When settling an application to suspend a warrant for eviction recently, Mary-Rachel McCabe and Simon Mullings had to find a way to prevent third party deductions legislation from rendering their client destitute. Here, they set out the background to the legislation and the details of the case, and suggest recitals that practitioners may find helpful. They in no way suggest that such an order should be called a McCabe/Mullings order.
In general, lawyers representing benefit-claimant tenants in housing possession proceedings have had a positive view of direct deductions from benefits (third party deductions or TPDs) towards arrears of rent. TPDs are, in appropriate cases, useful because they can assist tenants who have problems with budgeting to manage rent arrears and also give comfort to landlords (and judges) that regular payments will be made to the rent account.
Direct payments from benefits have been available since the 1970s, having first been introduced in an attempt to reduce fuel supply disconnections. Deductions for housing costs and rent arrears followed in the 1990s and 2000s. Research carried out in 19941Mannion et al, Direct payments from income support, DSS Research Report No 33, 1994, quoted in Social Security Advisory Committee Occasional Paper No 5: Third party deductions (TPDs): time for a policy review, February 2008.
and 20052Farrell et al, Perspectives of Social Fund loans and third party deductions – a qualitative study of recipients, Research Report No 240, 2005, quoted in Social Security Advisory Committee Occasional Paper No 5: Third party deductions (TPDs): time for a policy review.
appeared to show that claimants were not hostile to TPDs if
they were effective to prevent sanctions, such as disconnection of utilities or eviction from the home, and
if the amount deducted was fixed at a point that was affordable.
There are legitimate concerns that setting a fixed amount for deduction leads to courts not looking in sufficient detail at whether the amount is affordable, instead regarding the amount as a minimum floor when setting terms for repayment plans. 3See, for example, Step Change, Briefing on third party deductions, September 2017.
If amounts such as £3.65 per week sound too small to worry about then you have probably never lived for any significant length of time on minimum income benefits.
Fair enough, Gov
In Schedule 9 to the Social Security (Claims and Payments) Regulations 1987 SI No 1968, the amount that could be deducted from income support for rent arrears was restricted to five per cent of the standard applicable amount for a person aged 25 or over (Sch 9 para 5(6)). The maximum aggregate TPD allowed under the 1987 regulations was fixed at 15 per cent of the standard applicable amount (Sch 9 para 8(1)).
The five per cent restriction was retained as benefits such as jobseeker’s allowance (JSA), employment and support allowance (ESA) and pension credit were introduced. It has also become adopted colloquially at court as ‘the usual amount’ when making orders for payments towards rent arrears against benefit-claimant tenants, whether or not the payments are made by TPDs.
The third party deduction scheme does recognise that hardship can result where the deductions burden is too heavy. For this reason there is a fixed amount of arrears deduction for each item (£3.60), and an overall maximum equivalent to three arrears deductions. The fixed amount of arrears deduction is calculated at 5% of the personal allowance of income support for a claimant aged 25 or over.
It was possible to assume that this viewpoint persisted when regulations were first drawn up to deal with direct deductions from universal credit (UC). Universal Credit, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 SI No 380 Sch 6 para 7(5) continued to restrict deductions for housing costs and arrears to five per cent of what is described in UC as the ‘standard allowance’ for a person aged 25 or over.
Come on Gov, give me some credit
However, the above UC regulations did not remain unamended. Regulation 6(2)(c) of the Universal Credit and Miscellaneous Amendments (No 2) Regulations 2014 SI No 2888 changed the figure in para 7(5) to ‘no less than 10% and no more than 20%’. Effectively, that means that direct deductions made from UC cannot be less than 10 per cent of the standard allowance or more than 20 per cent. So, where the amount had previously been maintained at five per cent (currently £3.65 per week), deductions must now be no less than £7.30 per week and can be up to £14.60 per week.
The explanatory memorandum to the amendment regulations states:
7.5 Deductions from benefit and direct payments
Regulation 6 amends current provisions in universal credit for deductions to repay rent arrears of an amount equal to 5% of the standard allowance. It allows for deduction of an increased amount equal to between 10% and 20% of a claimant’s standard allowance in order to repay rent arrears in a shorter time. In the majority of cases the full universal credit award, including the housing costs element, will be paid direct to the claimant, therefore there is potentially a greater risk that rent arrears could accrue. Repaying arrears more quickly will protect the claimant by reducing the risk of eviction and ensure a secure income stream for landlords. The provision is for a minimum priority deduction of 10% and up to a further 10% where possible, subject to other priority deductions.
