"… [T]he calculation required by regulation 82 (1) (a) read together with regulation 54 of theUniversal Credit Regulations 2013 is irrational and unlawful in so far as employees who are paid on a four weekly basis (as opposed to a calendar monthly basis) are treated as having earned income of only 28 days' earnings in 11 out of 12 assessment periods a year."
"7. Basis of award (1) Universal credit is payable in respect of each complete assessment period within a period of entitlement. (2) In this Part an 'assessment period' is a period of a prescribed duration. (3) ... (4) In subsection (1) 'period of entitlement' means a period during which entitlement to universal credit subsists. 8. Calculation of awards (1) The amount of an award of universal credit is to be the balance of— (a) the maximum amount (see subsection (2)), less (b) the amounts to be deducted (see subsection (3)). (2) The maximum amount is the total of [various elements specified in sections 9-12]. (3) The amounts to be deducted are— (a) an amount in respect of earned income calculated in the prescribed manner …, and (b) an amount in respect of unearned income calculated in the prescribed manner …. (4) …" "
" Benefit cap (1) Regulations may provide for a benefit cap to be applied to the welfare benefits to which a single person or couple is entitled. (2) For the purposes of this section, applying a benefit cap to welfare benefits means securing that, where a single person's or couple's total entitlement to welfare benefits in respect of the reference period exceeds the relevant amount, their entitlement to welfare benefits in respect of any period of the same duration as the reference period is reduced by an amount up to or equalling the excess. (3) In subsection (2) the 'reference period' means a period of a prescribed duration.
"An assessment period is a period of one month beginning with the first date of entitlement and each subsequent period of one month during which entitlement subsists."
"The calculation of a person's earned income in respect of an assessment period is, unless otherwise provided in this Chapter, to be based on the actual amounts received in that period."
"(1) Unless regulation 82 or 83 applies, the benefit cap applies where the welfare benefits to which a single person or couple is entitled during the reference period exceed the relevant amount determined under regulation 80A (relevant amount). (2) The reference period for the purposes of the benefit cap is the assessment period for an award of universal credit."
"The benefit cap does not apply to an award of universal credit in relation to an assessment period where – (a) the claimant's earned income … is equal to or exceeds the amount of earnings that a person would be paid at the hourly rate set out in regulation 4 of the National Minimum Wage Regulations for 16 hours per week, converted to a monthly amount by multiplying by 52 and dividing by 12; or (b) …"
"14. UC was designed as a measure with a far-reaching social purpose. In particular, it was intended to bring about significant behavioural changes, incentivise work and increased earnings and to make the system simpler and fairer. It was designed to address both the complexity and perverse incentives inherent in the legacy benefit system, which had arisen as a result of its piecemeal development over a number of years. 15. Therefore, the policy objectives of UC included: (a) developing a system that was affordable, rewarding work and personal responsibility; (b) establishing a fairer relationship between benefit recipients and those who pay for them, particularly between out-of-work benefits and those receiving low pay; (c) targeting financial support more efficiently, by supporting those invulnerable circumstances; (d) establishing a simpler system for individuals to understand and for the Government to administer; (e) designing a system that will operate for all classes of case, straddling in work and out of work cases, which is essential if the system is to have strong work incentives."
"21. The calculation of UC in each monthly assessment period is a cornerstone of UC policy. All changes that occur in the assessment period are applied to the whole assessment period, and each policy consideration is looked at across the assessment period – such as the inclusion of disability elements, child elements, childcare costs, carer's element, conditionality arrangements, the treatment of income, capital, deductions, etc. 22. The assessment period is calculated as a calendar month. A calendar monthly basis is used as it is considered to best reflect the most common payment cycles (whether in terms of income, such as salary, or outgoings, such as bill payments). 23. The objective of workability and efficiency requires the same structure to operate for the whole population, notwithstanding that there are, of course, different types of payment cycles (such as irregular pay or weekly or lunar monthly pay). 24. The calendar month structure reflects the general position in modern working life, where individuals, even in more precarious employment, are usually paid monthly. Where claimants are unemployed, monthly assessment and payment of UC creates the discipline of budgeting and managing money on a monthly basis, which is considered to help improve skills which would reduce poverty whether in work or not. The same approach is applied whether a claimant is employed, unemployed or self-employed. This allows UC to be calculated on the same basis whether a person moves in and out of work or whether their earnings are composed of mixed employed and self-employed earnings."
"The Secretary of State decided to use the monthly assessment period … as the central component of UC. Accordingly, all entitlements are calculated on this basis, including, for present purposes, the application of the benefit cap. Other periods were considered, but resulted in other issues regarding entitlement which were likely to be detrimental to individuals and to undermine the social policy objectives of UC."
