UC benefit cap calculation and earned income

My client is a lone parent in receipt of UC (we’re a live service area) and has been declaring an earned income of £420pm. In doing a general benefit check I got a different entitlement figure than that on her award notice and it seems to come down to how the benefit cap has been applied.

My client’s UC award consists of her standard allowance, housing element and child allowance x3 and her only other benefit income is Child Benefit. When looking at how her entitlement has been calculated it appears that DWP have added together her maximum amount (£1623.12) and Child Benefit (£208.43) = £1831.55. They’ve applied the cap to this so have come to the conclusion that her entitlement needs to be reduced by £164.88. They’ve then reduced her maximum amount by the earned income reduction (£1623.12 - £143.64 = £1479.48) and applied the cap reduction to this, leaving a UC entitlement of £1314.60.

Every calculation I’ve done shows that the cap should actually be calculated from the UC entitlement, not the maximum amount, so her earnings should have been deducted from the maximum amount before applying the cap. Doing things this way leads to a benefit cap deduction of just £21.24 which leads to a UC entitlement of £1458.24pm.

The UC regs say “...the amount to be used is the amount to which the claimant is entitled…” - surely this means the UC entitlement, not the maximum amount, as using the maximum amount reduces the benefit by including an amount you’d never actually get because of other income?

I’ve queried this with DWP and they’re insisting that they’re correct (although the person I spoke to was told this by an “account developer” but they didn’t appear to be referring to any actual regs or guidance, just a “This is how I do it, so it must be right” sort of thing which has me even more worried…)

I’ve now come to the point where I’ve no idea if I’ve uncovered a potentially widespread error in how our local assessors are working out UC awards or if I’ve got the wrong end of the stick and am on a hiding to nothing, so I thought I’d ask whether anyone else has had experience of these calculations and could either let me know where I’m going wrong or, if it is DWP, point me to some regs or guidance that might convince them that just because they’re doing something a certain way it doesn’t automatically make it right.

Sorry if this is a bit rambling, I have to admit that I’m still trying to get this straight in my mind so I wanted to try and show my workings!

I agree with you - they’re doing it wrong.

It’s the UC entitlement in each AP which is taken into account - reg 80(1) UC Regs.

( https://www.legislation.gov.uk/uksi/2013/376/pdfs/uksi_20130376_310817_en.pdf )

UC maximum amount and UC entitlement are not the same when there is unearned income or earnings in excess of any work allowance.  ( Reg 22 UC Regs and s8(3) WRA 2012 )

Unfortunately, the guidance in ADM E5 isn’t very helpful.

( https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/618956/adme5.pdf )

It correctly says the amount of UC to take into account is the UC entitlement (E5018) but in the examples it just uses the ambiguous term “UC Amount” ( and because they don’t give the housing costs you can’t work the examples backwards to see what they’ve done).

Thanks for that! I think the fact that E5020 specifies that for UC the amount used is that before any reduction for a sanction must show that the maximum amount isn’t the relevant figure, because if they were just supposed to use the maximum amount they wouldn’t need to make it clear that you don’t take the sanction amount off it… Or am I trying to apply logic where none exists?

What really worries me is that the person I spoke to at the local Jobcentre told me they’d looked at other awards and they’d been calculated in the same way so it sounds like if they are wrong, it’s affecting more than just my client.

Let us know Billy if it seems to be widespread - or if anyone else has had a similar experience - I will raise it via stakeholders - very worrying if they’ve set the system to do it wrong!!

Shouldn’t this be sent through to the CPAG Early Warning System?

Thanks Paul, I’ll have a look at reporting this to CPAG.

We’ve now received the following response from our local DWP Partnership Manager (who I feel may be a bit annoyed that I didn’t just take their first answer and leave it alone…):

****
Universal Credit benefit cap deduction query

I received a this to follow up, this is the response I have received, this is on top of the other replies we have given you

We book agree, had a look through the regulations and would say the Benefit Cap applies to the gross benefit award (unless an exception applies). Reg 81 (3) says it is the total welfare benefit entitlement minus 79 (3). 79 gives the amount that are to be used and a list of welfare benefits used as well. Regs 82 & 83 neither mention that earnings are to be deducted before applying the benefit cap. 

If you require anything else it would have to go through to policy

****

I still think entitlement means the amount you’d get if there were no cap, rather than the most amount you could possibly ever get. As Jon said, UC maximum amount and UC entitlement are referred to as separate things elsewhere and surely if they meant maximum amount, the regs would say maximum amount?

I’m primarily in money advice these days and haven’t really come across many UC claimants but it seems quite shocking that the legislation and guidance can be so unclear that we can end up in a situation like this.

