Amber Rudd has been urged to take “immediate steps” over the way the controversial Universal Credit is calculated following a High Court victory for four working single mothers.
A lawyer representing one of the successful women said the Work and Pensions Secretary should now “ensure that no other claimants are adversely affected”.
Tessa Gregory, of law firm Leigh Day, who represented part-time dinner lady and mother-of-one Danielle Johnson, of Keighley, West Yorkshire, said the minister should also “ensure all those who have suffered because of this unlawful conduct are swiftly and fairly compensated”.
Her comments came after two judges in London announced on Friday that Ms Johnson and three other single mothers – who say they are struggling financially because of the way the welfare system operates – had succeeded in their judicial review action against the Work and Pensions Secretary.
The women argued that a “fundamental problem” with the scheme means that their monthly payments vary “enormously” and they end up out of pocket.
They challenged the method used by the Department for Work and Pensions (DWP) when calculating the amount payable under the Universal Credit Regulations 2013.
Lord Justice Singh and Mr Justice Lewis gave their ruling following a hearing in November when they were told the women are struggling to manage their household budgets, and some have fallen into debt or had to rely on food banks.
Lawyers for Ms Johnson, Claire Woods, Erin Barrett and Katie Stewart said the problem is likely to affect “tens of thousands of people” claiming Universal Credit, which was introduced to replace means-tested benefits including income support and housing benefit.
They said the problem highlighted by the case arises when claimants are paid by employers on a date which “clashes” with their assessment period for Universal Credit.
For example, they pointed out that if a claimant is paid early because of a weekend or bank holiday, the system counts them as having been paid twice in one month and they receive a “vastly reduced” Universal Credit payment.
The judges concluded that the “Secretary of State had wrongly interpreted the relevant regulations” and reached “flawed” decisions in the women’s cases.
They explained that as each of the women received her salary on or around either the last working day or last banking day of the month, there were times when salaries payable in respect of two different months were paid during one monthly assessment period for Universal Credit.
Claimants with childcare responsibilities or limited capacity for work are allowed to retain a certain amount of their earned income – known as a work allowance – for each monthly assessment period, without that affecting the amount of Universal Credit to be received.
The legal action by the four centred on decisions relating to an assessment period when they were treated as receiving two months’ salary in that period and were allowed to retain only one work allowance – the sum of £192.
In a summary of their decision, the judges said the Secretary of State was “wrong to treat the combined salaries for two different months as the amount of earned income received in respect of a single monthly assessment period simply because both salaries happened to have been received within that assessment period because of the dates on which they were paid”.
They added that the Secretary of State was “wrong to allow each of the claimants to retain only one amount of £192 from the combined amount of the two months’ salaries”.
Solicitor Carla Clarke, of the Child Poverty Action Group, which also brought the case on behalf of the lone mothers, said: “Today’s result should mean that in future no-one will lose out on their Universal Credit awards or face the hardship that my clients have faced simply because of when their payday happens to fall.”
A spokesman for the DWP said: “We are carefully considering the court’s judgment.”