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The cap fits?

This article was first published in the Local Government Lawyer.

In R (on the application of SG & Ors) v The Secretary of State for Work and Pensions and (1) Child Poverty Action Group (2) Shelter Children’s Legal Services (Interveners) [2014] EWCA Civ 156 the Court of Appeal has rejected appeals against the High Court’s dismissal of claims for a judicial review of the so-called "benefit cap". Its judgment confirms the lawfulness of one of the Government’s most controversial welfare reforms.

The benefit cap

The benefit cap ("the Cap") is given effect by the Welfare Reform Act 2012 and the Benefit Cap (Housing Benefit) Regulations 2012 ("the 2012 Regulations"). It is now applied nationwide.

The Cap limits the amount of benefits a claimant may receive to a sum equivalent to the average net weekly earnings of a working household in Great Britain, presently £26,000 per annum. It is fixed at £350 per week for single, childless claimants and £500 per week for all others.

The Cap is intended:

  • to introduce greater fairness in the welfare system between those receiving out-of-work benefits and employed taxpayers;
  • to make financial savings and, more broadly, make the system more affordable by reducing long-term benefit dependency; and
  • to increase incentives to work.

The judicial review

In 2013 six claimants, for whom the Cap had particularly harsh consequences, brought a claim for a judicial review of the 2012 Regulations. They challenged the lawfulness of the Regulations on three grounds:

  1. Unlawful discrimination: the cap discriminated unlawfully against women and large families in the enjoyment of rights under Article 8 of- and Article 1 of the First Protocol ("A1P1") to the European Convention on Human Rights ("ECHR"), in breach of Article 14 ECHR. They pursued closely-related claims of indirect and Thlimmenos discrimination: respectively, treating different claimants the same way and failing to treat different claimants differently.  The claimants contended the discrimination could not be justified.
  2. Breach of the claimants’ rights under Article 8 ECHR and/or the Secretary of State’s obligations under the United Nations Convention on the Rights of the Child ("UNCRC") to ensure the best interests of children are a primary consideration.
  3. Irrationality: the Secretary of State acted unreasonably (a) by failing to obtain relevant information about the Cap’s impact on single parents fleeing domestic violence and those living in temporary accommodation and (b) by creating incentives to work for people who were not in a position to work.

The High Court dismissed the claims in November 2013. It held that the Cap did not discriminate unlawfully against women and large families.The policy behind the Cap was not "manifestly without reasonable foundation" and any difference - or lack of difference - in the way the Cap applied to different groups was justified.

Further, it could not be said there had been any failure to appreciate the impact of the Cap on children, or that the Secretary of State had failed to treat the best interests of children as a primary consideration. Their interests were outweighed by countervailing considerations of social policy.

Finally, the Secretary of State had been well acquainted with the difficulties faced by those fleeing domestic violence or living in temporary accommodation, had consulted about them and had attempted to frame legislation so as not to disadvantage women fleeing domestic violence. While the Cap would bear harshly on parents with young children, unable to work, it was the Court’s place to interfere with Government decisions about the allocation of public funds.

The appeal

Four of the six claimants appealed against the High Court’s decision. The principal issues for the Court of Appeal (COA) were whether the 2012 Regulations:

  1. discriminated unlawfully against women generally, or women who were the victims of domestic violence, in breach of Article 14 ECHR and A1P1;
  2. infringed article 3(1) of the UNCRC;
  3. discriminated unlawfully against families, in breach of Articles 14 and 8 ECHR;
  4. infringed Article 8 ECHR generally; or
  5. were unlawful on grounds of irrationality.

Article 14 ECHR and A1P1: Discrimination against women

It was common ground before the COA that the Cap had a disproportionately adverse impact on women: a higher proportion of women received benefits; single parents were more likely to receive benefits than other members of society; and 92% of single parents, who had children living with them, were women.

Whether that amounted to indirect or Thlimmenos discrimination was immaterial. The critical issue was whether the discrimination was justified: the material test, whether the 2012 Regulations were “manifestly without reasonable foundation”1.

The Court rejected the contention that they were: the three aims of the Cap (above) were legitimate objectives. The broad concept of fairness, for example, between the employed and unemployed reflected a political view about the nature of a fair and healthy society. Further, the Secretary of State had justified the Cap’s discriminatory effect on women. He had, for example, considered whether Child Benefit income should be excluded from the effect of the Cap, deciding that it should not because its exclusion would undermine the need for a clear upper limit on the amount of benefits a family could receive. While cost-cutting per se was not capable of providing justification, it was could do so when coupled with other legitimate aims. Ultimately, the COA held, the Cap was not aimed at discriminating against women but, fundamentally, at changing a culture of welfare dependency; and that was a reasonable basis for the Cap.

In reaching that conclusion, that COA gave weight to three factors in particular: (i) the Cap was an aspect of social policy concerning the distribution of state benefits; (ii) the issues on which the appellants had relied to demonstrate discrimination had been debated in Parliament; and (iii) the 2012 Regulations had been approved by affirmative resolutions in both Houses of Parliament - facts that required the COA to adopt a particularly respectful approach.

Article 14 ECHR and A1P1: Discrimination against victims of domestic violence

As for the second limb of the appellants’ A1P1 argument, while the High Court had properly declined to address the effect of the Cap on women fleeing domestic violence, because it had not affected the claimants as a result of their fleeing domestic violence, the COA was inclined to make some observations.

It noted the appellants’ argument that many women’s refuges did not qualify as “exempt accommodation” within the meaning of the Housing Benefit and Council Tax Benefit (Consequential Provisions) Regulations 2006 (‘the 2006 Regulations’).

As a consequence, though Housing Benefit might be available in respect of both the refuge and the victim’s former home, the dual payment of Housing Benefit would not be excluded from the effect of the Cap.

