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Universal Credit: Court of Appeal Judgment

Volume 804: debated on Monday 29 June 2020

Commons Urgent Question

The following Answer to an Urgent Question was given on Thursday 25 June in the House of Commons.

“I can today confirm my department’s intention not to appeal against the judgment of the Court of Appeal of 22 June 2020 in the case of Johnson, Woods, Barrett and Stewart v the Secretary of State for Work and Pensions. The judgment relates to an appeal made in January 2019 by the department against the High Court decision.

As we told the court, identifying claimants is hard; it is a difficult issue. To date, we are aware of around 1,000 claimants who have disputed their earnings and fall within the relevant cohort. We are looking at how we can further identify people in this group. I stress that many people affected by two salary payments will not suffer a financial loss, as their universal credit award will increase in the following month to balance the reduction. However, we do recognise the budgeting issues that may have been caused, and we are now assessing the remedial options. That is not straight- forward—it is not the simple click of a switch—particularly at a time when the department is focused on meeting the challenges of unprecedented demand for its services.

I hope Members will appreciate that as the judgment was passed down on Monday, it would be remiss not to afford more consideration before we press on, particularly when the court has not called for immediate action. We will now begin the process of carefully considering possible solutions, and we will keep the House updated as progress is made. There are, however, immediate actions that can be taken. We are already working closely with Her Majesty’s Revenue and Customs to work with employers on how to report their employees’ earnings correctly. HMRC has issued updated guidance for employers which, if followed correctly, will further reduce the small numbers affected.”

My Lords, universal credit works on fixed assessment periods. But if, like NHS workers, you get paid at the end of the month, you can find two pay days falling in one universal credit period. The system then assumes that you have had a 100% pay rise and slashes your benefit, or even stops it altogether, thinking that you are now too rich to need it. We have raised this with Ministers repeatedly, but to no avail. It should not take four single mums going all the way to the Court of Appeal to have this obviously daft policy declared irrational. How will the Government find and compensate all those who have lost out? When will the system be changed to stop this happening in future?

Will the Minister confirm that as many as 85,000 claimants are affected by this judgment? Will she confirm that the Government will publish an action list, detailing when and how the claimants affected by this ruling will cease to be subject to these wild fluctuations in income? Will she also undertake to look into the support available to people in arrears with their rent, or suffering from other financial penalties, as a result of this “irrational and unlawful” action, to use the words of the judge who delivered the verdict, Lady Justice Rose?

I am pleased to say that the figure of 85,000 that the noble Baroness refers to is not one that resonates with us. We believe that the number of people impacted by this judgment is in the region of 1,000. We are assessing the situation. We got the judgment only on Monday, but we will keep the House fully up to date with decisions made in relation to it.

Will my noble friend the Minister outline what assessment has been made of the resilience and ability of the universal credit system to process such significant increases in applications in recent weeks? Has the digital design of universal credit enabled it to support an unprecedented number of people in recent months?

I can tell my noble friend Lady Stroud that we have been amazed and pleased that the universal credit digital system has shown enormous resilience. We have had a 600% increase in claims, and the vast majority of people have been paid in full and on time. Without wishing to be disrespectful in any way, this would never have happened under the legacy system.

My Lords, last week, the Minister promised MPs that

“everything is on the table”,—[Official Report, Commons, 25/6/20; col. 1462.]

except, it would seem, the monthly assessment itself, even though it does not align with the reality of the working lives of the many claimants paid more frequently, and bases a month’s entitlement on personal circumstances from a single day. This is another example of irrationality and inflexibility. As well as fixing the immediate problem urgently, will the Government undertake a longer-term review of the monthly assessment?

It may be helpful if I repeat for the House the Answer that my friend the Minister for Welfare Delivery gave in the other place last week. He said:

“I am absolutely determined to find a fix to this issue … a number of items are in the pipeline, ready to be changed on universal credit. Despite criticism from Opposition Members, we have made significant changes to universal credit, and much more is to come, such as the roll-on of legacy benefits next month, which will benefit people to the tune of £200. Those are all in the pipeline to be done, and this will be added to that. I will try to expedite it as much as I possibly can”.—[Official Report, Commons, 25/6/20; col. 1460.]

My Lords, will the Minister, along with her ministerial colleagues in the DWP, use this opportunity to have a root and branch review of social security policy, to ensure a refocus on the needs of people—many of whom have been reliant on food banks for a long time—a financial uplift of universal credit benefit and caution on the use of the digital system?

I assure the noble Baroness that the issues and successes coming out of universal credit are continually under review. However, I will take her specific question back to the department and will write to her with an answer.

My Lords, it is clear that the department should put right the particular matter identified by the Court of Appeal. I note that the Minister thinks that some 1,000 cases are involved. However, does she agree that the universal credit system has stood up very well to the severe challenges posed by the consequences of coronavirus?

I assure my noble friend and the whole House that the universal credit system has stood up well to the increased demand of 600% additional cost. I have repeated the Answer that my ministerial colleague gave in the other House. We are determined to find a fix for this. We will keep the House updated, but we will need time to consider the judgment, which was issued only last Monday.

My Lords, the Minister, who is usually very helpful on these kinds of questions, has not answered the questions put by my noble friend. If the computer system is as agile as she and her colleagues keep claiming it is, why can it not resolve this single issue quickly and give these people the justice they deserve? When will she answer the single, simple question: when will it be resolved?

I say again to the noble Lord that we are considering the judgment. We are working at pace to find a fix. The universal credit system, which has dealt with a massive increase in applicants, who have been paid, has been agile and flexible to do so. Some issues need to be overcome. They need a digital solution rather than a manual one. We have concentrated on paying people in these very difficult times, but I assure the noble Lord that a digital fix will be found as soon as it can.

My Lords, people made severe criticism of the digital system of universal credit when it was introduced, but it seems that this design has enabled it to support an unprecedented number of people in recent months—the huge increase the Minister referred to. Would she agree that we could not possibly have done this without the digital changes made by this Government?

I completely agree with my noble friend. We would never have coped with the increase in demand in universal credit claimants had we not had the digital UC system.

My Lords, the problem has been evident for years, so the Government have yet to explain why they kept fighting to defend this “unlawful” and “unfair” system, in the words of the judge. Crucially, would the Minister accept that whenever you have a conditional payment scheme, some people will unfairly miss out? No system can be “agile and flexible”, in her words, to ensure that everyone has a fair, secure payment. Only a universal basic income would do that.

The noble Baroness makes a good point. We have never, ever suggested that the universal credit system is 100% perfect, but it has absolutely delivered in terms of paying the increased numbers we have. She has raised universal basic income on previous occasions. Our position has not changed: we have no plans to bring it in because it would disincentivise people to look for work and the cost would be astronomical.

I congratulate my noble friend on the tremendous work of her department in coping with the unprecedented number of new universal credit claims. Could she confirm that more than 1 million people have been able to receive an advanced first payment, giving them support in just a few days? Does she agree that this has been vital to prevent hardship during this crisis period?

The Government have worked at pace to ensure that money gets to people in a timely manner to avoid hardship and as many difficulties as we can. I can confirm that 1 million applications for advances have been made available to people who need them quickly. The advances are interest-free and repayable over 12 months at the moment, but as of next year this will go up to 24 months.

Sitting suspended.