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Universal credit earnings calculations unlawful, judge says

<span>Photograph: Paul Marriott/Rex/Shutterstock</span>
Photograph: Paul Marriott/Rex/Shutterstock

A working single parent who was benefit-capped and left up to £463 a month worse off because of the “irrational” way universal credit calculated her monthly earnings has won a high court victory against the Department for Work and Pensions.

The ruling – the second in less than a month in which the DWP’s guidelines for assessing universal credit earnings have been ruled unlawful – found the system was unreasonable and placed absurd conditions on benefit claimants who fell foul of it.

Mr Justice Garnham said the system treated Sharon Pantellerisco, a 41-year-old care worker from Southport, as if she were not working, and punished her by arbitrarily reducing her overall universal credit award through the benefit cap.

In effect, Pantellerisco had been penalised financially because her four-weekly pay cycle did not fit in with the design of universal credit. No “reasonable” secretary of state for work and pensions would have allowed the system to operate as it did in this case, the judge said.

Pantellerisco welcomed the ruling and criticised the DWP for having persistently “fobbed off” her attempts to understand why she had been penalised, even as she fell into hardship and became reliant on charity food to feed her family. “The way they make you feel is absolutely disgusting,” she said.

She had been “devastated” to learn from an adviser at a local food bank that she had been benefit-capped, a policy designed to force benefit claimants to get a job or work more hours.

Pantellerisco, who has four children, worked 16 hours a week, receiving the “national living wage”, but was paid on a four-weekly basis, an arrangement that clashed with universal credit rules that calculate earnings over a calendar month.

This meant her income for most universal credit assessment periods was deemed to be too low, subjecting her to the benefit cap, which in turn resulted in her benefit income being docked by up to 20% a month. This left her stressed, depressed and struggling to feed and buy clothes for her children.

Had Pantellerisco been paid monthly on the same wage rather than four-weekly, she would have been deemed to earn above the benefit cap threshold – an outcome, the judge said, that treated Pantellerisco “as if she were not working enough when in fact she is”.

Universal credit claimants pass the threshold for the benefit cap if they earn the equivalent of working 16 hours a week at the “national living wage”, calculated as a monthly amount, currently £604.59 a month.

Pantellerisco said she felt badly let down: “They don’t realise the effect it has on people. They say universal credit is supposed to help people but it did not benefit me, and my children suffered.”

To avoid losing hundreds of pounds each month, Pantellerisco eventually moved to a monthly-paid 16-hours a week job. Since lockdown she has been furloughed, which has reduced her pay below the benefit cap threshold, meaning she remains capped.

Carla Clarke, a solicitor for Child Poverty Action Group, which brought the case, said: “A system that determines the amount of social security low-paid working claimants are entitled to on the arbitrary basis of whether they are paid monthly or four-weekly can only be irrational, unjust and unlawful.”

Last month the appeal court upheld a ruling that universal credit financially penalised claimants whose salary payment day and assessment period fell at the end of a month, resulting in fluctuating levels of income and reducing income in some cases by hundreds of pounds a year.

A DWP spokesperson said: “We are carefully considering this judgment, but it should be noted that it affects a very small number of claimants. Universal credit adapts to your personal circumstances, and the vast majority of claimants are better off on it.”

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