Would it be worth asking for mandatory reconsideration in respect of the benefit cap calculation? If so, would each assessment period class as a separate decision and need a separate MR for each month we think is wrong?

Also, thanks for all the help so far - it’s oddly comforting to know that if I’m wrong about this, at least I’m not the only one!

I agree with you, certainly when we wrote this material on Revenuebenefits we had the same understanding as you http://revenuebenefits.org.uk/universal-credit/guidance/entitlement-to-uc/calculating-universal-credit/

It doesn’t make sense to use the maximum amount.

Victoria

I’ve sent the thread and our calculations to UC via stakeholders - will let you know when I hear anything…

Billy M - 28 November 2017 02:26 PM

Would it be worth asking for mandatory reconsideration in respect of the benefit cap calculation? If so, would each assessment period class as a separate decision and need a separate MR for each month we think is wrong?

Also, thanks for all the help so far - it’s oddly comforting to know that if I’m wrong about this, at least I’m not the only one!

In the old days, I would have said you ask for a MR of the original decision and everything else would flow from that. As for the weird world of universal credit….but I would have thought a successful outcome of the first incorrect assessment would be then applied to subsequent AIP’s and payments.

DWP’s answer is so misconceived it’s difficult to know where to begin.  Obviously Regs 82 and 83 don’t refer to the way in which the cap is calculated, those regs prescribe cases where it doesn’t apply in the first place.  They have cited regulations but then introduced an expression that is wholly invented by them and does not occur in the legislation: “gross benefit award”.  No such thing.

But what are you going to do about it?  You have applied for revision and if the decision is confirmed what then?  If you want to appeal to the Tribunal you have to get past para 8A of Schedule 2 to the Social Security Act 1998:

8A.A decision to apply the benefit cap in accordance with regulations under section 96 of the Welfare Reform Act 2012 [is not appealable]

I would suggest:

- applying the benefit cap is not a decision in itself, it is a constituent determination embodied in a UC decision
- para 8A therefore fails to achieve its aim of preventing a claimant from challenging the fact that/way in which the benefit cap has been applied to him/her
- the ground for appeal is simply that the DWP has awarded the wrong amount of UC by getting the benefit cap wrong
- if DWP wants to be unaccountable to Tribunals when it makes the benefit cap rules up as it goes along, the legislation needs to be drafted tighter than this

The Tribunal would then at least have to analyse the jurisdiction point properly and there would be a chance to run the argument past the UT if the appeal is struck out.

For info, I don’t think this is only occurring in UC.

We came across a case in the past couple of weeks where the standard JSA rate was being used in the cap calculation despite actual JSA being around £30pw because of p/t work.

HB Anorak - 29 November 2017 08:42 AM

If you want to appeal to the Tribunal you have to get past para 8A of Schedule 2 to the Social Security Act 1998:

8A.A decision to apply the benefit cap in accordance with regulations under section 96 of the Welfare Reform Act 2012 [is not appealable]

I would suggest:

- applying the benefit cap is not a decision in itself, it is a constituent determination embodied in a UC decision
.

indeed.  if you challenge the the way it has all been worked out, you are not challenging the application of the cap as such, you are challenging the way the entire thing is calculated - and can then make arguments about how it should be calculated by reference to the relevant regulations….

Also worth pointing out that their logic is completely flawed, if the amount to be capped was the maximum amount before income, then why treat earnings differently to unearned income and therefore if it is the maximum amount not the payable amount then any new style esa/jsa etc would reduced the maximum amount but also added to the uc to apply the cap.  Makes no sense (yes I know the benefit system makes no sense)

I was thinking the same.  How can you not understand the logic and the policy intention of Ben Cap - to restrict the amount you can receive in benefits, and to ‘incentivise’ work?

Thanks for all the advice and suggestions so far - I think it would have been very easy for me to convince myself that I was making something out of nothing and just take DWPs word for it that they were definitely right, honest, if there was no place to really sound these things out. I can only imagine what it must be like for a claimant trying to navigate this system on their own…

Just to spice things up a little, my client’s now received her award notice for the October to November period. Letter dated 22 November 2017 and aside from a slight increase in her earnings and a new social fund deduction, everything’s pretty much as it was before with the hopefully incorrect method of calculating the cap.

And then comes the letter dated 23 November 2017 for the same period, with the same income amount and the same social fund deduction, but giving an increased UC entitlement because no benefit cap has been applied - it looks like, on this one, they’ve done the calculation we’re arguing for and after deducting her earnings amount, the “entitlement” was less than the cap so the results match what I think they should be. So, progress..?

But no, she rang the UC Helpline and they just said the second letter was wrong and should never have been sent out.

I’m very interested to try and find how they could have exactly the same information for the same period and manage to do two significantly different calculations on it, though I’m sure when I ask the question the answer will be entirely non-committal.