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Room for manoeuvre

housing portrait1In the second article in a two-part series looking at recent Court of Appeal rulings on key elements of the Government’s welfare reforms, Dean Underwood examines its judgment on the under-occupation charge or ‘bedroom tax’.

In R (on the application of MA & Ors) v The Secretary of State for Work and Pensions (Respondent) and The Equality and Human Rights Commission (Intervener) [2014] EWCA 13 the Court of Appeal has rejected appeals against the dismissal of claims for a judicial review of the so-called "bedroom tax", bringing to an end – for the time being at least – months of speculation about the lawfulness of arguably the most controversial aspect of the Government’s welfare reform programme. 

The "bedroom tax", formally known as the Social Sector Size Criteria (‘SSSC’), is given effect by new Regulation B13 of the Housing Benefit Regulations 2006. It came into operation on 1 April 2013 and reduces the Housing Benefit (‘HB’) entitlement of claimants who under-occupy social housing. A reduction of 14% applies for one unoccupied bedroom; 25% for two or more. 

The SSSC prescribe members of the claimant’s household expected to share a bedroom. For example, they allow one bedroom for a couple, one for children under the age of 10 and one for children of the same sex under the age of 16. 

Exception is made for certain claimants. A claimant with a child serving abroad in the armed forces, for example, is allowed an ‘extra’ room. Until recently, the SSSC did not allow an ‘extra’ room for a child unable to share with his or her siblings because of severe disability.

A similar scheme, the Local Housing Allowance (‘LHA’), limits the entitlement of those occupying accommodation in the private sector. In 2012, the Court of Appeal held in Gorry v Wiltshire County Council [2012] EWCA Civ 629 [2013] PTSR 117 that the LHA discriminated unlawfully against claimants with such a child.

The claims

In 2013, 10 family groups, whose members included disabled and abused children and disabled adults, sought a judicial review of the regulations implementing the SSSC - the Housing Benefit (Amendment) Regulations 2012 – (‘the SSSC Regulations’). The claimants, or members of their family, were unable to share a bedroom with others because of a disability or, for example, because of a consequent risk of violence.

They challenged the lawfulness of the SSSC on three grounds:

  • Unlawful discrimination: in breach of Article 14 of the European Convention on Human Rights (‘ECHR’), read with Article 1 of the First Protocol (‘A1P1’) to the ECHR, the SSSC discriminated unlawfully against a class of individuals, of whom the claimants were said to be representative, for reasons relating to their disability. They contended the discrimination could not be justified.
  • Breach of the Public Sector Equality Duty ("PSED"): the Secretary of State breached the PSED in section 149 of the Equality Act 2010 (‘the 2010 Act’) when implementing the SSSC. In particular, he failed to consider the disproportionate impact the SSSC were likely to have on persons in the claimants’ position.
  • Unlawful guidance: the Secretary of State had, unlawfully, issued guidance prescribing the calculation of HB entitlement for claimants with severely disabled children, who were unable to share a room, instead of legislating.

Claims dismissed

In July 2013, the High Court rejected the claims. In a judgment with which Cranston J agreed, Laws LJ held that, while they had a markedly disparate and adverse effect on the disabled and, indeed, on other groups, the SSSC were not ‘manifestly without reasonable foundation’ (Humphreys v HMRC [2012] 1 WLR 1545 applied). The Secretary of State had conducted a rigorous examination of their likely effect and made due enquiry where necessary. The criticisms levelled at him were “an attempt to persuade the court to 'micro-manage' the policy-making process”, which it would not do.

Further, the provision of extra funding for Discretionary Housing Payments (‘DHPs’) and the publication of guidance about their use was not a disproportionate approach to the difficulties faced by groups such as the disabled.

While a circular was not a lawful means of prescribing the calculation of HB entitlement and the decision in Gorry required the Secretary of State to ensure, by regulations, that HB entitlement would not be reduced if a claimant’s child required an extra bedroom because of a severe disability, the Court was satisfied that drafting of the necessary regulations was “under consideration”.

The Housing Benefit and Universal Credit (Size Criteria) (Miscellaneous Amendments) Regulations 2013 (‘the Gorry Regulations’) were duly brought into force in December 2013.

