Taylor Moore had recently changed jobs when she commenced maternity leave. She was unable to claim SMP because she lacked sufficient continuity of service with her new employer. It was common ground that she would have been better off had she been able to claim SMP.

The case was heard in the English High Court of Justice (Queen’s Bench Division) by Justice Swift.

Classed as unearned income

Under the Universal Credit Regulations 2013, part of a claimant’s earned income is disregarded when calculating any deductions to Universal Credit, whereas unearned income is deducted in its entirety from the amount of UC payable. The Regulations classify SMP as earned income but classify Maternity Allowance as unearned income.

The claimant discovered she was pregnant around the time she left her previous job for a better paid one. She started her new job in June 2018 and signed off work sick in October of the same year because of complications with her pregnancy. Her daughter, who was listed as the second claimant, was born on 22 November 2018.

When the claimant commenced maternity leave, she made a claim for Maternity Allowance. She did not qualify for SMP as she had not been in her new job for the required continuous period of 26 weeks ending with the week immediately preceding the fourteenth week before the expected week of confinement, as given in the Social Security Contributions and Benefits Act 1992.

In November 2018, the claimant applied for Universal Credit. The decision of the Secretary of State for Work and Pensions, the respondent to the application, was that her entitlement was £813.36 per month without deductions. After deducting the amount paid in Maternity Allowance, this was reduced by £644.28. Had the claimant been entitled to SMP, only £225.09 would have been deducted, leaving her better off by £419.19 per month.

The claimant argued that the decision to treat Maternity Allowance as unearned income was not compliant with the obligation at section 149 of the Equality Act 2010 to have due regard to the need to eliminate discrimination, or with article 14 of the ECHR. The same point was also put on the basis of illegality at common law.

Range of considerations

In his decision, Swift J said of the key issue of the case: “The matter to be addressed is not so much why Maternity Allowance is treated as unearned income but why Statutory Maternity Pay is treated as earned income. By their nature, both Maternity Allowance and Statutory Maternity Pay are unearned income. It is only by reason of regulation 55 of the 2013 Regulations that Statutory Maternity Pay is required to be treated as earned income.”

Examining the policy reasons for the distinction, he said: “A range of considerations relating to the practical workings of the Universal Credit system combined to produce the conclusion that Statutory Maternity Pay should be treated as if it were earned income. The first consideration was that Statutory Maternity Pay, unlike Maternity Allowance was paid by employers through the payroll. It is treated in the same way as earnings paid through the PAYE system. By contrast, Maternity Allowance is paid directly by the Secretary of State through Jobcentre Plus.”

He continued: “Next, in consequence of the route by which Statutory Maternity Pay is paid, payments are recorded by employers and reported to HMRC through the RTI system. For the purpose of Universal Credit, the Department for Work and Pensions used the RTI system as the source of information to establish a person’s earnings. This was an important feature of Universal Credit.”

Addressing the claimant’s submissions directly, he said: “I accept that the purposes served both by Statutory Maternity Pay and Maternity Allowance are materially the same. However, it does not follow from this that any distinction between them is illegitimate.”

He continued: “It was recognised that the approach for the purposes of Universal Credit which distinguished between the treatment of Statutory Maternity Pay and Maternity Allowance was a different approach to that taken in the context of Tax Credits. Nevertheless, the decision proposed in the Written Ministerial Submission was that it was appropriate for the rules of Universal Credit to be less generous than those applicable to Tax Credits in this regard. While it is possible to dispute the policy, I do not consider that this difference of approach identifies anything that indicates illegality.”

On the public sector equality duty under the Equality Act 2010, he said: “The section 149 obligation is a process-type obligation, requiring prescribed considerations to be built-in to every decision-making process. The obligation will either have been discharged or breached by the time the relevant substantive decision has been taken.”

For these reasons, Swift J held that the claim failed on all grounds.