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Cite as: [2014] UKUT 187 (AAC)
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MN v Bury Council & Anor (HB) (Human rights law : article 14 (non-discrimination)) [2014] UKUT 187 (AAC) (17 April 2014)
THE UPPER TRIBUNAL Appeal No. CH 1445 2013
ADMINISTRATIVE APPEALS CHAMBER
MN v Bury Council and Secretary of State for Work and Pensions (HB)
PROVISIONAL DECISION
The sums received by the appellant from the Netherlands WUV scheme for compensation for victims of national socialist persecution are to be treated in the same way as if they were received from one of the funds identified in paragraph 15(g) of Schedule 5 to the Housing Benefit Regulations 2008 and the equivalent provision in the Council Tax Benefit Regulations 2008.
Further directions for the full decision are set out below.
REASONS FOR DECISION
1 This is a provisional decision made on reference of the appellant’s appeal from the First-tier Tribunal under section 9(5)(b) of the Tribunals, Courts and Enforcement Act 2007. A First-tier Tribunal judge had decided the appeal. However, when application was made for permission to appeal the judge decided to set aside the decision and exercise the right to refer the matter to the Upper Tribunal instead of reviewing it. I accepted that reference. It is therefore the task of the Upper Tribunal in this appeal to redecide the appellant’s appeal in full.
Introductory
2 This reference was made at the same time as another reference in a factually related case was made to the Upper Tribunal by another appellant and also accepted by me. Both raise a common issue, namely a challenge to decisions of Bury Council, the challenge being made explicitly under the Human Rights Act 1998 and parallel European Union legislation.
3 I am informed that other cases raising the same point are also under consideration in the First-tier Tribunal. The full decision in each of the appeals depends or may depend on the outcome of consideration of the human rights issue.
I therefore decided to consider that issue first, and to defer full consideration of the cases until that matter had been decided. I further decided that I would take this case as a representative or lead case in respect of that issue and confine consideration to that case alone.
4 This appeal is an appeal by the appellant against a decision about housing benefit entitlement made by Bury Council. However, as discussed below, the point is one common to several sets of social security benefit rules that apply nationally. I therefore invited the Secretary of State for Work and Pensions to become a party to the appeal, and the Secretary of State accepted that invitation. Following that, Bury Council took no further part in the argument about the human rights issue, while of course still remaining interested in the outcome of the appeal.
5 There is a parallel decision of the Council relating to council tax benefit. The provision discussed below in the Housing Benefit Regulations 2006 (Schedule 5, paragraph 15(g)) is mirrored in the Council Tax Benefit Regulations 2006, Schedule 4, paragraph 16(g). The analysis of the housing benefit provisions clearly applies exactly also to the council tax benefit provisions. For simplicity, I consider only the housing benefit provisions below, but this decision is to be read as applying equally to the council tax benefit provisions.
6 On that basis I held an oral hearing of the case in Manchester on 18 03 2014 to hear argument for the appellant and the Secretary of State. I am most grateful to
Benjamin Tankel of counsel, instructed by the Free Representation Unit for the appellant and to Stephen Cooper, instructed by the Solicitor to the Department for Work and Pensions for the Secretary of State for their skeleton and oral arguments presented at the hearing. Bury Council were represented at the hearing but, as agreed by all concerned, did not take part directly in the hearing. As the argument was confined to the human rights issue, no other matters were discussed and, again as agreed, the appellant did not attend.
The human rights issue
7 The issue, at its simplest, is this. Provision is made in the Housing Benefit Regulations 2006, Schedule 5, paragraph 15(g) to exclude from income for assessment purposes the first £10 of any payment made by the German and Austrian Governments to victims of National Socialist persecution. The appellant receives compensation for that reason under a scheme made by the Netherlands Government. It is argued for her that she should be entitled to the same £10 disregard and that failure to allow this is unlawful discrimination of which she is a victim.
8 I must make full findings of fact before making my final decision in this case. Without prejudice to those full findings, I have approached this decision – as have the parties – on the following factual basis. It is common ground that the appellant is entitled to a pension under the Netherlands scheme, relevant details of which are set out below. It is therefore common ground that she was, as a child, a victim of Nazi persecution within the scope of the Netherlands scheme. She was a Netherlands national at the relevant times, and that nationality was required for entitlement to arise. The Embassy of the Netherlands has confirmed entitlement and that is not in dispute.
The relevant law
9 The specific provision giving rise to this issue is paragraph 15 of Schedule 5 to the Housing Benefit Regulations 2006 (SI 2006 No 213). Schedule 5 takes effect under regulation 40 of those Regulations. It is a list of items of income to be disregarded in whole or part in the calculation of income other than earnings for the purposes of housing benefit entitlement. Paragraph 15 lists:
“15. Subject to paragraph 34, £10 of any of the following, namely—
(a)a war disablement pension (except insofar as such a pension falls to be disregarded under paragraph 8 or 9);
(b)a war widow’s pension or war widower’s pension;
(c)a pension payable to a person as a widow, widower or surviving civil partner under the Naval, Military and Air Forces Etc (Disablement and Death) Service Pensions Order 1983 insofar as that Order is made under the Naval and Marine Pay and Pensions Act 1865 or the Pensions and Yeomanry Pay Act 1884, or is made only under section 12(1) of the Social Security (Miscellaneous Provisions) Act 1977 and any power of Her Majesty otherwise than under an enactment to make provision about pensions for or in respect of persons who have been disabled or have died in consequence of service as members of the armed forces of the Crown;
(d)a guaranteed income payment;
(e)a payment made to compensate for the non-payment of such a pension or payment as is mentioned in any of the preceding sub-paragraphs;
(f)a pension paid by the government of a country outside Great Britain which is analogous to any of the pensions or payments mentioned in sub-paragraphs (a) to (d) above;
(g)pension paid to victims of National Socialist persecution under any special provision made by the law of the Federal Republic of Germany, or any part of it, or of the Republic of Austria.”