" Taking earnings into account in the assessment without averaging or attribution – As a first principle we want to reflect the cash flow into the household by taking into account the amount of earnings received in the assessment. For the majority of straightforward cases this will mean there is no need to apply complex averaging or attribution rules."
"(a) It is based upon an assessment period, as is the case for all other aspects of the calculation. (b) It supports a fundamental principle of UC by reflecting the cash-flow of the household in the assessment period rather than the number of hours that a person is working. (c) It uses RTI, which allows for an automatic calculation and is therefore efficient. UC is not designed to collect information regarding number of hours worked. (d) It provides for additional flexibility where, for example, a person might be able to secure employment at a higher rate and therefore choose to work fewer hours. (e) A fixed amount can be changed in future with minor adjustments. (f) The original fixed amount (described below) was a clear comparison with the level at which lone parents could access Working Tax Credit. It was recognised that the benefit cap would apply to lone parents to a greater extent and as such this approach would assist with smooth transition between the old and new systems."
"Accordingly, the DWP's position is that the current calculations are correct and in compliance with the law. The DWP is however always considering possible changes (consistent with the 'test and learn' philosophy) and this is one issue under consideration."
"12. It is not therefore possible with the current arrangements to process the 'pay cycle' data as part of the UC award. As I indicated in my first statement, the DWP is considering reforms in relation to pay cycles. However, this requires considerable input from policy, legal and technical stakeholders. It is not realistic to rely on the fact that HMRC is able to capture pay cycle data to conclude that UC decision makers can approach the calculations in the way suggested by the Claimants (i.e. by assuming that any salary payment which is paid with a 28-day 'indicator' will inevitably be paid in the same way on an ongoing basis). 13. The fundamental problem remains the need to maintain the integrity of the monthly Assessment Period structure which underpins UC and the need to base calculations upon actual data rather than predictions as to future earnings (which, in this context, are notoriously uncertain). Any reform needs to have regard to the complications of fluctuating pay patterns, multiple employment arrangements (with different patterns), and other forms of earnings and income."
"… [T]he choice of monthly assessment periods was based in part on the increasing prevalence of that salary cycle amongst the working population and because many household bills are payable monthly. Indeed, the alignment of the duration of the assessment period with household outgoings is intended to encourage responsible budgeting by low income claimants."
"The witnesses on behalf of the SSWP emphasise the importance of the fact that benefit awards made each month are not calculated manually by DWP officers but are generated by a computer programmed to take the many and varied inputs about the claimant's family and financial circumstances and work out the award each month. The automation of the process is an important advantage of the universal credit regime over the legacy benefits system for a number of reasons. First, it generates substantial savings in the costs of administration thereby releasing more money to be paid out in benefits. Secondly, it enables the amount awarded to respond immediately to changes in circumstances; a payment made seven days after the end of the assessment period can take into account any changes reported by the claimant during that assessment period. Thirdly, the overall move to digitisation prompts claimants to develop skills which enable them to access other online services which they might previously have been reluctant to use. This may itself be a way of reducing poverty, for example enabling access to cheaper online services offered by utilities. In order to achieve that objective it requires simple and automatic processes."
"The threshold for establishing irrationality is very high, but it is not insuperable. This case is, in my judgment, one of the rare instances where the SSWP's refusal to put in place a solution to this very specific problem is so irrational that I have concluded that the threshold is met because no reasonable SSWP would have struck the balance in that way."
"113. I start by saying that I recognise, as does Rose LJ, the extraordinary complexity of designing a system such as universal credit, and that it necessarily involves a range of practical and political assessments of a kind which the Court is not equipped to judge. I also accept that in order to be workable any such system may have to incorporate bright-line rules and criteria which do not discriminate fully between the circumstances of different individuals. … For those reasons I fully accept that a Court should avoid the temptation to find that some particular feature of such a system is 'irrational' merely because it produces hard, even very hard, results in some individual cases. 114. However, for the reasons which Rose LJ gives, that is not a sufficient answer in this case. Non-banking day salary shift is common and entirely predictable, and its arbitrary effect on entitlement to universal credit is now well-recognised, whether or not it was actually predicted when the scheme was being designed. That effect has a severely harmful impact, which they can do nothing to avoid, on very large numbers of vulnerable claimants. … That impact is not the inevitable consequence of the application of some fundamental principle of the legislation. I of course understand that it is a fundamental principle that entitlement should be based on monthly receipts, however much a claimant's income may vary from month to month. But an adjustment specifically to address the non-banking day salary problem would not in any real sense undermine that principle: indeed it could be said to vindicate it, since the receipt of salary in the 'wrong' month because of the mechanics of bank payment is purely factitious (unlike other kinds of irregular payment discussed in argument). … If anything, the present operation of the scheme runs positively counter to its declared purpose, as Rose LJ points out at paras. 100-101. It follows that I cannot accept that there is no way in which an appropriate adjustment can be made without prejudicing the overall statutory purpose; and I agree with Rose LJ that there is nothing in the evidence to justify the conclusion that no solution can be devised without causing unacceptable cost or problems elsewhere in the system."
