tribunal. The tribunal confirmed the local authority's decision. In doing so, the tribunal chairman agreed with the interpretation of the regulation 30(5) then advanced by the local authority. He noted that the regulations "are quite clear" and that the "'gross figure' is the amount of income from his IB… before reductions and/or reductions" (presumably this was a misprint for "reductions and/or deductions" – but therein lies the problem).

The claimant applied for leave to appeal to the Commissioner. A District Chairman granted leave, expressing the view that the tribunal's decision was "clearly incorrect". That District Chairman also considered setting the tribunal's decision aside under section 13(2) of the Social Security Act 1998. With a hint of exasperation, he declined to do so, noting that if a fresh tribunal decided the matter the other way the local authority would probably wish to appeal. He therefore invited the Commissioner to give a binding ruling on the point.

The submissions to the Social Security Commissioner

In these proceedings a friend of the claimant has acted as his representative. The friend happens to work as a housing benefit officer in a neighbouring authority but in this appeal acts in a personal capacity only. The representative has provided a detailed and cogently argued submission setting out why the tribunal's decision is wrong in law. He points out a number of consequences that would flow from the approach adopted by the tribunal but which could not have been intended. For example, following that approach to its logical conclusion, a claimant whose incapacity benefit entitlement was entirely removed by the operation of section 30DD would still be treated as receiving the full rate of that benefit. The tribunal's approach also effectively results in double counting of the occupational pension payments.

The local authority has now conceded that its interpretation, and that of the tribunal, cannot be right in law. The authority invites me to send the case back to a fresh tribunal for rehearing. The claimant's representative submits that there is no justification for a remittal to a new tribunal.

I agree with the claimant's representative both on the proper interpretation of the relevant legislation and on the appropriate course of action to dispose of this appeal to the Social Security Commissioner.

The meaning of regulation 30(5) of the Council Tax Benefit Regulations 2006

I am wholly satisfied that regulation 30(5) of the Council Tax Benefit Regulations 2006 does not apply on the facts of this case. The claimant's incapacity benefit is not "subject to any deduction by way of recovery". Rather, it is subject to a reduction by virtue of the operation of section 30DD of the 1992 Act – no amount is being "recovered" from his benefit entitlement. Moreover, the effect of section 30DD is to make a reduction from the claimant's benefit and not to effect a deduction. For the purposes of this appeal I do not need to define with precision the scope of the term "any deduction by way of recovery" in regulation 30(5), but it would clearly include matters such as deductions for recoveries of overpaid benefit.

Were it relevant to the facts of this case, the same reasoning would apply to the equivalent provision in the housing benefit legislation. I note that the commentary in Housing Benefit and Council Tax Benefit Legislation Twentieth Edition 2007/2008 (by Findlay et al.) expresses the opinion that the parallel regulation 40(5) of the Housing Benefit Regulations 2006 would apply to deductions to recoup overpayments, "not to the situation where benefit is reduced for some other reason such as a trade dispute or for a JSA sanction" (at page 308).

I agree that the provision would not apply where a trade dispute or JSA sanction is involved, as these would be reductions in entitlement rather than the operation of "any deduction by way of recovery". There is a nice point as to whether regulations 30(5) and 40(5) are limited to deductions by way of recovery for overpaid benefit, as the commentary in Findlay et al. implies.

In the present case the claimant's representative suggests that the provision might apply where there is any deduction from benefit by virtue of regulations 34A, 34B and 35 and Schedules 9, 9A and 9B to the Social Security (Claims and Payments) Regulations 1987 (S.I. 1987 No. 1968). If so, the rule would extend to cover deductions for e.g. fuel debts, council tax arrears or unpaid fines. This depends on whether the word "recovery" in the phrase "Where the payment of any benefit under the benefit Acts is subject to any deduction by way of recovery" is referring solely to recovery of benefit overpayments or more generally to the recovery of other debts.

It is arguable that the narrower interpretation applies, as there are separate provisions, aside from the Claims and Payments Regulations, governing the recovery of benefit overpayments (Social Security, Payments on Account, Overpayments and Recovery) Regulations 1988 (S.I. 1988 No. 664)). The narrower view is also supported by paragraph 8 of Schedule 9B to the Claims and Payments Regulations. This expressly provides that a deduction from benefit in respect of child support maintenance is "a deduction by way of recovery" for the purposes of the income support and jobseeker's allowance schemes. There are no equivalent provisions in relation to deductions for other debts under Schedules 9 or 9A to the Claims and Payments Regulations. However, I do not need to resolve this issue for the purposes of the present appeal.

It follows in any event that the decision of the tribunal is erroneous in point of law for the reason set out at paragraph 16 above and so must be set aside (paragraph 8(4) of Schedule 7 to the Child Support, Pensions and Social Security Act 2000).

The appropriate disposal of this appeal to the Commissioner

The next question is the appropriate disposal of this appeal. The facts are not in dispute and there is no reason to send the case back to a new tribunal for rehearing. I am therefore able to give the decision that I consider the tribunal should have given (paragraph 8(5)(a) of Schedule 7 to the Child Support, Pensions and Social Security Act 2000).

My decision, in substitution for that of the appeal tribunal, is as follows:

The appeal to the tribunal by the claimant succeeds. The decision of the local authority dated 22 May 2007 is wrong in law and is revised. Regulation 30(5) of the Council Tax Benefit Regulations 2006 does not apply on the facts of this case. The correct approach is to assess the claimant's income based on (a) his gross occupational pension payments (see R(IB) 3/05), (b) the actual rate of incapacity benefit in payment to him after any reduction by virtue of section 30DD of the 1992 Act and (c) any other relevant income.

The local authority should recalculate the claimant's entitlement to council tax benefit accordingly.

If there is any dispute about the calculations that are made by the local authority following my decision as set out in paragraph 23 above, which cannot be resolved between the parties, the case may be returned to me (or to another Commissioner if necessary) for further decision.

(signed on the original) N J Wikeley

Deputy Commissioner

25 September 2008