Paragraph 34 provides a cap of £20 a week where more than one disregard is relevant to a claimant. It is not relevant for the purposes of this decision.
10 As Mr Cooper submitted at the hearing, this provision is the current statutory formulation of a test introduced into housing benefit rules – and social security entitlement rules more generally – as part of the general reform of income-related benefits that took place in 1987. Indeed, the 2006 Regulations are expressly stated to be consolidation regulations.
11 The provision now in paragraph 15 was previously in paragraph 14 of Schedule 4 to the Housing Benefit (General) Regulations 1987 (SI 1987 No 1971). Schedule 4 had the same format and title as the current Schedule 5. The list in paragraph 14 at the time when those Regulations were made was:
“14. Subject to paragraph 33, £5 of any of the following, namely–
(a) war disablement pension or war widow’s pension or a payment made to compensate for the non-payment of such a pension;
(b) a pension paid under the social security scheme of a country outside Great Britain and which either –
(i)is analogous to a war disablement pension, or
(ii)is paid to a war widow in respect of a person’s death but is otherwise analogous to such a pension;
(c)a pension paid under any special provision made by the law of the Federal Republic of Germany or any part of it, or of the Republic of Austria, to victims of National Socialist persecution.”
Regulation 33 was a similar capping provision to that in the 2006 Regulations. The original wording of paragraph 14 was replaced in full by a new paragraph from 28 10 1995 by SI 1995 No 2792, regulation 5. This increased the sum allowed to £10 as well as expanding the categories of income listed.
12 Similar provisions to these are to be found in the other income-related benefit regulations made in 1987. For example, there is a directly parallel provision to paragraph 14 in paragraph 16 of Schedule 9 to the Income Support (General) Regulations 1987 (SI 1987 no 1967), again with a £5 disregard when the regulations first came into effect, but increased later to £10. The same provisions are also to be found in the Family Credit (General) Regulations 1987 (SI 1987 No 1973) at paragraph 14 of Schedule 2 to those Regulations and at paragraph 14 of Schedule 4 to the Council Tax Benefit (General) Regulations 1992 (SI 1992 No 1814).
Relevant income tax provisions
13 Although I was not taken to this by either party, I note that there is a similar provision exempting compensation for National-Socialist persecution from income tax. The current provision is in section 642 of the Income Tax (Earnings and Pensions) Act 2003. That was a codification of a provision in section 330 of the Income and Corporation Taxes Act 1988. This was itself a consolidation of a provision in the Income and Corporation Taxes Act 1970, section 377. The 1970 provision was, however, limited to compensation payable by the then Federal Republic of Germany of a kind that was exempt from German income tax. It originated as section 22 of the Finance Act 1961. Unusually, that section was enacted in terms that deemed it to have retrospective effect from the time when payments were first made.
14 A search of the Hansard database of discussions in Parliament produced the following. In reply to the debate in the House of Commons to the clause that became section 22 of the 1961 Act, the Minister, Sir Edward Boyle stated (at HC Deb 08 June 1961 vol 641 cc1473-6):
“I rise only to thank hon. Members for their comments and to say how much I agree with them. This is the third time in recent years that we have discussed this subject, and I would not be human if I did not feel a good deal happier speaking in response to the debate on this Clause this evening than I felt late at night when I responded to the debate on the Clause on this subject last time, or my right hon. Friend the Minister of Health felt when he held my office and replied to the debate on this subject in 1957.
All hon. Members realise that this is not an easy matter. The exemption contained in this Clause is contrary to the general principle of the Income Tax Act, which is that receipts of an income nature are taxable, irrespective of the reason underlying their payment, and that the sole criterion of the liability is the taxpayer's ability to pay. I mention that because one has to remember how dangerous it can be to make changes in our Income Tax law and to introduce new principles without due consideration.
When we discussed this matter last year, I think the Committee felt that this compensation arises in what are demonstrably exceptional circumstances of unprecedented hardship and suffering, and I assure my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) that Lord Amory and my right hon. and learned Friend in reviewing this matter took full note of the views expressed last year by hon. Members on both sides.
I agree that it is an impressive point that the hon. Member for Sowerby (Mr. Houghton) and my right hon. Friend the present Minister of Health took different views last year from those they took in 1957. I also agree with what my hon. Friend said about the work of my hon. and learned Friend the Member for Northwich (Mr. J. Foster) in this connection. Not only has he advocated this case eloquently in the House, but also in deputations, and I was very impressed with his arguments when he led a deputation to see me soon after I returned to the Treasury.