"… [T]he First Claimant is in continuous and regular employment, earning regular amounts of money throughout every assessment period. However, in 11 out of 12 assessment periods the Regulations treat her (and others in her position) as having earned less income for that period than is in fact the case, because of the dates on which she was paid. The result is that she receives substantially less UC, perhaps some£400 per month or 20%, less, than would be the case if she was paid monthly. That is, self-evidently, a very significant reduction for somebody of modest means. As Mr Drabble correctly puts it, the First Claimant is treated as if she were not working enough, when in fact she is. Then, once a year, the Regulations treat her as having almost double the income she has actually earned in that period." (2) The second is that, contrary to the avowed legislative policy of encouraging work, the result of the 28-day cycle effect "discourages work when the work available is paid on a lunar month basis"
"The scheme is said to be designed to be responsive to changes in earned income, and to make work pay to the fullest possible extent. But in these circumstances, it is neither." (3) The third is that the result of the 28-day cycle effect is that it "causes the First Claimant's household income to fluctuate dramatically once a year, making it difficult to budget": see para. 54. He notes that what he describes as "a similar phenomenon" was caused by the non-banking day salary shift and was part of the basis of the decision in Johnson . (4) The fourth is that it will in the great majority of cases be impossible for UC claimants to persuade employers who pay on a 28-day cycle to shift to payment by the calendar month. Garnham J says, at para. 56: "… [T]he idea of having to choose employment based, not on the nature of the work, but on the particular pay cycle operated by the employer seems to me absurd. The consequence is to give the UC scheme an appearance of arbitrariness."
"It is … no part of the policy underlying universal credit to encourage claimants to base their employment choices on the salary payment date offered by a prospective employer. Yet that is what is happening for these Respondents."
"On the evidence in the present case, it is plain that some, at least, of the necessary computer software is in place and can readily be utilised. As noted above …, the data provided by employers to HMRC includes pay frequency. Presently, the DWP routinely receives only a subset of that data which does not include pay frequency; it is said that that information 'is not routinely accessible to operational delivery staff'. However, it is not suggested that other staff do not have access to that data or that it could not be made available."
"67. One important element of the UC regime was to align the assessment period with monthly payment and charging cycles. Rose LJ said at [56]: '… It is no part of the policy underlying universal credit to encourage claimants or employers to adopt a non-monthly salary cycle; on the contrary the choice of monthly assessment periods was based in part on the increasing prevalence of that salary cycle amongst the working population and because many household bills are payable monthly. Indeed, the alignment of the duration of the assessment period with household outgoings is intended to encourage responsible budgeting by low income claimants.' 68. I accept that accommodating a four-weekly salary cycle would not advance the behavioural change of encouraging people to plan their working lives around a monthly work and payment pattern, and that is a consideration in favour of the Secretary of State's present stance. But first, the weight to be attached to that consideration is somewhat reduced by the evidence discussed at [64] above to the effect that the data needed to manage four-weekly payments is already collected by HMRC. And second, that is not the only behavioural change in prospect. A solution to the lunar month problem would encourage people for whom the only employment available, or likely to become available, was paid four-weekly to take and keep such work, a central element in the UC regime. 69. I accept too that introducing a solution to the lunar month problem would make the UC process technically more complicated, although for the reasons discussed, it seems to me unlikely to be unmanageable. Furthermore, in my view, such a solution would make UC conceptually much simpler. 70. For the reasons discussed above, a solution to the lunar month problem would reduce disincentives to work, make the system fairer and reduce perverse incentives. In those respects, a solution of the lunar month problem would be consistent with the nature of the UC regime. 71. Ms Krahé says in her witness statement that the fundamental problem remains the need to maintain the integrity of the monthly assessment period structure which underpins UC and the need to base calculations upon actual data. But in my judgment the collection and deployment of the 'actual data' provided to HMRC would enable calculations to be made that not only respect the integrity of the monthly assessment period structure but enhance it by ensuring the calculation of income in each assessment period accurately represents actual receipts."
"79. The consequence of the lunar month problem is that for 11 months out of 12 the First Claimant's earned income is treated as being her earnings for just 28 days. The result of that is that the benefit cap is applied, and her UC is reduced, by perhaps as much as 20%. As discussed above, the disadvantages of allowing the lunar month problem to persist are manifest and serious. By contrast, the principle [ sic ] suggested disadvantages cannot survive the analysis of the Court of Appeal in Johnson. 80. The importance of ensuring that the payment system can be automated is clear and not in dispute. During the hearing, much the most powerful consideration in favour of maintaining the status quo was the suggested difficulty in collecting and deploying the data necessary to enable the calculation of earned income in relevant assessment periods to be carried out automatically when payment had been made on a four-weekly basis. But that difficulty substantially disappeared when the further evidence was obtained from Ms Hargreaves and Ms Krahé [this is a reference to their second witness statements]. There was little evidence that the SSWP ever focused on the lunar month problem, as opposed to the general benefit of a universally applicable monthly assessment period, and nothing to suggest the possibility of solving that problem was ever considered and rejected. 81. In those circumstances, it seems to me that the outcome of the balance is obvious and irresistible. I cannot see how any reasonable Secretary of State could have struck the balance in the way the SSWP has done in this case."
