Two-child benefit rule held lawful

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Recently, in R (SC, CB and 8 children) v Secretary of State for Work and Pensions & ors [2021] UKSC 26 (“SC”), the Supreme Court held that the two-child rule (contained in the Welfare Reform and Work Act 2016) limiting key subsistence benefits to two children per household, was lawful.

Introduction: The limitation on entitlement to child tax credit to two children (“the two-child rule”) was announced by the Government on 8 July 2015 as one of a number of measures to reduce spending on welfare benefits. Expenditure on tax credits was said to be particularly concerning as it had more than trebled over the course of a decade. Accordingly, the two-child rule was brought into effect on 6th April 2017 and applied to tax credits claimed in relation to children born on or after that date.

In SC, the Supreme Court considered the challenge to the two-child rule on the grounds that it discriminated against children as a class, against children belonging to households containing three or more children and against women as primary carers contrary to article 14 ECHR, read together with articles 8 and A1P1 ECHR. In giving the sole judgment, the President of the Supreme Court, Lord Reed, held the rule lawful. Therefore, the individual element of the child tax credit will continue to be limited to a maximum amount calculated as the amount payable in respect of two children.

The purpose of the rule

The limit on child tax credit was introduced for the stated purpose of putting the welfare system on a more sustainable footing; previously, persons in receipt of child tax credits were guaranteed a rise in income for every additional child they chose to have, without limit. The rule was also said to be aimed at encouraging people in receipt of tax credits to consider whether they could afford to support additional children and leave choices about family size to the individuals concerned in light of what state support would be available. Furthermore, it was said to incentivise people to support themselves and their families through work.

The Government had previously put in place an overall limitation, or cap, on the total amount of welfare benefits which a person could receive, measures which were challenged unsuccessfully in earlier proceedings (see R (SG) v Secretary of State for Work and Pensions (Child Poverty Action Group intervening) [2015] UKSC 16); on the original benefits cap and R (DA) v Secretary of State for Work and Pensions [2019] UKSC 21 on the revised benefits cap).

Three preliminary issues

One of the significant legacies of SC will be the “Three preliminary issues” discussed by Lord Reed, at [73]-[185] of his judgment, relating to “Compliance with unincorporated international law” ([73]-[96]), the “Manifestly without reasonable foundation” test at the justification stage ([97]-[162]) and “The use of Parliamentary materials” ([163]-[185]). These paragraphs form the backbone of the ultimate reasoning and are worth reading in full.

In summary:

  • Lord Reed clarified that domestic courts should not determine whether the UK is in breach of its obligations under an unincorporated international treaty;
  • The intensity of review to be applied by the Court will depend on a wide range of factors. Very weighty reasons will usually have to be shown if difference in treatment on a “suspect” ground is to be justified but other factors may lower the intensity of review even in those cases. The “manifestly without reasonable foundation” formulation is merely a way of describing a wide margin of appreciation; and
  • Caution should be exercised when considering the relevance of Parliamentary material to see if certain matters had or had not been considered. A high-level of review of whether a topic was raised before Parliament is sufficient.

Whether the rule discriminated against children as a class as compared with adults

It was argued that the two-child rule directly discriminated against children as it resulted in a difference in treatment between children as a class as compared to adults. This was on the basis that the rule excluded third and subsequent children in a household from the scope of benefits intended to provide children with financial support, whereas there was no corresponding exclusion of adults from the scope of benefits designed to provide adults with equivalent support, such as income support, jobseeker’s allowance etc.

The Court rejected this argument on the basis that children and adults were not in relevantly similar situations as the person entitled to child tax credit was not the child but the person responsible for him/her:

“There is in any event a fundamental problem with the argument. Child tax

credit does not affect children and adults in comparable ways...It is not paid to adults for their own benefit, but in order to assist them in meeting the needs of the children for whom they are responsible. A rule which limits the amount of child tax credit affects the children in the household, since it limits the amount of money which the responsible adults can spend on their care. It does not have any comparable effect upon the adults themselves” (Lord Reed at [63]).

Whether the two-child rule constituted indirect discrimination against women as compared to men

The Court acknowledged that the policy affects women disproportionately as compared to men as more women act as primary carers. It concluded, nonetheless, that the discrimination against women was not intended by the legislation (Welfare Reform and Work Act 2016) and the difference in treatment was justified as it pursued a legitimate aim of protecting the economic wellbeing of the country. The policy was a contribution to the efforts at tackling the budget deficit and rebalancing the welfare state by spending on causes that also serve the interests of children, such as education and healthcare. Importantly, the Court found that the legitimate aims of the measure could simply not be achieved without a disproportionate impact on women, arising from the fact that they form the majority of parents bringing up children. Moreover, the Court could not take a different view to Parliament that the objectives pursued by the rule justified its enactment, notwithstanding that greater impact on women.

Whether the two-child rule discriminated against children in households of two compared to those with more than two children

The Court ultimately found that the discrimination was justified in, again, promoting the economic well-being of the country and to address what was regarded as an unfair and unreasonable aspect of the child tax credit system.

It pointed out that the limitation was not hypothecated to the care of particular children (the first two) to the exclusion of other children (third and subsequent) in the household. The limitation did not, therefore, exclude any children from the scope of the support provided by child tax credit, let alone from the scope of the support provided by the benefits system as a whole. In other words, the child tax credit which adults could claim for use to meet the needs of the children in their household was available to all children, and not limited to the first two. Thus, the rule did not discriminate between the children in the same household. Of course, as a result of the rule less money was available overall as the sum available for two children was stretched to meet the needs of three or more children. The Court pointed out, however, that there was a range of support available to families with children including 70% assistance with childcare costs as part of working tax credit, discretionary assistance with childcare costs for those working less than 16 hours per week and free childcare for younger children and free school meals, none of which was subject to any limitation relating to the number of children. Most notably, the child tax credit was separate from, and additional to, a range of benefits which could be claimed by families with children such as child benefit, for which there is no limit referable to the number of children in respect of whom child benefit is paid.

Overall, the Court considered that the issue was ultimately whether Parliament had made the right judgment on a question of intense political controversy. This was not a question that could be answered by any process of legal reasoning and democratic institutions were better placed to make judgements on what was fair.

For a detailed discussion on SC, please access a recording of the webinar here.

Yaaser Vanderman is a barrister specialising in public law and human rights. He, alongside Galina Ward, appeared for the Respondents and Richard Drabble QC appeared for the Appellants.

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