The Committee can be very pleased this evening that we are exempting with retrospective effect certain compensation payments made by the Federal German Government or the Government of any constituent States to victims of Nazi persecution who are resident in this country. I am grateful for the response which the Clause has had.”
15 The reasoning behind the 1961 measure was discussed in connection with a new clause being moved by a backbencher to the Finance Bill 1968. The new clause was not adopted. That clause was designed to extend tax relief to the Austrian scheme. In opposing its adoption the Minister (Mr Taverne) told the House of Commons:
“The hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) has raised a very difficult matter which I am sure has the sympathy of the whole House. He has drawn a parallel with exemption tax on payments made by the Federal German Government which, on the face of it, is a parallel calling for action, although I am not sure whether on closer examination it is a real parallel.
We start with a general principle of tax law which is of some importance, namely, that receipts of an income nature are taxable, whatever their source. If one starts looking at the general question, it becomes extremely difficult to differentiate between different sources of income which often may be payments arising from the most distressing circumstances and to say that in certain cases the origin of the payments can be a ground for exemption and in other cases not.
On the face of it, there was an exemption in 1961 for certain victims of Nazi persecution which would seem to give rise, in principle, reason and logic, apart from grounds of sympathy, to the argument that exactly the same test should be applied to other victims of Nazi persecution. But the reason why this special provision was made in 1961 was not only out of sympathy for the victims of Nazi persecution, victims of perhaps the greatest crime this century has known, but also because of the special circumstances in which the annuity in which they were paid became payable.
The background to the matter is this. The Federal German Government made specific provision for exempting those to whom they paid compensation from their tax law. They said that there was a limited amount which they felt they could afford to pay, and, to increase the amount which they felt able to pay to the victims of Nazi persecution, they exempted the payments from their general tax laws and said that they should not bear tax. They then requested all foreign Governments in the countries in which other victims of Nazi persecution who received these payments resided to make similar exemptions in their tax law in respect of them.
The reason it was felt possible to depart from the general rule that one should not look at the source from which taxable payments come in deciding whether they should be exempt from tax was that in this case the amount was calculated on the basis that the payments should be exempt from tax and it was, therefore, agreed that they should also be exempted from tax in the United Kingdom. No such special circumstances existed for pensions or social security payments made by the Federal German Government payable to other people who happened to be victims of Nazi persecution.
In this case, the position is rather different. As the hon. Member for Walsall, South said, the Austrian Government have said that persons whose pensions would otherwise be greater but for the fact that they had not paid contributions at the time of Nazi persecution should be paid their pensions in full. But, as I understand the position, these pension payments in Austria are subject to the general Austrian tax law and there is no provision that they should be exempt from Austrian tax law. In that sense, they are in a different position from the special category of payments covered by Section 22 of the 1961 Act.
I understood that the number of cases involved was very small. I now gather from the hon. Member for Walsall, South that about 4,000 people are affected. In the past, the Revenue came across Austrians who had been compensated under Section 22. Although they were not former German subjects, the Revenue found that the cases were very few and the payments were very small, and any tax which might have been due was given up on the grounds that the case was not worth pursuing.
I shall look at that question again, but, on the general principle, there is a distinction between the 1961 case and this case. This is not an annuity paid in the same way which is exempt from tax. This is an ordinary pension made up to those who could not pay their full contributions. In that special case, there would not seem to be special grounds for changing the general principle when so often one gets circumstances in which, under the law, the pension becomes payable but, nevertheless, the source for payment of an Income Tax nature cannot be looked at by the Revenue.”
16 This was subsequently subject to a number of questions and Ministerial Answers. One such question and answer were (Tax Exemption (Compensation for Nazi Persecution)
HC Deb 31 January 1978 vol 943 cc125-6W:
“Mr. Sainsbury asked the Chancellor of the Exchequer whether he will seek to extend the provisions of Section 22 of the Finance Act 1961, exemption from tax of compensation for National Socialist persecution, to exempt from tax comparable annuities paid under the law of the Austrian Republic.
Section 377 of the Income and Corporation Taxes Act 1970—formerly Section 22 of the Finance Act 1961—extends only to those compensation annuities paid by the Federal Republic of Germany to victims of National-Socialist persecution which were computed on the basis that they would be free of German and foreign tax. So far as I am aware, no comparable annuities are paid by the Austrian Republic. One-half of pensions paid by the Austrian Government to victims of National-Socialist persecution is exempt from United Kingdom tax—and has been since 1974—in the same way as similar pensions paid by the Federal Republic of Germany which are not wholly exempted under Section 377. I have no plans for increasing the amount exempted.”
17 Section 377 of the 1970 Act was re-enacted under section 51 of the Finance Act 1986 with effect from the tax year 1986-87. The section, as from 1986-87 read:
“Pensions paid to victims of National-socialist persecution
Annuities and pensions payable under any special provision for victims of National- Socialist persecution which is made by the law of the Federal Republic of Germany or any part of it or of Austria shall not be regarded as income for any income tax purpose.”
This plainly deals with the point covered by the Ministerial Statement in 1968 and by the question and answer in 1978 and shows a change of government policy on the point.
