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Change to DWP guidance on recovering hardship payments for sanctioned Universal Credit claimants

Thursday 1 July 2021

Matthew Ahluwalia of the Garden Court Chambers Welfare Benefits Team was one of the counsel in the case. He was instructed by Sarah Clarke and Emma Vincent Miller of Public Law Project.

Case of B v SSWP – settled

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Press release by Public Law Project is here. PLP’s explainer to claimants and advisers is here. Rightsnet post is here.

Following judicial review proceedings, the DWP have amended their policy on recovery of hardship payments – an important change for anyone who has been sanctioned under Universal Credit.

In brief, the Claimant challenged the DWP’s refusal to exercise discretion not to seek the recovery of hardship payments that were paid to the Claimant. Under the statutory scheme, the Secretary of State for Work and Pensions (SSWP) has discretion as to whether or not to seek the recovery of such hardship payments. However, the SSWP had denied that this discretion existed, and/or appeared to have misdirected herself as to the scope of any such discretion. She, therefore, refused to consider whether or not it should be exercised on the facts of this case. The Claimant challenged this refusal, arguing that this was an error of statutory construction and that the SSWP’s reliance on the wording in the hardship payment application form was a fetter on her discretion.

After the claim was issued in the Administrative Court, the DWP, in their Acknowledgement of Service, indicated that they did not intend to defend the claim. A settlement was reached between the parties and the DWP’s policy was changed.

The key outcome is that it is now publicly acknowledged that the DWP does have discretion as to whether or not to recover hardship payments. It is to be hoped that this will increase take-up of hardship payments among sanctioned Universal Credit claimants, with greater reassurance that this need not necessarily add to claimants’ financial hardship later down the line.

Facts

B, a single mother, was sanctioned six times by the DWP under her Universal Credit claim. This deprived her of the standard allowance of her Universal Credit award for over a year and a half. She appealed those decisions to the tribunal and successfully overturned each decision.

In the meantime, B had claimed hardship payments. Hardship payments are available to Universal Credit claimants who have been sanctioned and are in ‘hardship’. The rate of payments is approximately 60% of the standard allowance element. The criteria for entitlement for hardship payments are set out in regulation 116(1) of the Universal Credit Regulations 2013/376. A claimant who has been sanctioned must be a) aged 18 or over, b) meet any compliance condition under regulation 104(2)(a)(i), c) complete the approved form, d) provide the information required. Further, regulation 116(1)(e) provides that it is a precondition that “the single claimant or each joint claimant accepts that any hardship payments that are paid are recoverable.” Finally, the Secretary of State must be “satisfied that the single claimant or each joint claimant is in hardship” ((1)(g)).

If an applicant/claimant makes an application for a hardship payment and meets the criteria for entitlement, the Secretary of State must make a hardship payment; it is a matter of statutory entitlement as opposed to a discretionary payment.

‘Hardship’ under reg 116(1)(g) means that because Universal Credit has been reduced as a result of a sanction or benefit offence, the applicant “cannot meet their immediate and most basic and essential needs”, or those of a child for whom they are responsible. ‘Needs’ is further defined as “accommodation, heating, food and hygiene.”

However, because hardship payments were (prior to this challenge) treated by the DWP as always being recoverable, many Universal Credit claimants have been put off from applying for this support as it effectively doubles the length of time of the sanction, since money would be deducted from future monthly Universal Credit payments to pay off the hardship payment.

B brought judicial review proceedings, challenging the lawfulness of the DWP’s decision-making in seeking to recover her hardship payments. B’s arguments were that the DWP had misinterpreted the statutory provisions around the recovery of hardship payments (ground one) and that the Secretary of State’s approach amounted to a fetter of her discretion (ground two). The impact of the DWP’s position was to increase the financial hardship on B, who at the time was still dealing with the effects of the sanctions as well as other deductions on her Universal Credit claim.

Ground One arose because section 71ZH of the Social Security Administration Act 1992 provides that the SSWP has statutory discretion as to whether to recover hardship payments (“may recover”). In line with this, regulation 119 of the Universal Credit Regulations 2013 refers to hardship payments being “recoverable” in accordance with that section. Regulation 116(1)(e) refers to the claimant agreeing that any such payments are “recoverable” i.e. they can be recovered. There is nothing in the statutory language of either the Welfare Reform Act 2012, 1992 Act, or the 2013 Regulations which contradicts that or suggests that all hardship payments will or must be recovered; rather than they may be recovered in accordance with s. 71ZH. Accordingly, the DWP’s position that all hardship payments must be recovered unless reg. 119(2) or (3) applies, was argued to be an error of law.

Ground Two arose from the SSWP’s reliance on a declaration that hardship payment applicants are required to sign on the application form itself. This declaration reads as follows:

I/we further agree that any recoverable hardship payment will be paid back out of:
- future payments of Universal Credit that I qualify for, that are not liable to a sanction or penalty
- other social security benefits, or
- through debt recovery

The SSWP’s position was that this amounted to an applicant consenting or agreeing to pay back hardship payments.

It was argued on behalf of the Claimant that the wording of the declaration is materially different from, and thus inconsistent with, the wording of regulation 116(1)(e) which refers to the payments being “recoverable”, in line with regulation 119 and s. 71ZH. Therefore, if relied on by the SSWP in this way, such an agreement would operate as a fetter on the proper exercise of the SSWP’s discretion.

Outcome

Sanctioned Universal Credit claimants, who have received hardship payments, under this policy change can make representations to the DWP as to why hardship payments should not be recovered. Factors to consider could include financial hardship, the circumstances around the sanction being imposed, the amount of hardship payment received, health issues or disability, or other protected characteristics if relevant.

It is hoped that this will give anyone who has been sanctioned some more encouragement to apply for hardship payments, should that support be needed – a potentially important lifeline for anyone who has been sanctioned, with hopefully a lesser chance of destitution for sanctioned claimants.

Matthew Ahluwalia of the Garden Court Chambers Welfare Benefits Team represented the client with Zoe Leventhal of Matrix Chambers. They were instructed by Sarah Clarke and Emma Vincent Miller of Public Law Project.

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