Judicial review: Income support

The self-employment income support scheme (the Scheme), by which payments were made to persons who carried on a business that had been adversely affected by the Coronavirus emergency, did not unlawfully discriminate against self-employed women who had taken a period of leave relating to maternity or pregnancy in the three preceding tax years. Accordingly, the Scheme did not breach art 14 of the European Convention on Human Rights, read with art 1 of the First Protocol to the Convention. The Administrative Court so ruled, in dismissing the claimants’ judicial review claim. Further, the court ruled that the Chancellor was not in breach of the public sector equality duty in s 149 of the Equality Act 2010.

In April 2020, HM Treasury (the defendant) introduced the self-employment income support scheme (the Scheme), by way of a direction under ss 71 and 76 of the Coronavirus Act 2020 (CA 2020). Under the Scheme, payments were made to persons who carried on a business that had been adversely affected by the Coronavirus emergency. With some exceptions, payments under the Scheme were to be based on average trading profits (ATP) of the individual’s business over the preceding three full tax years (i.e. 2016/17, 2017/18 and 2018/19).

The Scheme was established by means of ‘The Coronavirus Act 2020 Functions of Her Majesty’s Revenue and Customs (Self-Employment Income Support Scheme) Direction’ (the First Direction). The Revenue and Customs Commissioners (HMRC) were to be responsible for the payment and management of payments under the Scheme.

The first claimant was a registered charity which aimed to end discrimination faced by pregnant women and mothers by campaigning for changes to legislation, raising awareness of these issues in the media and working with employers to change business practice and culture. The second claimant was a self-employed energy analyst who had three young children: her second child was born in 2017 and her third was born in 2018. Following the birth of each of those children, she took maternity leave of 39 weeks. Consequently, her business income reduced significantly in the tax years 2017/18, and 2018/19.

The claimants brought a judicial review claim, challenging the Scheme.

(1) Whether, as the claimants contended, the Scheme unlawfully discriminated against self-employed women who had taken a period of leave relating to maternity or pregnancy in the three preceding tax years, contrary to art 14 of the European Convention on Human Rights, read with art 1 of the First Protocol to the Convention (A1P1).

The claimants submitted that the discrimination took one of two forms, either ‘conventional’ indirect discrimination or discrimination of the Thlimmenos type, in either case, resulting in unjustified disadvantage to the present group of women.

In the present case, the second claimant and the group of women she represented had not been the subject of indirect discrimination under the Convention in either of the ways suggested. Even if the court had found discrimination to exist, it would be justified applying the ‘manifestly without reasonable foundation’ test (see [90] of the judgment).

It was common ground that the approach to indirect discrimination claims in the context of art 14 was to be guided by R (on the application of Stott) v Secretary of State for Justice  [2019] 2 All ER 35 per Lady Black JSC. It was necessary to establish four elements. First, the circumstances had to fall within the ambit of a Convention right. Second, the difference in treatment had to have been on the ground of one of the characteristics listed in art 14 or ‘other status’. Third, the claimant and the person who had been treated differently had to be in analogous situations. Fourth, objective justification for the different treatment would be lacking. It was not always easy to keep the third and the fourth elements entirely separate, and it was not uncommon to see judgments concentrate on the question of justification, rather than on whether the people in question were in analogous situations (see [52] of the judgment).

There was no dispute in the present case that the circumstances fell within the ambit of a Convention right, that being A1P1. There was no dispute that women who, like the second claimant, had been on maternity leave in the last three years shared a protected characteristic which qualified as ‘other status’ for art 14 purposes (see [53] of the judgment).

An issue arose over whether the [second] claimant was in an analogous situation with others who had been treated differently. The claimants’ case was that the Scheme was a neutral PCP, which applied in the same way to everyone, but it had a differential effect on women who had taken maternity leave in the recent past who were thus disadvantaged by it. It was in that context that the claimants pressed the point that pregnancy and childbirth were unique circumstances which could not be compared with other reasons for absence from work. In the alternative, the claimants argued that their unique situation required a unique solution, and that the calculation for those women should have been different, so as to remove the disadvantage which affected them if they were treated in the same way as everyone else who was claiming payment under the Scheme. That was the Thlimmenos discrimination argument (see [54], [55] of the judgment).