Treatment in comparable states
18 Other official sources open to consultation on the Internet, and linked from a reference given to me by Mr Tankel (at www.claimscon.org) (and which both parties agreed I should consult), are the equivalent treatments of this form of compensation by comparable states. Two comparators may be noted namely the United States of America and Australia. Both are of course common law states and both shared with the United Kingdom in the conflicts that followed from Nazi persecution. Similarly, all three states received victims of persecution into their territories during and following that period.
19 The Australian Social Security Act 1991, section 8(8)(n) specifically exempts “an amount paid, under the law of, or applying in, a country or part of a country, by way of compensation for a victim of National Socialist persecution”. This covers not only the German and Austrian systems for paying restitution to victims of Nazi persecution, but also payments payable under the Netherlands VUW scheme (but not all Netherlands schemes) and other schemes. However, the Australian Guide to Social Security Law, version 1.203 as at 20 03 2014, Part 4, chapter 4.3, section 4.3.6 at paragraphs 4.3.6.30 and 40 (set out in full on the relevant website) focuses on the German, Austrlan and Netherlands schemes. Any such payments are exempted from being considered as income for social security purposes.
20 United States federal law also exempts all such compensation. The relevant law is Public Law 103-286 (at 108 Stat 1450) enacted on 1 08 1994. Like the Australian law, this exempts all payments made to individuals because of their status as victims of Nazi persecution from inclusion as income for social security and related purposes. Until its enactment in 1994, previous provision granted exemption to the German, Austrian and Netherlands schemes. The US scheme is detailed on the Official Social Security Website. Treatment of the Netherlands VUW scheme is detailed in the US Program Operations Manual System at paragraphs SI 01130.610 and SI 00830.725.
21 I draw from those comparators the conclusion that those responsible in both those states formed the view some time ago that the German, Austrian and Netherlands schemes should be treated by law in the same way for social security (and other) purposes.
The nature of the Netherlands WUV scheme
22 There are brief details about the Netherlands scheme in the papers before me, and their relevance to the appellant is confirmed by the letter from the Netherlands embassy. Again, the resources available on the internet supplement these valuably. In particular, there is an official English guide to the relevant scheme on the internet site maintained by the Sociale Verzekeringsbank, the Netherlands social security administration responsible. Entitled The Benefit Acts for Victims of War, it is held at www.svb.nl/images/9567EX.pdf.
This makes a number of features of the scheme under which the appellant receives compensation clear. It is funded by the Netherlands Government from tax revenues, and is not a scheme financed by the German (or Japanese) authorities. It is established by Netherlands law and is part of the national social security system of the Netherlands. It is not based on any international agreement. It is specifically limited to victims of persecution or violence of war. It is not a property compensation scheme. And of particular importance here, it is available only to those who are or were Dutch nationals or those who were persecuted on Dutch territory and later became Dutch nationals.
23 My concern here is with the scheme under which the appellant is paid, the WUV scheme, established under the Benefit Act for Victims of Persecution 1940-45 (the WUV Act). It is operated alongside the Benefit Act for Civilian War Victims 1940-45 (the Wubo Act). But it is separate from it, and the latter, compensating victims of war rather than victims of persecution, is still an open scheme. For example, the guide noted above shows that compensation may be available on new claims where someone is injured by an unexploded bomb that remains after war. Only the WUV scheme is relevant here.
24 This scheme is to be compared, on the information available to me, with the Austrian and German schemes. The critical qualification to come within the Austrian scheme is presence in Austria at the time of the Anschluss (12 03 1938). There are a range of German provisions under German national schemes. A common provision is that there is no entitlement under general German schemes if the German government has reached a specific agreement with other European states. For example, an agreement was reached between the German government and the United Kingdom government under which single payments were made. That is now closed. And double compensation is, I understand, not allowed.
Conclusion about scope of the schemes
25 I have set out above what appears to be the history of the precise forms of the provision for such compensation in United Kingdom law, limited as it is to German and Austrian schemes. I have also compared it with the relevant United Kingdom income tax provisions because there appears from the way the tests are drafted to be common ground here even if there is no formal official expression that I have seen of that common ground. This was originally to confine any relief to German systems only and then, as noted, to extend it to Austrian systems. I have included the United States and Australian provisions because they show that other states have taken the view that the Netherlands WUV scheme should have similar treatment to the German and Austrian schemes. However, I have not found any official debate about the Netherlands scheme in the United Kingdom either when the income tax exemption was given to the German schemes or when both income tax and social security exemptions were extended to the Austrian scheme. Nor were the parties able to point me to any relevant contemporary discussion about the proper treatment of the Netherlands scheme.
26 I conclude from those comparisons, however, that there is an arguable case that the failure to include the Netherlands WUV scheme within the same provisions as the German and Austrian schemes for social security purposes may be discriminatory when judged, as it must now be, by the standards now required by the Human Rights Act 1998 and European Union law. This arises because the appellant, as a Netherlands national entitled to compensation under the Netherlands WUV scheme because she is a victim of persecution as defined for that scheme, is not entitled (and cannot be) under the German and Austrian schemes regardless of any other common circumstances. Further, that exclusion does not arise from German law or from international agreements to which the United Kingdom is a party. Nor indeed is it funded indirectly by Germany or any other state of international agency. It arises by reason of Netherlands law as part of the Netherlands social security system.
