The High Court has rejected claims for a judicial review of the so-called "bedroom tax". Its judgment brings 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"
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 force on 1 April 2013 and, broadly, reduces the entitlement of Housing Benefit 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. So, 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. A similar scheme – the Local Housing Allowance ("LHA") – limits the entitlement of those occupying accommodation in the private sector.
The claims for a judicial review were brought by ten family groups, whose members included disabled and abused children and disabled adults. They were unable to share a bedroom with others because of their disability or, for example, because of a consequent risk of violence.
They challenged the lawfulness of the SSSC on three grounds.
- Unlawful discrimination: the SSSC discriminated unlawfully against the claimants, in breach of Article 14 ECHR, by adversely affecting a class of individuals, of whom the claimants were representative, for reasons relating to their disability. They contended that the discrimination could not be justified.
- Breach of the Public Sector Equality Duty ("PSED"): the Secretary of State had breached the PSED imposed by section 149 of the Equality Act 2010 when implementing the SSSC. In particular, he had failed, it was said, 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 Housing Benefit entitlement for claimants with severely disabled children, who were unable to share a room. Following the Court of Appeal’s judgment in Gorry v Wiltshire Council and another  EWCA Civ 629  PTSR 117 that, the claimants contended, could only be done by secondary legislation; and in any event, the Secretary of State’s guidance could not cure the discriminatory effect of the SSSC.
The judgment in overview
The Court rejected claims of direct and indirect discrimination. According to Laws LJ the claimants’ case was best regarded as one of Thlimmenos discrimination – an alleged failure to treat different people or classes of people differently, without reasonable and objective justification.
He acknowledged that the SSSC had a markedly disparate and adverse effect on the disabled and on other groups. The fact that it was not possible to define these groups with clarity did not mean the SSSC could not be discriminatory in the Thlimmenos sense.
The real question was whether the policy rationale of the SSSC could be justified or, as Laws LJ put it, “whether the refusal to exclude (some) disabled persons from the ‘bedroom tax’ regime, and the provision made and to be made by way of access to [Discretionary Housing Payments (‘DHPs’)], constituted a proportionate approach to the difficulties suffered by such persons in consequence of the HB policy.”
That, according to Laws LJ, involved high policy. The appropriate test therefore, applying Humphreys v HMRC  1 WLR 1545, was whether the policy rationale of the SSSC was "manifestly without reasonable foundation". The fact that social policy was at play meant that the Secretary of State enjoyed a wide margin of discretion. Further,
“Where the discrimination issue is to be resolved, as here, by the requirement of a proportionate judgment, its discipline and that of the PSED are very close. Both demand an informed and conscientious appreciation of the difficulties facing the persons or group adversely affected by the prospective measure. If that has been done, the PSED duty will have been fulfilled; and, most likely, a proportionate decision arrived at.”
For the court, therefore, the answers to the first and second grounds of the claim were largely aligned.
Laws LJ duly analysed the duty imposed by section 149 of the 2010 Act on public authority decision makers: to have due regard to the need to achieve the goals identified in section 149; to conduct a rigorous examination of a decision or policy’s effects, including due enquiry where necessary; but not to undertake a minute examination of every possible impact and ramification; and the duty did not require a particular result. Importantly, the courts were not to micro-manage the exercise; and the duty should not be treated as a back door by which to challenge the merits of a decision.
The question posed by the court was, therefore, whether the Secretary of State had conducted a rigorous examination of the likely effect of the SSSC and made due enquiry where necessary. It resolved that he had: the criticisms levelled at the Secretary of State were “an attempt to persuade the court to 'micro-manage' the policy-making process” and looked “very like a list objections to the policy under the guise of a litany of matters left unconsidered.”
Moreover, the policy rational of the SSSC was not manifestly without reasonable foundation. The provision of extra funding for DHPs and advice and guidance about its use could not be said to be a disproportionate approach to the difficulties faced by groups such as the disabled.
As for the third ground of the claim, it was plainly right that a Departmental circular was not a lawful means of prescribing the calculation of Housing Benefit entitlement. That could only be done by secondary legislation. It was also plainly right that the Court of Appeal’s decision in Gorry required the Secretary of State to provide by Regulations that a claimant’s Housing Benefit entitlement would not be reduced if he or she required an extra bedroom for a child unable to share because of a disability. No such Regulation had, however, been made and the court was singularly unimpressed:
“The Secretary of State has no business considering whether to introduce regulations to conform HB provision with the judgment in Gorry. He is obliged to do so.”
As the Secretary of State had, however, indicated that drafting was “under consideration” the court desisted from ordering the Secretary of State to make Regulations.
Interest in this judgment will surely be high, whether academic, legal, political or practical.
Academically, the judgment is noteworthy for its treatment of the forms of discrimination on which the claimants relied – direct, indirect and Thlimmenos – and the important conceptual differences between them. As Laws LJ observed:
“…the difference between direct and indirect discrimination (and Thlimmenos discrimination) retains a conceptual importance, because it will determine what it is that must be justified. Where the discrimination is direct – where a rule, practice or policy prescribes different treatment for persons in like situations – it is the rule itself that must be justified: the difference in treatment. Where the discrimination is indirect – where a single rule has disparate impact on one group as opposed to another – it is the disparate impact that has to be justified. With Thlimmenos discrimination, what must be justified is the failure to make a different rule for those adversely affected."
Equally, the conflation of justification and proportionality considerations with PSED compliance is likely to spark considerable academic interest as well as legal dispute.
Legally, it is suggested respectfully that the judgment sits rather uncomfortably with that of the Court of Appeal in Gorry and the appeals joined with it. In Gorry, for example, the Court had felt able to identify with sufficient certainty a class of person against whom the LHA discriminated unlawfully: those with a severely disabled child, unable to share a bedroom by reason of his or her disability. It is perhaps difficult to see why, if the court was able to identify such a class in Gorry, it felt unable to do so here.
Moreover, the courts’ treatment of the Secretary of State’s reliance on the DHP fund is markedly different. In Gorry, reliance on DHP availability, to make up the shortfall between benefit entitlement and rent in appropriate cases, was treated with something marginally short of contempt. The DHP fund is finite, intended as a temporary expedient only and its allocation necessarily uncertain. Here, by contrast, it weighs favourably in the balance of proportionality. The explanation, perhaps, lies in the court’s approach to the question of justification. As the SSSC were found to involve ‘high policy’ – aimed not only at saving public funds but at shifting the place of social security support in society – the threshold for the claims’ success here was particularly high: proof that the SSSC policy was "manifestly without reasonable foundation". Whether that was the right test to apply and whether the court was right to conflate the question of justification with that of PSED compliance are questions the Court of Appeal may well have to consider in due course.
Meanwhile, politically and practically, application of the SSSC is certain to remain controversial. Anecdotal and empirical evidence suggests they have contributed already to an increase in tenant arrears and landlord bad debt. While 2014 is likely, therefore, to be a critical year for the SSSC in the Court of Appeal, it is likely to prove just as critical in the county court for the tenants and landlords to whom it applies.