The appeal

The claimants’ appeal was, therefore, based on their first two grounds of challenge alone. First, it was said, the SSSC discriminated against disabled persons such as the appellants without justification, therefore violating their rights under Article 14 ECHR, read with A1P1. Secondly, the Secretary of State had introduced the SSSC in breach of the PSED.

It was common ground that entitlement to HB fell within the ambit of A1P1 as a possession and that disability fell within the purview of Article 14 ECHR. The issues were whether the SSSC discriminated against disabled persons, such as the appellants, on grounds of their disability; and, if so, whether that discrimination was justified.

The issue raised by the second ground of appeal was whether the Secretary of State had breached the PSED when formulating the SSSC policy.

Unlawful discrimination?

Delivering the leading judgment, with which Longmore LJ and Ryder LJ agreed, Lord Dyson MR doubted that categorization of the discrimination in question mattered, though like Laws LJ he was minded to think it indirect or Thlimennos discrimination – respectively, treating different claimants in the same way and failing to treat different claimants differently. In a benefits case, the test for justification was the same regardless (Humphreys v Revenue and Customs Commissioners [2012] UKSC 18, [2012] 1 WLR 1545).

In isolation, the SSSC discriminated against disabled persons like the appellants but the SSSC could not be viewed in isolation. They were part of a package of reforms intended to address the under-occupation of social housing. The Secretary of State had, for example, recognised that the entitlement of some claimants should not be reduced and had increased DHP funds to enable local authorities to meet the needs of others for whom the SSSC had particularly harsh consequences. The question was whether that was sufficient to justify the disproportionately adverse effect of the SSSC.

The Court rejected the appellants’ contention that the High Court had applied the wrong test for justification. The appellants had argued that, whereas the formulation of SSSC policy involved high, social policy, its application did not. The appropriate test, accordingly, was whether the SSSC were a proportionate means of achieving a legitimate aim.

The Court disagreed; the formulation of SSSC policy and its application could not be disentangled. As in Humphreys and the High Court below, the material test was whether the SSSC were ‘manifestly without reasonable foundation’. That required the Court to ask whether the discrimination in question had an objective and reasonable justification. It did not mean that the justification advanced by the Secretary of State should escape careful scrutiny. On analysis, the SSSC might lack a reasonable basis. The stringency of the test required, however, that there was a serious flaw in the SSSC scheme, which produced an unreasonable discriminatory effect.

As for the intensity of the Court's review, it was important that the SSSC Regulations had been approved by both Houses of Parliament. Respect for Parliament's constitutional function required the Court to exercise considerable caution before it would declare them unlawful (Bank Mellat v HM Treasury [2013] 3 WLR 179 and Black v Wilkinson [2013] EWCA Civ 820, [2013] 1 WLR 2490 applied). That was particularly so in the appellants’ case, because some of the SSSC’s alleged shortcomings had been debated before Parliament.

The Court found the Secretary of State had justified the SSSC’s discriminatory effect. It was not persuaded that Gorry – in which Henderson J had (at paragraphs 46, 47 and 64) found the availability of DHPs insufficient to justify the discriminatory effect of the LHA – required the Court to reach the same conclusion about the SSSC. Henderson J’s reasoning either did not apply, or did not apply with such force to the SSSC. In that regard:

  • though the LHA and SSSC were similar in many ways, Gorry was concerned with a different scheme;
  • the category of claimant, which the appellants sought to exclude from the effect of the SSSC, was not limited as in Gorry, but was broad, not always easy to recognize, was potentially open to abuse and, in some cases, would need monitoring;
  • the DHP scheme had changed to some extent since Gorry; for example, the Secretary of State had increased the DHP fund and had issued further guidance to the local authorities administering it;
  • it was not clear that evidence about the evolution of Government policy placed before the Court in Gorry in 2012 was the same as that placed before the Court in 2013;
  • Henderson J had, apparently, been unaware of statements made by the Secretary of State that the DHP fund would be reviewed and increased if necessary; and
  • unlike the SSSC, the LHA had not been made under the shadow of financial crisis and the need to reduce public spending.

While the Secretary of State might have identified the category of claimant to whom the appellants were said to belong by a form of words, such as that suggested by their representatives (see Box 1 below), he had been entitled to consider it impracticable to add an imprecise class of persons to whom the SSSC would not apply. That would have introduced more complexity into the assessment of HB.