27 In drawing that conclusion, I emphasise that this is a conclusion made specifically with regard to the WUV scheme. I do not attempt to relate it to any other scheme that similarly compensates victims of persecution from that time, many of which are based on international agreements between Germany and other states. Nor does it apply to other Netherlands schemes that are not confined in the way the WUV scheme is confined to victims of persecution. And, in particular, I am not concerned with comparisons with schemes (such as the United Kingdom scheme) under which capital sums were paid. Nor am I concerned with schemes for compensation for seizure or loss of property.
28 Further, it is clear that
this focus means that my concern is with a limited and closed class of victim. By
its very nature it is now also a small class as the period to which the
compensation relates closed in 1945. Although the WUV scheme does allow (as in
this case) compensation to a child who lost a parent due to persecution or
whose parent was a victim of persecution where the child also suffered, that
still makes the youngest potential claimant someone who has been an adult for
some years. In this case the Netherlands Embassy confirms that the appellant is
recognised as a second generation victim of persecution because of the effect
of illnesses or disabilities as a result of the appellant’s mother’s
internment. (The appellant was born in 1964). Given that the official view just
20 years after the closure of the Austrian scheme was that the numbers then
were small, it is unlikely that many are now included in this class, even with
the inclusion of second generation victims such as the appellant (no later
generations are included). And all those who are in the class can be
identified, as happened here, by the Netherlands authorities.
Is there discrimination against a Dutch claimant?
29 As I understand it in the light of the above, a citizen of the Netherlands who is entitled to compensation under the WUV scheme is excluded from any entitlement, regardless of circumstances, under any German or Austrian scheme. Nonetheless, he or she is entitled to that compensation because of either of direct being persecuted by the National Socialists before 1945 or direct persecution of a parent.
30 That presents the challenge raised for the appellant. It was put starkly, but not in my view with undue exaggeration, by Mr Tankel. If a Dutch national had been put on a train to a concentration camp by the Nazi authorities or those acting for them, and then suffered persecution, he or she would plainly come potentially within the Netherlands scheme. But if he or she was German or Austrian, then he or she would come under other schemes even if put on the same train to the same destination to suffer the same persecution. And, he argued, there was no essential difference between the compensation paid by the schemes or the circumstances giving rise to that compensation. The key point is that the Netherlands scheme is a national scheme based on nationality criteria.
31 I am satisfied that that constitutes a form of discrimination based on eligibility for one scheme rather than another, which itself is based on nationality.
Is the discrimination within Convention rights?
32 It is common ground that the rights of an individual to any social security benefit in the United Kingdom are possessions within the meaning of Article 1 of Protocol 1 to the European Convention on Human Rights and that accordingly the appellant is entitled to peaceful possession of those rights and to be protected from deprivation of them.
33 That must be read with Article 14 of the Convention:
“The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”
34 Mr Tankel contended that the appellant was subject to discrimination within the scope of this provision because she had been subject to a different rule as a Netherlands national to the rule to which she would have been subject had she been a German or Austrian national. He relied on this in particular on the judgment of Baroness Hale in AL(Serbia) v Secretary of State for the Home Department [2008] 1 WLR 1434, at para 28. The question should be, he submitted, not whether there was discrimination – there was – but the nature of the discrimination and the extent to which this imposed a duty on the public authority to justify the discrimination. In this case, he argued, this was nationality discrimination and accordingly very weighty justification was needed. That was the case whether this was direct discrimination, as he argued, or indirect discrimination.
35 That was the view taken by the First-tier Tribunal. The Tribunal held that the appellant was put in a less favourable position than that of German and Austrian nationals with the same history. This was, however, something that the Tribunal had no power to remedy.
36 Mr Cooper submitted for the Secretary of State that there was no direct discrimination in this case. The rules did not as such discriminate. It was a case that certain schemes – and those who qualified under those schemes – had the advantage of this provision. Anyone else did not. That was not of itself an issue of nationality or indeed other specific discrimination by “other status”. Nor was this indirect discrimination. In particular, it could not be said (as he informed me had been argued before other tribunals) that this was discrimination against Jewish people. If it was said to be indirect nationality discrimination then it had to be shown – and it had not been shown – that compensation payments had been made to a significantly higher number of German or Austrian nationals than victims of other nationalities.
37 More generally, while it was accepted that the appellant, as the recipient of a pension from the Netherlands government, was treated differently from a person in receipt of a pension under the German or Austrian government schemes, it was not accepted that this was because the appellant had any “other status” within the scope of Article 14. There was no personal characteristic that defined that status. Perhaps implicitly conceding that the First-tier Tribunal might however be right on this, the submission for the Secretary of State was that if so it was in the outer rings of the concentric circles to which Lord Walker and Baroness Hale referred in R(RJM) v Secretary of State for Work and Pensions [2008] UKHL 63.
38 In my view, the First-tier Tribunal judge took the correct approach on this point. The appellant is identified for present purposes because she satisfies two criteria: Netherlands nationality and the status as being a victim of Nazi persecution. It must be shown that both criteria are met for someone to come within the WUV scheme. Neither is sufficient in isolation. But someone who meets both criteria thereby falls outwith the criteria for the otherwise comparator German and Austrian schemes. In my view that is sufficiently clear to be within the scope of “other status” if not within the scope of the express reference to nationality in Article 14. I do not see any need for statistics to be produced to establish this, although no doubt such statistics do exist precisely because the comparison is between two closed classes both defined by national legislation and both relating to schemes run by government authorities.