The Divisional Court’s comments in R (on the application of Adiatu and another) v Her Majesty’s Treasury [2020] All ER (D) 78 (Jun) had relevance to the present case, especially the passage at paragraph 149. In the present case, too, the disadvantage was not caused by the Scheme itself; rather it was a disadvantage which flowed from an absence of or reduction in a person’s income in the past; for the group of women represented by the claimants, it was the consequence of a self-employed woman being unable to earn while on maternity leave. The court accepted the point made in the defendant’s evidence and by submission on its behalf, that there might be many reasons why a self-employed person was unable to work. That was not to draw comparisons between the different reasons; it was simply to recognise the fact that, for self-employed people, absence from work was likely to translate into lower earnings (see [62] of the judgment).

The court was not persuaded that there was any indirect discrimination, approaching the matter on a conventional analysis. The measure imposed no hidden barriers to eligibility. So far as quantum of payment was concerned there was no hidden barrier either: quantum was based on past (average) trading profits, which were a matter of past fact. The same rule applied to all and it was no harder for a woman who had been on maternity leave to qualify or calculate their payment, than someone who had not. The fact that some claimants would receive lower payments than others reflected the fact of lower earnings in past years. The reasons for lower earnings in past years, in the context of the Scheme with its stated purpose, were not relevant (see [64] of the judgment).

Applying the alternative approach based on Thlimmenos, counsel for the claimants suggested that women who had recently been on maternity leave, who were thus in a unique situation, had to be afforded different treatment to reflect the fact that they had lost out on self-employed earnings in the relevant tax years; in other words, the calculation for them had to be adjusted to take account of the period of lost earnings related to childbirth. That was an argument that such women had been treated similarly when they should have been treated differently. Many of the same points already outlined could be made in that context. However, there were (at least) two problems specific to that argument (see [65] of the judgment).

First, accepting for present purposes that pregnancy and maternity were unique situations for which no comparator existed and in relation to which special protections were warranted, they were circumstances which, for the second claimant and the group she represented, existed in the past. The effect of the claimants’ argument would be to demand redress by means of the Scheme in relation to a unique situation in the past. None of the six factors noted by the Court of Appeal in Capita Customer Management Ltd v Ali (Working Families intervening); Hextall v Chief Constable of Leicestershire Police (Working Families intervening)[2019] 4 All ER 91 were relevant at the present distance of time. The court was shown no authority to support the proposition that uniqueness, or difference, in the past was a basis on which to require different treatment in the present, such that failure to accord that different treatment in the present amounts to unlawful discrimination (see [66] of the judgment).

Second, the disadvantage identified by the claimants followed from the fact that they earned less in past years. The court failed to see how that state of affairs required them to be compensated through the benefits system currently, by receiving a higher level of benefit. That was the Adiatu point: the disadvantage was not caused by the measure. Rather, it existed independently of the measure. The Scheme’s failure to take account of, and rectify, historic disadvantage did not amount to discrimination (see [67] of the judgment).

It followed that the court was not persuaded that art 14 was breached, whether on the basis of indirect discrimination of the conventional type or on a Thlimmenos analysis. However, in case it was wrong about that, the court would go on to consider justification (see [68] of the judgment).

The test on justification was whether the Scheme was manifestly without reasonable foundation. Accordingly, the question for the court was a single compendious one: whether the foundation advanced by the defendant was reasonable (see [42], [69] of the judgment).

The defendant relied on five separate justifications. The first was the purpose of the Scheme, the stated purpose of which (namely, to provide support for self-employed people whose businesses were adversely affected by the pandemic) was a reasonable one. It was reasonable to seek to advance that purpose by calculating payments under the Scheme by reference to ATP (see [72], [73] of the judgment).

The second justification was policy delivery. The claimants suggested that the Scheme should have included an adjustment for women who had been on maternity leave in the recent past. The defendant argued that any such alterations to the design would have introduced complexity which in turn would have led to cost and delay. It was accepted that a move away from a method of calculation based on actual profits, reflected in data collected and held by HMRC, would have involved expense and led to delay, both of which were antithetical to the required quick delivery of the policy. The defendant had good reason for adopting an approach that was simple and quick, which used one rule, one approach, applicable to all. IT overheads and manual intervention were kept to a minimum so that the Scheme could be implemented quickly. That was not unreasonable (see [74]-[77] of the judgment).

The third justification was the desire to minimise the risk of fraud. The desire for claims to be verifiable by reference to data already held by HMRC was a powerful justification for the design of the Scheme. Overall, it was reasonable for the Government to accept some areas of fraud risk while seeking to minimise that risk in other areas. The design of the Scheme involved a balance of various interests and factors (see [78]-[80] of the judgment).

