Universal credit policy on deductions for court fines unlawful as it did not contain exception for financial hardship

Thursday 1 July 2021

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The Facts

The four claimants were all in receipt of universal credit (‘UC’).  All had encountered financial difficulties. Some had a history of rough sleeping.  All had incurred court fines for criminal offences.  Where a fine is imposed by a magistrates' court, the court can ask the Secretary of State for Work and Pensions (‘SSWP’) to deduct sums from the offender’s UC (Fines (Deductions from Income Support) Regulations 1992, SI 1992/2182, reg 4, and Universal Credit, Personal Independence Payment, Jobseeker's Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013, SI 2013/380, Sch 6 para 4).  The SSWP had a policy of taking deductions at the maximum permitted level subject to a cap of 30 per cent of the standard allowance for UC.  All of the claimants had deductions at the full 30 per cent for court fines but for some, the deduction was a composite amount of up to three priority debts. 

The claimants had tried to get their deductions reduced due to financial hardship but they were refused.  The SSWP’s guidance made no provision for reducing deductions on the ground of financial hardship. Instead, they were told they could apply to the fines officers and magistrates' court to remove the deductions from the benefits order and enter into direct arrangements with the court to repay the fine. The claimants sought judicial review of this deduction policy on the ground that the SSWP had unlawfully fettered the exercise of her statutory discretion to deduct (subject to parameters) ‘any sum’ from the UC standard allowance.

The Judgment

Kerr J held that the SSWP’s policy and practice were not lawful due to a fettering of discretion as it did not provide for any exceptions, even rare exceptions, in individual cases. Kerr J rejected the SSWP’s argument that the claimants were not prejudiced by the rigidity of the deductions policy because they could apply to the magistrates' court to change the method of payment, for example by lowering the number of regular instalments. Kerr J agreed with the claimants that this alternative remedy was inadequate because the court or fines offer would not necessarily know what the effect, if any, varying the payment rate would have on the deductions from UC in an individual case and therefore on alleviating financial hardship:

 ‘In my judgment, it is – at any rate in this case - no answer to the charge of fettering a discretion to say that it does not matter because someone else can "un-fetter" it. The present case calls for individual consideration, where necessary, by the person responsible for exercising the statutory power. It is not an answer, at least in this case, to a complaint that the Secretary of State is shutting her ears to a debtor seeking reduced deductions, to say that he can go elsewhere and get a less exacting payment rate instead.’ (para [86]).

Comment – The position post-Blundell

The maximum amount that could be deducted from UC in the past was an amount equivalent to 40 per cent of the standard allowance.  In October 2019, the government amended its deductions policy to reduce this to 30 per cent.  But from April 2021 this has been restricted to 25 per cent.

Following the Blundell case, the DWP has updated the Benefit Overpayment Recovery Guide which sets out its policy on deductions. The guide now provides that deductions for fines will be set at 5% of UC of the standard allowance (see Appendix four, Maximum Deduction Rates).

The Judgment is available here.

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