Box 1: The proposed MA exception

B13(7A)- Where because of their disability or that of a member of their family or household, a person has a need to occupy accommodation where the number of bedrooms exceeds the number of which they would otherwise be entitled under Regulation B13(5), (6) and (7), then they shall be entitled to such additional bedroom or bedrooms as are necessary to meet that need.

B13(7B) - A need of a kind described in B13(7A) shall only be found to exist where: (i) the disabled person in question is entitled to the care component of disability living allowance at the highest or middle rate prescribed in accordance with section 72(3) of the Act; and (ii) the person provides the relevant authority with such certificates, documents, information or evidence as are sufficient to satisfy the authority of that need.

Further, it was relevant that the nature of a person's disability and disability-related needs might change over time. The Court accepted that, if the disability-related need for more accommodation were addressed by way of additional HB, the time and costs of administering HB would increase significantly; and the greater flexibility of DHPs meant that they were a more appropriate way of addressing the needs of those concerned.

It was also relevant, particularly in the current climate, that local authorities were not subject to the same financial discipline when allocating HB as they were in relation to DHPs. In the circumstances, the SSSC were not manifestly without reasonable foundation.

Breach of the PSED?

The principal question for the Court, on the appellants’ second ground of challenge, was whether, in the process leading to the SSSC regulations, the Secretary of State had had due regard to the considerations prescribed by section 149 of the 2010 Act.

The appellants’ complaint was that the history of the policy’s evolution disclosed no focused analysis of disability-related matters. The Equality Impact Assessment of June 2012, for example, had not indicated the number of disabled persons whose housing needs would not be met under the SSSC; and there was no evidence that, during the legislative process, the Secretary of State had been made aware of his obligation to have due regard to the need to advance equality of opportunity between disabled and non-disabled persons.

The Court disagreed. The history of the SSSC’s evolution demonstrated the Secretary of State had understood that there were some disabled persons who, by reason of their disabilities, would need more space than was deemed necessary to non-disabled claimants. The question of how that need should be addressed under the SSSC had been subject to wide consultation and considered in detail by both the Secretary of State and Parliament, as had the specific question of whether any categories of claimant should be excluded from the effect of the SSSC, or their needs met by DHPs, or indeed a combination of both; and whether there would be enough money by way of DHPs to meet likely need. In the circumstances, the Court found, that the Secretary of State had paid due regard to his statutory duties.

Commentary

There will be a great deal of interest in this judgment. It is likely the appellants will now petition the Supreme Court to consider the SSSC further following the Court of Appeal’s judgment.

Potentially, a second appeal raises issues about the appropriate test for justification of the SSSC. On balance, the Supreme Court would probably uphold the Court of Appeal’s application of Humphreys. The appellants’ attempt to distinguish Humphreys on the premise that the application and effect of the SSSC did not involve high social policy feels, it is suggested respectfully, artificial; so too, however, the Court’s reasons for distinguishing Henderson J’s concerns about the role played by DHPs. The increase of funds and further guidance notwithstanding, DHPs were intended to be and remain a short-term solution to a potentially long-term problem: a ‘stop-gap’ to enable claimants to meet their rental liability while they find alternative income or alternative and more affordable accommodation. For many disabled HB claimants, however, neither will be available or practicable.

Whatever the issues for the Supreme Court, their determination will not bring an end to the litigation of welfare reform issues.

The High Court, surely, will see an increase in claims for a judicial review of decisions concerning the allocation, amount and duration of DHP awards; so too, perhaps, challenges to the policies of registered housing providers, which preclude either a mutual exchange or a management transfer if the tenant is in rent arrears.

County courts will be at the sharp end of welfare reform litigation. They will continue to face the invidious task of determining whether tenants affected by the SSSC should continue to stay in accommodation they can no longer afford; or become the charge of the local housing authority; and of determining thereafter whether decisions about the cause of subsequent homelessness are lawful.

At all levels of the court system welfare reform is likely remain a prevalent and controversial issue for the foreseeable future.

Dean Underwood is a barrister at Hardwicke.

See also: The cap fits? The first article in this series saw Dean Underwood looks at a ruling that rejected a challenge to the benefit cap.

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