Changes to Universal Credit and other benefits payment system have now been introduced, after a court case.
An update has been issued by the Department for Work and Pensions (DWP) after a payment error that could impacted 85,000 claimants of benefits like Universal Credit.
The DWP has now changed its systems so that it now automatically takes account of people’s wages being paid in earlier because of the bank holiday weekend and identifies claimants who receive a second monthly salary payment in one benefit assessment period. The DWP was ordered to fix the issue after a court case.
It had promised claimants who get paid twice in a month by their employer that they should not be penalised in their following UC payment.
However, the DWP has said that its computer systems will now flag this automatically, meaning from this August Bank Holiday there should be no need to raise the issue via online accounts, reports Birmingham Live.
It should help 85,000 claimants who otherwise faced being left with no benefit payment next month.
It comes after four single mothers won a Court of Appeal case over the issues.
The court said that the Secretary of State for Work and Pensions had acted “irrationally and unlawfully” by making Universal Credit regulations that fail to take into account that the dates on which monthly salaries are paid can vary because of weekends and bank holidays.
Three judges at the Court of Appeal ruled that “the failure of the Secretary of State to ensure that the regulations cater for the phenomenon of ‘non-banking day salary shift’ is unlawful.”
Workers who were paid twice were being flagged as ‘over-earning’ on the DWP’s systems – meaning their next benefit payment was reduced – sometimes to zero..
But the ‘double payday’ was because employers paid them on the first or last working day of a month, or they received a late or early payment because of a bank holiday.
The Government tried to block the change when it went to the Court of Appeal after single mother Danielle Johnson, along with three other mums, won a High Court legal challenge to the Government’s interpretation of regulation 54 of the Welfare Reform Act 2012 which meant some months she would receive much less in Universal Credit than in others.
Danielle, a school dinner lady, is paid on the last working day of each month. But in some months, due to a weekend being at the end of a month, her wages are deposited in her bank account a day or so earlier.
The Universal Credit computer system interpreted this as Danielle having earned twice as much in one month and none in others, so her benefit payment would be recalculated as a result.
Following the ruling, lawyers for Danielle Johnson, Claire Woods, Erin Barrett and Katie Stewart urged the Government to take “urgent steps” to rectify the problem with UC – which was introduced to replace means-tested benefits including income support and housing benefit.
Lady Justice Rose, sitting with Lords Justice Underhill and Irwin, said: “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.”
The judge said the evidence before the court established there is a “very substantial number” of people in work who claim benefits who are “likely to come to the … conclusion” that they would be better off not financially by not working at all.
This included a statement from Ms Johnson which read: “I am trying to make the best of myself, despite the difficulties caused by being on UC, but sometimes I feel like it would be easier if I was unemployed because at least then I would have a steady and predictable income.
“When I didn’t work I was a lot more financially stable than I am now. It is maddening.
“I can’t say the amount of times I have broken down in tears because I don’t know how I’m going to get through the month. It shouldn’t be like this.”
Meanwhile Ms Woods opted to continue with secretarial work and a second job as a waitress, despite training as an occupational therapist, rather than take up a position in the NHS to gain experience because she was concerned about the effect of a different pay day on her income, the court heard.
Following the ruling, Ms Johnson said: “I get a regular monthly salary and the support I get from UC should reflect that.
“I am relieved that the judgment means that the Government must now act to ensure that I and others affected will no longer lose out on money and will have a steady cash flow.
“I find it unbelievable that the Government has fought this case in the courts for so many years, it should not have taken the Court of Appeal to tell them something which is just a matter of common sense.”
Her solicitor Tessa Gregory, of law firm Leigh Day, said: “We are delighted with the Court of Appeal’s judgment which is a complete vindication of our client’s case.
“UC was designed to ‘make work pay’ yet our client, who like millions of others is paid on the last working day of the month, found herself facing severe hardship because the Secretary of State made regulations which fail to take into account that the date when someone is paid may vary because of non-banking days.
“The Secretary of State committed to a ‘test and learn’ approach in rolling out UC yet she refused to listen to these four hardworking mums when they raised this issue over two years ago.
“Our client hopes the Secretary of State will now accept the ruling and take urgent steps to fix this perverse situation which, as noted by the court, only serves to disincentivise work.”
Solicitor Carla Clarke, from Child Poverty Action Group (CPAG) – which represented the other three women, said: “Justice has been done and common sense has prevailed.
“The court has recognised that it’s not enough to say ‘the losses weren’t real and the computer system can’t be changed’ when the losses were very real to the mothers in this case who are working hard to try and give their children a secure and stable income.”
Ms Clarke added: “The DWP now needs to take action to prevent this happening to the many thousands of working parents who find themselves in the same situation.”
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