39 Summarising this point, I respectfully take comfort from the recently expressed approach of the Master of the Rolls in R(MA and others) v Secretary of State for Work and Pensions [2014] EWCA Civ 13, the “bedroom tax” case about housing benefit:
- In contrast to domestic and EU equality law, the Strasbourg case law does not speak of "direct" or "indirect" discrimination. When analysing the extent of justification required, it is the substance of the discrimination which matters, not its form. I doubt whether it matters whether the discrimination is properly to be characterised as direct, indirect or Thlimennos. It is said that it does matter because the bar is set higher for justification of direct than for indirect or Thlimennos discrimination. But it is clear from what Lady Hale said at para 19 in Humphreys v Revenue and Customs Commissioners [2012] UKSC 18, [2012] 1 WLR 1545 that in a benefits case the test for justification is the same however the discrimination is characterised. I shall return to justification later.
40 I conclude, as did the First-tier Tribunal, that the appellant is entitled to be viewed as a victim of discrimination by reference to Article 14 read with Article 1 of Protocol 1 to the European Convention on Human Rights in light of the above.
Justification
41 As the Master of the Rolls observed in the above passage, the issue of justification of discrimination within the rules for a social security benefit was considered fully by the Supreme Court recently in Humphreys v Her Majesty's Revenue and Customs [2012] UKSC 18, where the judgment of the Court was given by Baroness Hale. I set the relevant passage out in full:
- The proper approach to justification in cases involving discrimination in state benefits is to be found in the Grand Chamber's decision in Stec v United Kingdom (2006) 43 EHRR 1017. The benefits in question were additional benefits for people who had to stop work because of injury at work or occupational disease. They were entitled to an earnings related benefit known as reduced earnings allowance (REA). But on reaching the state pension age, they either continued to receive REA at a frozen rate or received instead a retirement allowance (RA) which reflected their reduced pension entitlement rather than reduced earnings. Women suffered this reduction in benefits earlier than men because they reached state pension age at 60 whereas men reached it at 65.
"The scope of this margin will vary according to the circumstances, the subject-matter and the background. As a general rule, very weighty reasons would have to be put forward before the Court could regard a difference in treatment based exclusively on the ground of sex as compatible with the Convention. On the other hand, a wide margin is usually allowed to the State under the Convention when it comes to general measures of economic or social strategy. Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is in the public interest on social or economic grounds, and the Court will generally respect the legislature's policy choice unless it is 'manifestly without reasonable foundation.'"
- The phrase "manifestly without reasonable foundation" dates back to James v United Kingdom (1986) 8 EHRR 123, para 46, which concerned the compatibility of leasehold enfranchisement with article 1 of the First Protocol. In Stec, the Court clearly applied this test to the state's decisions as to when and how to correct the inequality in the state pension ages, which had originally been introduced to correct the disadvantaged position of women. "Similarly, the decision to link eligibility for REA to the pension system was reasonably and objectively justified, given that this benefit is intended to compensate for reduced earning capacity during a person's working life" (para 66). The Grand Chamber applied the Stec test again to social security benefits in Carson v United Kingdom (2010) 51 EHRR 13, para 61, albeit in the context of discrimination on grounds of country of residence and age rather than sex.
- The same test was applied by Lord Neuberger (with whom Lord Hope, Lord Walker and Lord Rodger agreed) in R (RJM) v Secretary of State for Work and Pensions [2008] UKHL 63, [2009] 1 AC 311, which concerned the denial of income support disability premium to rough sleepers. Having quoted para 52 of Stec he observed, at para 56, that this was "an area where the court should be very slow to substitute its view for that of the executive, especially as the discrimination is not on one of the express, or primary grounds". He went on to say that it was not possible to characterise the views taken by the executive as "unreasonable". He concluded (para 57):
"The fact that there are grounds for criticising, or disagreeing with, these views does not mean that they must be rejected. Equally, the fact that the line may have been drawn imperfectly does not mean that the policy cannot be justified. Of course, there will come a point where the justification for a policy is so weak, or the line has been drawn in such an arbitrary position, that, even with the broad margin of appreciation accorded to the state, the court will conclude that the policy is unjustifiable."
- Their Lordships all stressed that this was not a case of discrimination on one of the core or listed grounds and that this might make a difference. In R (Carson) v Secretary of State for Work and Pensions [2005] UKHL 37, [2006] 1 AC 173, both Lord Hoffmann and Lord Walker drew a distinction between discrimination on grounds such as race and sex (sometimes referred to as "suspect") and discrimination on grounds such as place of residence and age, with which that case was concerned. But that was before the Grand Chamber's decision in Stec. It seems clear from Stec, however, that the normally strict test for justification of sex discrimination in the enjoyment of the Convention rights gives way to the "manifestly without reasonable foundation" test in the context of state benefits. The same principles were applied to the sex discrimination involved in denying widow's pensions to men in Runkee v United Kingdom [2007] 2 FCR 178, para 36. If they apply to the direct sex discrimination involved in Stec and Runkee, they must, as the Court of Appeal observed (para 50), apply a fortiori to the indirect sex discrimination with which we are concerned.
