[2008] UKSSCSC CG_1239_2008 (25 November 2008)
Decision of the Upper Tribunal
(Administrative Appeals Chamber)
My decision is given under section 11 of the Tribunals, Courts and Enforcement Act 2007:
The decision of the Sutton appeal tribunal under reference 242/07/03317, held on 18 July 2007, did not involve the making of an error on a point of law. 

Reasons for Decision
1.	I must begin my apologising for the time that it has taken to write this decision. My only excuse is that I have been trying to understand the operation of regulations 6 to 9 of the Social Security (Computation of Earnings) Regulations 1996. In the end, I have decided that was too ambitious a task. The way that those provisions operate is not entirely clear and they would benefit from being reconsidered, if not redrafted. 
2.	As a result of the time I have taken, the social security jurisdiction of the Commissioners has been transferred, on 3 November 2008, to the Upper Tribunal. The proceedings before the Commissioner were transferred to the Upper Tribunal under the Transfer of Tribunal Functions Order 2008 (No 2833). This has not affected my decision on the issues raised by the appeal.
A.	The issue
3.	On retirement, the claimant received one month’s salary and seven days’ accrued holiday pay. The issue is how the accrued holiday pay should be attributed to particular weeks. The significance of this is that a claimant whose income exceeds a threshold is not entitled to a carer’s allowance. In this case, when the claimant’s final salary and accrued holiday pay were taken together, the effect was to deny him benefit for almost two months. This was despite the fact that it only represented income for just over five weeks. 
B.	History and background
4.	The facts of this case, unlike the interpretation and application of the legislation, are straightforward and not in dispute. 
5.	The claimant retired from his employment on 30 November 2006. He last worked on 21 November 2006. His contractual payday was the 18th of each month. As that date fell on a Saturday in November 2006, he was paid on 17 November. On that date, he received his monthly salary and pay for seven days holiday that had accrued but not been taken. 
6.	The claimant made a claim for a carer’s allowance to take effect from 1 December 2006. The Secretary of State made an award from 29 January 2007, but refused the claim for the inclusive period from 1 December 2006 to 28 January 2007.
7.	That decision was based on the attribution of the claimant’s final payment, applying Mr Commissioner Turnbull’s decision in CG/4172/2001. The appeal tribunal followed that decision and dismissed the claimant’s appeal, but the chairman gave the claimant leave to appeal to a Commissioner.
C.	The oral hearing
8.	I held an oral hearing of the appeal on 9 October 2008. The claimant attended and was represented by Mr Tom Richards, of counsel, acting for the Free Representation Unit. The Secretary of State was represented by Mr Jeremy Heath on behalf of the Solicitor to the Department for Work and Pensions. I am grateful to them both for their detailed arguments on this difficult issue. 
9.	Mr Richards conceded that the claimant final salary should be attributed to the period from 13 November 2006 to 17 December 2006. The former date is the first day of the benefit week in which the payment was made. The latter is one month after his last salary payment. 
D.	The legislation
10.	Carer’s allowance (as invalid care allowance) was first contained in section 7 of the Social Security Benefits Act 1975. Before it came into force, this section was consolidated as section 37 of the Social Security Act 1975. It is now authorised by section 70 of the Social Security Contributions and Benefits Act 1992:
‘(1)	A person shall be entitled to a carer’s allowance for any day on which he is engaged in caring for a severely disabled person if-
…
(b)	he is not gainfully employed; …
…
(8)	Regulations may prescribe the circumstances in which a person is or is not to be treated for the purposes of this section … as gainfully employed …’
11.	Regulation 8 of the Social Security (Invalid Care Allowance) Regulations 1976 is made the authority of section 70(8):
‘(1)	For the purposes of section 70(1)(b) of the Contributions and Benefits Act 1992 (condition of a person being entitled to a carer’s allowance for any day that he is not gainfully employed) a person shall not be treated as gainfully employed on any day in a week unless his earnings in the immediately preceding week have exceeded [£84] and, subject to paragraph (2), shall be treated as gainfully employed on every day in a week if his earnings in the immediately preceding week have exceeded [£84].’
12.	The calculation of earnings is governed by section 3 of the Social Security Contributions and Benefits Act 1992:
‘(2)	For the purposes of this Part of this Act and Parts II to V below other than those of Schedule 8-
(a)	the amount of a person’s earnings for any period; or
(b)	the amount of his earnings to be treated as comprised in any payment made to  him or for his benefit, 
shall be calculated or estimated in such manner and on such basis as may be prescribed ...’
