DWP admits it must fix Universal Credit loophole as it abandons legal battle

Department will not fight judgement that found payment rule “irrational"
Chris Young/PA Wire/PA Images

By Beckie Smith

26 Jun 2020

The Department for Work and Pensions has abandoned a long legal battle over a design flaw in Universal Credit system that left people out of pocket.

Work and pensions minister Will Quince said yesterday that his department would not appeal a Court of Appeal judgement, reached this week, that found Universal Credit rules limiting payments for working claimants who were paid twice in one month were “irrational” and “unlawful”.

He said DWP accepted it must fix a problem in its digital system, which treats claimants as if they have had a 100% pay rise when a weekend day or bank holiday means their salary is paid slightly earlier or later than usual, pushing it into the same month as another paycheque.

The appeal judgement represents a victory for four single mothers who brought a legal challenge against the department after they were forced into rent arrears and debt and had to use food banks because they missed out on payments.

In January 2019 the High Court said it was “odd in the extreme” that DWP had refused to correct the issue.

Appealing the judgement, DWP said updating its online system would cost £7.5m and undermine the principle of Universal Credit.

But in this week’s Court of Appeal judgement, Lady Justice Rose said the feature was “perverse”.

“This case is, in my judgment, one of the rare instances where the secretary of state for work and pensions’ 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 [minister] would have struck the balance in that way,” she said.

The department is now attempting to identify all of the affected claimants and is assessing “remedial options”, Quince said.

“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,” Quince told MPs in the House of Commons yesterday.

DWP estimates around 1,500 people have been affected by the issue, including the 1,000 claimants who have disputed payments, Quince said.

The minister said those affected would not suffer a financial loss, as any benefits they lose in one month because of the double salary payments will be added to their next month’s Universal Credit payment.

But he admitted the system may have caused “budgeting issues” for people who receive UC.

And he said fixing the problem would take time, especially amid the coronavirus crisis.

“That is not straightforward – 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,” he said.

He said 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,” he said.

Mark Harper, a former minister in the department who oversaw the Universal Credit programme in 2014 and 2015, said he did “not underestimate how complicated it is to put in place a fix”.

In the short term, Quince said DWP had begun working with HM Revenue and Customs on ways for employers to report their employees’ earnings correctly.

Quince said HMRC had published guidance for employers that would reduce the number of people affected.

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