42 The test therefore must be: is the exclusion of the Netherlands scheme from these provisions “manifestly without reasonable foundation” as viewed, as now it must be, in the light of the requirements of the European Convention on Human Rights and the Human Rights Act 1998. I say “as now it must be” because the history of the provision suggests the current formulation predates any concern with compliance with the 1998 Act and the view now taken by the European Court of Human Rights that social security benefits are possessions for the purpose of Article 1 of Protocol 1. So it did not need to be any part of official thinking when the current rules were first adopted.
43 But I am further assisted by the “bedroom tax” case on this because, as Mr Cooper rightly submitted, the specific question of justification of discrimination within the Housing Benefit Regulations was the focus of the Master of the Rolls and with him Longmore and Ryder LLJ in that case. Plainly, I am bound to adopt that approach. Having discussed the judgment of Baroness Hale set out above, the Master of the Rolls dealt with the submissions about the application of the test defined there, as it applied to the “bedroom tax” case, as follows:
- A further factor that is relevant to the intensity of the court's review of the scheme is that the Regulations were approved by affirmative resolution in both Houses of Parliament. That is not a bar to judicial review, but it is a factor which must be firmly borne in mind. When a statutory instrument has been reviewed by Parliament, respect for Parliament's constitutional function calls for considerable caution before the courts will hold it to be unlawful: see Bank Mellat v HM Treasury [2013] 3 WLR 179 at para 44 per Lord Sumption and Black v Wilkinson [2013] EWCA Civ 820, [2013] 1 WLR 2490 at paras 46 to 49. In my view, considerable weight should be given to this factor, particularly because some of the alleged shortcomings in the scheme that have been canvassed before us were debated in Parliament. The effect of the 2012 Regulations (as amended) in conjunction with the DHP scheme on the position of disabled persons was well understood by Parliament.
- Mr Westgate relies on a passage in the judgment of Lord Hope in In re G (Adoption: Unmarried Couple) [2008] UKHL 38, [2009] 1 AC 173 to support his submission that, in an area such as discrimination, the courts should be slow to defer to the judgment of the legislature. Lord Hope said at para 48:
"It is, of course, now well settled that the best guide as to whether the courts should deal with the issue is whether it lies within the field of social or economic policy on the one hand or of the constitutional responsibility which resides especially with them on the other: see, for example, R (ProLife Alliance) v British Broadcasting Corpn [2004] 1 AC 185, para 136, per Lord Walker of Gestingthorpe. The fact that the issue is a political issue too adds weight to the argument that, because it lies in the area of social policy, it is best left to the judgment of the legislature. But the reason why I differ from the Court of Appeal's approach is that it lies in the latter area as well. Cases about discrimination in an area of social policy, which is what this case is, will always be appropriate for judicial scrutiny. The constitutional responsibility in this area of our law resides with the courts. The more contentious the issue is, the greater the risk is that some people will be discriminated against in ways that engage their Convention rights. It is for the courts to see that this does not happen. It is with them that the ultimate safeguard against discrimination rests."
- I acknowledge that, despite the fact that we should (i) apply the manifestly without reasonable foundation test and (ii) exercise considerable caution before interfering with the scheme approved by Parliament, we are obliged to scrutinise carefully the reasons advanced by the Secretary of State in justification of his scheme: see Humphreys at para [22] and R (Quila) v Secretary of State for the Home Department [2012] 1 AC 621 at paras 45, 46 and 61 per Lord Wilson. That is particularly important since we are dealing with a vulnerable group (disabled persons) and the discrimination is closely connected with their disabilities.
44 I have set that out at length because I am asked to deal with a rather different kind of discrimination within the same regulations. It is not contended for the Secretary of State that this is a matter of high policy. Indeed, if I may say so, Mr Cooper with typical fairness and candour admitted that it was not entirely clear what the original policy was in 1987. I add to that that the regulations in issue here were subject to the affirmative procedure but that the original 1987 regulations were made within 12 months of the enabling legislation so were not referred to the Social Security Advisory Committee. I have not been taken to any other discussion at that time of the reasons for the precise provision in those regulations in issue here. Nor would I expect to find any detailed discussion about a minor point in one of several schedules.
45 Is there a reasonable justification for the exclusion of the Netherlands scheme? The justification offered by the Secretary of State, is – perhaps for that reason – far short of the kinds of justification seen in the “bedroom tax” case and that I and colleagues have seen in other similar cases. There is no evidence offered as to original policy or as to valid grounds for discriminating between the German and Austrian schemes on the one hand and the Netherlands scheme on the other. I have noted above that the only official justification I could find on the record was between the German scheme and the Austrian scheme. But that plainly is no longer relied on. So I am left with the general submission for the Secretary of State that:
“There are limited exceptions to the basic principle where, due to the specific circumstances which have given rise to the income payment, the government of the time has decided that those circumstances should be recognised by (usually) a partial disregard. This includes war pensions, which are subject to a £10 statutory disregard. The treatment of national Socialist persecution pensions falls into the same category. This is a matter within the Government’s margin of appreciation.”