Section 70 is in Part III of the Act and so section 3 applies to carer’s allowance.
13.	The Social Security Benefit (Computation of Earnings) Regulations 1996 are made in part under the authority of section 3(2).
14.	The function of these regulations is to identify what counts as earnings, attribute those earnings to a particular week or number of weeks, and convert them to weekly amounts.
15.	What counts as earnings This is dealt with in regulation 9(1):
‘Earnings of employed earners
9.—(1) Subject to paragraphs (2) and (3), "earnings", in the case of employment as an employed earner, means any remuneration or profit derived from that employment and includes— 
(a)	any bonus or commission;
(b)	any payment in lieu of remuneration except any periodic sum paid to a claimant on account of the termination of his employment by reason of redundancy;
(c)	any payment in lieu of notice;
(d)	any holiday pay except any payable more than four weeks after the termination or interruption of employment;
(e)	any payment by way of a retainer;
(f)	any payment made by the claimant’s employer in respect of expenses not wholly, exclusively and necessarily incurred in the performance of the duties of the employment, including any payment made by the claimant’s employer in respect of— 
(i)	travelling expenses incurred by the claimant between his home and place of employment;
(ii)	expenses incurred by the claimant under arrangements made for the care of a member of his family owing to the claimant’s absence from home;
(g)	any award of compensation made under section 112(4) or 117(3)(a) of the Employment Rights Act 1996 (remedies and compensation);
(h)	any such sum as is referred to in section 112(3) of the Contributions and Benefits Act (certain sums to be earnings for social security purposes);
(i)	where— 
(i)	a payment of compensation is made in respect of employment which is not part-time employment and that payment is not less than the maximum weekly amount, the amount of the compensation less the deductible remainder, where that is applicable;
(ii)	a payment of compensation is made in respect of employment which is part-time employment, the amount of the compensation;
(j)	any remuneration paid by or on behalf of an employer to the claimant in respect of a period throughout which the claimant is-
(i)	on maternity leave;
(ii)	on paternity leave;
(iii)	on adoption leave; or 
(iv)	absent from work because he is ill.
…’
16.	Attributing earnings to a particular week or weeks This divides into two separate steps. First, the number of weeks is identified. Then, the date on which payment is treated as being made is identified in order to identify the particular week or weeks. The former is dealt with in regulation 6; the latter is dealt with in regulation 7:
‘Calculation of earnings of employed earners
6.—(1) Earnings derived from employment as an employed earner shall be calculated or estimated over a period determined in accordance with the following paragraphs and at a weekly amount determined in accordance with regulation 8 (calculation of weekly amount of earnings).
(2)	Subject to paragraphs (3) and (5) to (8), the period over which a payment is to be taken into account— 
(a)	in a case where it is payable in respect of a period, shall be a period equal to a benefit week or such number of benefit weeks as comprise the period commencing on the date on which earnings are treated as paid under regulation 7 (date on which earnings are treated as paid) and ending on the day before the date on which earnings of the same kind (excluding earnings of the kind mentioned at regulation 9(1)(a) to (j)) and from the same source would, or would if the employment was continuing, next be treated as paid under that regulation;
(b)	in any other case, shall be a period equal to such number of weeks as is equal to the number (less any fraction of a whole number) calculated in accordance with the formula— 
P 
Q+R
where— 
P is the net earnings;
Q is the amount of the relevant earnings limit plus one penny; and
R is the total of the sums which would fall to be disregarded or deducted as appropriate under regulation 10(2) or (3) (calculation of net earnings of employed earners),
and that period shall begin on the date on which the payment is treated as paid under regulation 7 (date on which earnings are treated as paid).
(3)	Where earnings not of the same kind are derived from the same source and the periods in respect of which those earnings would, but for this paragraph, fall to be taken into account overlap, wholly or partly, those earnings shall be taken into account over a period— 
(a)	equal to the aggregate length of those periods, and
(b)	beginning with the earliest date on which any part of those earnings would otherwise be treated as paid under regulation 7 (date on which earnings are treated as paid).
(4)	In a case to which paragraph (3) applies, earnings under regulation 9 (earnings of employed earners) shall be taken into account in the following order of priority— 
(a)	earnings normally derived from the employment;
(b)	any payment to which paragraph (1)(b) or (c) of that regulation applies;
(c)	any payment to which paragraph (1)(i) of that regulation applies;
(d)	any payment to which paragraph (1)(d) of that regulation applies.
…
Date on which earnings are treated as paid
7.	Earnings to which regulation 6 (calculation of earnings of employed earners) or 11(2) (calculation of earnings of self-employed earners) applies shall be treated as paid— 
…
(b)	in any other case, on the first day of the benefit week in which the payment is due to be paid.’