The Master of the Rolls expressed concern that, despite having stated in April 2013 that it would amend the definition of “exempt accommodation” to mitigate this issue, the Government had not done so. Nevertheless, the fact that it intended to do so was a cogent reason for refusing relief. That conclusion was reinforced by the fact that neither of the adult appellants had received dual Housing Benefit as a result of having fled domestic violence.

Article 3(1) of the UNCRC

The appellants’ argument, that the High Court had misdirected itself in its approach to the UNCRC, fared little better.

There had been ample evidence before the High Court that the Secretary of State had treated the interests of children as a primary consideration. Indeed, it was “plain on the basis of this evidence that the rights of children were, throughout, at the forefront of the decision-maker’s mind”.2

Further, the Secretary of State had not been obliged to address conflicting considerations of public policy in any particular order; it was necessary and sufficient “to give appropriate weight to the interests of children as a primary consideration in the overall balancing exercise”3,which the Secretary of State had done.

Articles 14 and 8 ECHR

As for discrimination in the enjoyment of Article 8 ECHR rights, the Court accepted the effect of the Cap on private and family life - requiring families, for example, to relocate to more affordable areas, away from support networks – was capable of engaging Article 8. For the reasons given in respect of Article 14 ECHR and A1P1 however (above) it rejected the proposition that the Cap discriminated unlawfully against families in the enjoyment of their Article 8 rights.

Article 8 ECHR generally

It rejected similarly the appellants’ freestanding reliance on Article 8 ECHR. Article 8 did not confer on the appellants a right to a home4; nor, save in the most exceptional cases, require the State to provide financial assistance to support family life or ensure that individuals can enjoy it to the full or in any particular manner5. It was clear from the authorities that “the threshold for a positive obligation to provide welfare support under Article 8 is set at a very high level”.6

Having considered the appellants’ cases, the COA considered the argument that their family life would not continue as a result of the Cap, to be premature and pessimistic; and the facts of their cases, as the High Court had held, fell well short of demonstrating a breach of Article 8 ECHR. Further, even if, in an individual case, the Cap were to cause such extreme consequences as to breach Article 8 ECHR, it would not necessarily follow that the underlying scheme required amendment.

In the circumstances, the COA did not need to consider the question of justification. Had it done so, however, it would have applied the same test as for Article 14 ECHR7, with the same result.

Irrationality

The COA gave short shrift to the appellants’ challenge on grounds of irrationality. The Secretary of State had introduced a Welfare Reform Bill in Parliament, which had been debated at length in both Houses before receiving Royal Assent, and had then adopted secondary legislation, again debated in Parliament before its approval by affirmative resolution.

It could not be said the Secretary of State had failed, when introducing the Cap, to inform himself sufficiently about the difficulties faced by those fleeing domestic violence or those living in temporary accommodation.

Conclusion

While the Cap was controversial and would cause financial hardship, the COA held it was carefully calibrated to produce a scheme judged by the Government and Parliament to strike a fair balance between members of society; between those who work and those who do not. In the circumstances:

“…..the cap in its present form reflects the political judgment of the Government and it has been endorsed by Parliament after considerable debate. It is not the role of the court to say whether it agrees with this judgment or not. The court’s sole function is to rule on whether the cap is lawful. On the main issue of whether it unlawfully discriminates against women (including victims of domestic violence) and families, the question is whether the cap is manifestly without reasonable foundation. For the reasons that we have given, we are satisfied that the cap plainly does have a reasonable foundation. For these and the other reasons that we have given in this judgment, the appeals must therefore be dismissed.”8

Commentary

Civil servants in the Department for Work and Pensions will have breathed a collective sigh of relief when the COA handed down its judgment. The Government will be praying - no doubt - that it was not premature.

It is anticipated that the Supreme Court will, in due course, consider the lawfulness of the Cap and its policy rationale, in light of the COA’s judgment. When it does, what issues will it consider? Potentially, a second appeal raises issues fundamental to the Cap’s efficacy and to rights enshrined in the Human Rights Act 1998. To what extent, for example, is Article 8 ECHR engaged by the Cap? To what extent does it impose on the State a positive obligation to provide financial assistance to secure the continuation of family life? With the passage of time, the issues will become clearer. What is clear already is that their determination will help shape one of the most significant reforms to the Welfare State of the last 70 years.

On a more prosaic level, county courts nationwide will continue to face the invidious task of determining whether tenants affected by the Cap should remain in possession of accommodation they can no longer afford; or become instead the charge of the local housing authority.

For their part, local housing authorities in the South East particularly will have the difficult task of reconciling their duty to the reform-homeless with the relative expense of rental accommodation in their area:

“As the Divisional Court said (para 54), the bottom line is that the local authority will retain an obligation to find some accommodation which the family can afford. This may mean that the accommodation offered is not where the family would like to be, but neither this nor the fact that it may be difficult to challenge a local authority decision is a reason for holding that the cap is unlawful.”9

Clearly, whatever else it proves to be, 2014 will be a year of further argument and controversy in the courtroom.

1. Humphreys v Revenue and Customs Commissioners [2012] UKSC 18, [2012] 1 WLR 1545

2. Paragraph 75

3. Paragraph 73

4. Chapman v UK (2001) 33 EHRR 18

5. R (Carson) v Secretary of State for Work and Pensions [2003] EWCA Civ 797; [2003] 3 All ER 577; Anufrijeva v Southwark LBC [2004] QB 1124 CA; R (G) v Lambeth LBC [2012] PTSR 364 CA

6. Paragraph 98

7. Swift v Secretary of State for Justice [2013] 3 WLR 1151

8. Paragraph 111

9. Paragraph 81