The fourth justification advanced was the risk of perverse effects if the claimants’ proposals were adopted. That point merged with the policy delivery point examined above: The defendant wished to preserve the Scheme’s simplicity. For every tweak to the simple formula, a new cohort of hard cases would have been created which fell on the wrong side of the tweaked line. The bright line solution was preferred. That, again, was a political decision for Government to make (see [81], [82] of the judgment).

The fifth justification was value for money. The claimants’ proposals would have cost money, on IT and human intervention. The defendant argued that such expenditure was not justified. Simplicity was the key to the Scheme; it meant that the payments had to correlate with data already supplied by self-employed individuals who claimed payment under the Scheme to HMRC in their tax returns. That kept implementation costs down and enabled swift payments to be made (see [83], [84] of the judgment).

Whether the various justifications were taken separately or in combination, the defendant’s decisions were reasonable ones, especially when judged in context. The Scheme was a macro-economic policy involving substantial public expenditure to mitigate the effects of a global pandemic. The Government had a wide margin of appreciation. The design of the Scheme, specifically in the way the payments were calculated by reference to ATP, was not manifestly without reasonable foundation (see [85] of the judgment).

Webb v EMO Air Cargo (UK) Ltd: C-32/93 C-32/93 considered; Barry v Midland Bank plc [1999] 1 WLR 1465 considered; Trustees of Uppingham School Retirement Benefit Scheme for Non-Teaching Staff v Shillcock [2002] EWHC 641 (Ch) considered; Stec v United Kingdom (Applications 65731/01 and 65900/01) [2006] ECHR 65731/01 considered; Humphreys v Revenue and Customs Comrs [2012] UKSC 18 considered; R (on the application of SG and others (previously JS and others)) v Secretary of State for Work and Pensions [2015] UKSC 16 considered; Re an application by Denise Brewster for Judicial Review [2017] UKSC 8 considered; R (on the application of Adath Yisroel Burial Society and another) v HM Senior Coroner for Inner North London [2018] EWHC 969 (Admin) considered; R (on the application of Stott) v Secretary of State for Justice [2018] UKSC 59 considered; R (on the application of DA and others) v Secretary of State for Works and Pensions; R (on the application of DS and others) v Secretary of State for Work and Pensions [2019] UKSC 21 considered; Capita Customer Management Ltd v Ali (Working Families intervening); Hextall v Chief Constable of Leicestershire Police (Working Families intervening) [2019] EWCA Civ 900 considered; Langford v Secretary of Defence [2019] EWCA Civ 1271 considered; R (on the application of Adiatu and another) v Her Majesty’s Treasury [2020] EWHC 1554 (Admin) considered; R (on the application of Salvato) v Secretary of State for Work and Pensions [2021] EWHC 102 (Admin) considered.

(2) Whether the defendant had breached the public sector equality duty (the PSED) in s 149 of the Equality Act 2010 (EqA 2010).

By s 149(1), a public authority had to have ‘due regard to’ the need to eliminate discrimination and promote equality of opportunity. The duty was procedural and was not a duty to achieve any particular result. The court should not go further than to identify whether the essential questions had been conscientiously considered and that any conclusions reached were not irrational (see [86] of the judgment).

In the present case, there had been no breach of the PSED (see [89] of the judgment).

Prior to the First Direction, the defendant had considered the general equality implications, as well as the particular position of mothers who had recently taken maternity leave. Those matters had been raised, generally, in the ministerial submission of 24 March 2020, and expressly in the submissions of 2 April and 22 April. Although the Scheme had been announced before those submissions, the whole point of them had been to focus on the detailed implementation of the Scheme; work was underway to perfect the detail and it was not too late to adjust or carve out an exception, if that was what the Chancellor had wanted to do. He had had the specific issue well in focus and the regard he had to it had been proper and conscientious (see [88] of the judgment).

R (on the application of British Medical Association) v Secretary of State for Health and Social Care [2020] EWHC 64 (Admin) considered.

Jude Bunting, Clare Duffy and Donnchadh Greene (instructed by Leigh Day and Co) for the claimants.

Julian Milford QC, Rupert Paines and Zoe Gannon (instructed by the Government Legal Department) for the defendant and the interested party, HMRC.

Carla Dougan-Bacchus Barrister.