Suddenly, a useful tool to assist tenants with managing payment towards rent arrears in order to keep their home has become, to those who subsist entirely or mostly on UC, an unaffordable repayment burden.
Suddenly, a useful tool to assist tenants with managing payment towards rent arrears in order to keep their home has become, to those who subsist entirely or mostly on UC, an unaffordable repayment burden. When we got to the position of being able to settle an application to suspend a warrant for the eviction of our client Tony Rice, it was necessary to find a way to ensure that the council did not have recourse to TPDs from his UC. Otherwise, there is no doubt that he would have been left destitute and unable to manage.
Tony Rice: ‘a real life Daniel Blake’
The case of Tony Rice, his enforced move from ESA to UC and his subsequent near-eviction from his home of nine years is one of a number of cases that has garnered media attention for the alarmingly speedy way in which UC can leave people destitute and facing homelessness.
Tony was forced to give up work a few years ago when his life was turned upside down: over a short period of time, both his mum and dad died, and he was stabbed in the shoulder and face in an unprovoked attack. Tony was diagnosed with depression and post-traumatic stress disorder, and a range of physical health difficulties arising from the stabbing. At that time, Tony was in receipt of ESA and housing benefit, which went straight to the council to pay the rent for his flat.
A few weeks after his stabbing, the Department for Work and Pensions (DWP) called Tony in for a work capability assessment. The health assessor found him fit for work and both of his benefits were stopped. Tony had no income whatsoever for seven months and started falling into rent arrears. After seven months of pleading with the job centre, the DWP told him that he could claim UC. The problems were immediate. Tony does not have and cannot use a computer, and could not manage his claim online. There was a two-month delay before any payments were made, so he had to apply for an emergency payment, which was clawed back once he started receiving payments. When he finally started getting money, he received a lump sum for rent and living costs – the housing costs were no longer paid directly to the council, which Tony didn’t realise.
Because he’d been assessed as fit for work, Tony was expected to spend 35 hours a week looking for a job. He was summoned to a meeting to explain what he’d been doing to find work but he didn’t receive any notification: it might have been sent electronically, so he missed it. When Tony didn’t turn up to the jobseeker’s meeting, he was sanctioned for 212 days, meaning he was only paid the housing element of his benefit, and no living costs. Tony did not know this and assumed the money he was receiving was for him to live on. By this stage his arrears had reached £10,000.
The council applied for a bailiff’s warrant to evict him because of his rent arrears. He agreed to pay £300 a month out of the little amount of UC that he was receiving, leaving him with £114.33 a month, or £26.38 a week, to live on. It would be remiss of us not to acknowledge the council’s patient approach, which involved a number of adjournments of Tony’s application to suspend the warrant so that the problems with his UC could be tackled.
With the help of Citizens Advice, we managed to get Tony’s UC claim back on track, with some backdating. Eventually, we were able to make an offer to the council to settle the application to suspend the warrant on terms of regular payment towards the arrears.
Although Tony’s UC award had been regularised, it was clear that, once rent and other deductions were made, he could only afford a small regular payment – no more than £3.65 per week. If Tony was in receipt of JSA, ESA or similar, we would have advised him to agree to TPDs towards the arrears for his ease and to reassure the council. However, on UC, Tony has £56.53 weekly after rent and deductions. TPDs would be no less than £7.30 and up to £14.60 per week, at best leaving him with just £49.23 per week to meet council tax, utilities and all other expenses.
We decided that we would not only need to negotiate terms of £3.65 per week but we would also need to secure the council’s agreement not to seek TPDs. We were conscious of the fact that the council may apply for TPDs without realising their impact on Tony’s finances. We therefore drew up a consent order suspending the warrant, with the following two recitals:
AND UPON the claimant agreeing not to ask the Department for Work and Pensions to make direct payments from the defendant’s universal credit towards the arrears because the minimum that could be paid that way is £7.30 per week (10% of the standard weekly allowance), leaving him at risk of destitution.
AND UPON the parties agreeing that it would be more appropriate for the court to order that the defendant pay towards the arrears 5% of the standard allowance, currently £3.65.
Again, to the council’s credit, it understood what was proposed and agreed. Happily, the court approved the order.
It is regrettable that the utility of TPDs has been thrown away by setting the minimum amount at 10 per cent. It appears to us regressive to take away the discretion of the court when setting repayment rates if TPDs are to be used. We hope that the recitals we used can offer some protection to tenants but a better solution would be for the minimum level of TPDs to be returned to five per cent, or even less.