"83. It is right to say that the Court of Appeal's conclusion in Johnson was expressly and deliberately confined to the specific problem of 'non-banking day salary shift'. Rose LJ said at [107] that 'the SSWP's refusal to put in place a solution to this very specific problem' was unreasonable. That conclusion was confined to the 'very specific problem' of 'non-banking day salary shift'. At [86] Rose LJ said, 'We are not concerned here with making an exception for people who are paid at frequencies other than monthly.' 84. In his concurring judgment Underhill LJ added, at [116], '…I regard this as a case which turns on its own very particular circumstances. It has no impact on the lawfulness of the universal credit system more generally.' 85. Mr Brown argues, against that background, that any extension of the Johnson approach to other pay cycles would reintroduce precisely the uncertainty which the Court of Appeal, in overturning the Divisional Court, were concerned to remove. 86. It is plain that the Court of Appeal was anxious, whilst correcting the unfairness and irrationality in cases such as Ms Johnson's, to preserve intact the structure and tenets of the UC scheme as approved by Parliament. But in my view, the principles the Court identified, and the essential logic of the argument they accepted, apply with equal force to cases of claimants paid on a four-weekly basis. 87. In fact, it can fairly be said that the logic applies with even greater force. First, four-weekly payments are genuinely and consistently regular; they do not incorporate the inevitable, if occasional, irregularity that comes with monthly payments as described by the Court of Appeal. Second, in monthly payment cases the difficulty arises in a few months each year; with lunar monthly cases such as the First Claimant's, it arises in 11 months out of 12. In those circumstances, it seems to me that the case for the Regulations making an exception for such claimants is even stronger than it was in Johnson . The one substantial ground on which a Secretary of State might reasonably decline to make such an exception is if the availability of data by RTI threatened the integrity of the automated processing of claims. And such evidence as there is points in the opposite direction on that issue."
"The second ground on which the Lord Chancellor's Decision is challenged encompasses a number of arguments falling under the general head of 'irrationality' or, as it is more accurately described, unreasonableness. This legal basis for judicial review has two aspects. The first is concerned with whether the decision under review is capable of being justified or whether in the classic Wednesbury formulation it is 'so unreasonable that no reasonable authority could ever have come to it': see Associated Picture Houses Ltd v Wednesbury Corp[1948] 1 KB 223 , 233-4. Another, simpler formulation of the test which avoids tautology is whether the decision is outside the range of reasonable decisions open to the decision-maker: see e.g. Boddington v British Transport Police[1998] UKHL 13 ;[1999] 2 AC 143 , 175 (Lord Steyn). The second aspect of irrationality/unreasonableness is concerned with the process by which the decision was reached. …"
"The common law no longer insists on the uniform application of the rigid test of irrationality once thought applicable under the so-called Wednesbury principle. The nature of judicial review in every case depends upon the context."
"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 on some ground (such as irrationality) which is within the ambit of Parliament's review. This applies with special force to legislative instruments founded on considerations of general policy."
"I recognise, as does Rose LJ, the extraordinary complexity of designing a system such as universal credit, and that it necessarily involves a range of practical and political assessments of a kind which the Court is not equipped to judge. I also accept that in order to be workable any such system may have to incorporate bright-line rules and criteria which do not discriminate fully between the circumstances of different individuals. … I fully accept that a Court should avoid the temptation to find that some particular feature of such a system is 'irrational' merely because it produces hard, even very hard, results in some individual cases."
"There is a compelling reason to her this appeal, namely to determine whether Graham J.'s careful analysis in his judgment has carried the effect of R (Johnson) v Secretary of State for Work and Pensions[2020] EWCA Civ 778 ;[2020] PTSR 1872 beyond its intended scope, see paragraphs 83 to 86 of his judgment. I grant permission on all grounds."
"[CPAG] recommended using existing arrangements for averaging earnings, which are currently used to determine whether claimants are earning enough to exceed the threshold for in work conditionality – if they are in-work but below the threshold they may be required to look for more work in order to receive UC and face sanctions if they do not continue to seek additional work. The averaging, which is done to make sure the system does not unfairly penalise people, currently has to be done manually. CPAG recommended the system be applied immediately due to the 'serious financial losses for affected claimants'."