46 Nor is there any evidence of any in depth analysis of the German, Austrian, Netherlands or other schemes to evidence why some schemes of this kind deserve the treatment accorded them in the Housing Benefit Regulations and others do not. I am told in submissions that “there is a difference between payments made by various governments to assist those who suffered as a result of the Second World War… and those made by Germany and Austria where the payments are generally of a restitutionary nature and recognise the culpability of their wartime governments”. That is unspecific and not supported by any detail of any of the “various” schemes. It is followed by another submission which in my view is simply wrong in fact when applied to the Netherlands scheme: “While it is accepted that some countries have created schemes using compensation payments from Germany and Austria, these may take different forms. For example as in this case…” I do not continue because that is factually wrong. The Netherlands scheme was not based on compensation from elsewhere.
47 It was then submitted that “there is a an even greater need in the current economic climate to consider every disregard or partial disregard very carefully.” This is supported by the comment that if the Netherlands scheme were included then a number of other schemes with a number of different bases should be included. I reject that justification also for two separate reasons. First, the policy dates back to 1986 or 1987 and the comment about “current economic climate” is hindsight. But secondly, and more important, I do not accept that a decision that there is no justification for the exclusion of the Netherlands scheme opens the doors, or the flood gates. I base that on three grounds: (a) that we are talking about small closed classes of beneficiaries; (b) my own analysis of the Netherlands scheme as compared with the German and Austrian schemes as one founded on national legislation and funded nationally; and (c) by reference to the approaches taken by the United States and Australian legislatures and authorities set out above.
48 Another argument deployed to support the current provision is that of the need for a “bright line”. That I take to be another version of the flood gates argument. Both the Australian and United States provisions show that drawing a bright line is not a problem here. It is where the line is drawn that is the problem.
49 I am forced to conclude that if there is a policy justification for this specific form of discrimination then it is one to which the Secretary of State could not point me and which did not emerge from my own researches. Indeed, as I have set out above, those researches pointed firmly to that conclusion rather than away from it. I raised at the hearing the question of further consideration of the justification for the provisions in question. Having reflected on this, I accept the point made by Mr Tankel. The Secretary of State had full opportunity both in written submissions and at the hearing to produce justification for the provision, and was given adequate time to do so. There is no reason why the Secretary of State should be given a third bite at that cherry. Indeed, to reflect on the test being applied, if there is clear justification then why have I not been shown it to date? I therefore conclude that I should set out my reasoning in full but not let it lead to yet another round of discussion on this narrow and focussed issue.
50 I conclude that the provision is discriminatory in a way that has not been shown by the Secretary of State to be based on any reasonable ground. Or, to put that in the terms of the test cited above, it is manifestly without reasonable justification.
A remedy?
51 The important question that follows is the one on which the First-tier Tribunal hesitated – remedy. This was discussed with the parties at the hearing. Mr Tankel rightly pressed the point that if there was discrimination then there should be a remedy. This was in secondary legislation not an Act of Parliament so the Upper Tribunal has the power, and therefore the duty, to provide that remedy.
52 On reflection, I agree with an approach suggested by Mr Cooper at the hearing and raised by Mr Tankel in argument. I should identify the discrimination following the approach taken by the Court of Appeal in Francis v Secretary of State for Work and Pensions [2006] 1 WLR 3202, R(IS) 6/06,but not attempt to redraft, read up or read down the current legislation. That case was one where the Court of Appeal found discrimination (on an appeal from a decision where I found none) but resisted the temptation to make good the defective law. Instead, it directed the matter to the attention of the Secretary of State in the following way (paragraphs 31 and 32 of the judgment of the court given by Sir Peter Gibson):
“Miss Lieven submitted in the alternative that the court should grant a declaration that Ms Francis was entitled to Maternity Grant. Mr Kolinsky accepted that that was the appropriate remedy. I agree. That would allow the Secretary of State to decide how best to reformulate the Regulations so as to exclude the discrimination identified in the present case. … I would allow the appeal and grant the declaration which I have indicated.”
53 Noting the agreement of both parties, I adopt that approach here and refer the matter to the attention of the Secretary of State. However, for immediate current purposes I must direct the appropriate course of action to the Council. This is that the Council is to consider that the sums received by the appellant from the Netherlands scheme are to be treated in the same way as if they had been received from the German or Austrian schemes. That I make as a provisional decision in the appeal, and that must now be considered before I make a full decision.
DIRECTIONS
1 The Council are to reconsider their decisions in this case in the light of the above decision. If the Council, as a result, makes any new decision to the advantage of the appellant then it is to inform the Upper Tribunal of this within one month of making the decision. If the Council, as a result, confirms its decisions, then it is to make a further submission to the Upper Tribunal within one month of confirming the decision explaining how it has given effect to this decision and how, if at all, that affects the decisions of the Council. The Upper Tribunal is to copy any submissions or information received from the Council to the appellant and representative.
2 If the Council makes the submission indicated in paragraph 1, and does not make a new decision to the advantage of the appellant, then the appellant and any representative may make a submission in response to the submission of the Council within one month of receiving a copy of it.
3 I will then consider further case management of the appeal, including a further oral hearing (unless both parties indicate that no further hearing is necessary).
Upper Tribunal Judge
[Signed on the original on the date stated]