17.	Converting earnings to weekly amounts This is dealt with in regulation 8:
‘Calculation of weekly amount of earnings
8.—(1) For the purposes of regulation 6 (calculation of earnings of employed earners), subject to paragraphs (2) to (4), where the period in respect of which a payment is made— 
(a)	does not exceed a week, the weekly amount shall be the amount of that payment;
(b)	exceeds a week, the weekly amount shall be determined— 
(i)	in a case where that period is a month, by multiplying the amount of that payment by 12 and dividing the product by 52;
(ii)	in a case where that period is three months, by multiplying the amount of the payment by 4 and dividing the product by 52;
(iii)	in a case where that period is a year, by dividing the amount of the payment by 52;
(iv)	in any other case, by multiplying the amount of the payment by 7 and dividing the product by the number equal to the number of days in the period in respect of which it is made.
(2)	Where a payment of earnings from a particular source is or has been paid regularly and that payment falls to be taken into account in the same benefit week as a payment of the same kind and from the same source, the amount of those earnings to be taken into account in any one benefit week shall not exceed the weekly amount determined under paragraph (1)(a) or (b), as the case may be, of the payment which under regulation 7 (date on which earnings are treated as paid) is treated as paid first.
(3)	Where the amount of the claimant’s net earnings fluctuates and has changed more than once, or a claimant’s regular pattern of work is such that he does not work every week, the application of the foregoing paragraphs may be modified so that the weekly amount of his earnings is determined by reference to his average weekly earnings— 
(a)	if there is a recognisable cycle of work, over the period of one complete cycle (including, where the cycle involves periods in which the claimant does no work, those periods but disregarding any other absences);
(b)	in any other case, over a period of five weeks or such other period as may, in the particular case, enable the claimant’s average weekly earnings to be determined more accurately.
(4)	Where any payment of earnings is taken into account under paragraph (7) of regulation 6 (calculation of earnings of employed earners), over the period specified in that paragraph, the amount to be taken into account shall be equal to the amount of the payment.’
E.	Reality and how the regulations work
18.	The regulations have to apply both to employment that is continuing and to the final payments made in an employment. I have to interpret them with that in mind.
19.	One approach to these issues would be a legalistic one. On this approach, earnings are usually paid in arrears and should be attributed to the period for which they are paid. The result would be that amounts already paid would not count as future earnings for benefit entitlement. This was the claimant’s original argument. 
20.	Mr Richards did not rely on this argument, which is unsustainable in law. The social security legislation takes a different approach. This approach focuses on the sums that are available for future expenditure. This accords with the realistic assumption that payment for past work meets expenditure for the future. 
21.	The simplest illustration involves a claimant who earns a regular salary with no additional payments. Assume that a claimant is paid a monthly salary on the last day of the month. The salary is earnings under the opening words in regulation 9(1). It is treated as paid on the first day of the benefit week in which the actual payday falls under regulation 7. It is attributed to the period from that date to the day before the next payday under regulation 6(2)(a). It is then converted to a weekly amount under regulation 8.
22.	That looks like a sensible approach that reflects the fact that salary for the past month is available for payments in the coming month. However, the realism of this assumption is qualified, even in such a straightforward case. The reason lies in regulation 7. The relationship between the actual payday and the first day of the relevant benefit week may vary with the result that the number of weeks to which the earnings are attributed can vary. And that in turn affects the operation of regulation 8. The result can be that a claimant who earns the same each month is treated as having different weekly earnings depending on when the calculation is made. 
23.	The effect of the regulations also departs from realistic assumptions when additional payments are made. Assume the previous example with this addition. The claimant also receives payment for expenses that are not necessarily incurred in the performance of his duties. The claim for expenses is submitted at the end of the month and covers expenditure in that month. After processing, the expenses are paid in the middle of each month. The regulations apply like this. 
24.	The expenses are earnings under regulation 9(1)(f). They are treated as paid on the first day of the benefit week in which the actual payday falls under regulation 7. They are attributed to the period from that date to the day before the next salary payday under regulation 6(2)(a). They are then converted to a weekly amount under regulation 8.
25.	Notice that the payment is not attributed to the next payday for expenses, but to the next payday for salary. The effect is that they are treated as available for expenditure over two or three weeks instead of the whole month, which is the period to which they relate. 
26.	There is also a further feature. The period to which the expenses would otherwise be attributed overlaps with the period to which salary is attributed. However, this overlap is not permitted. Regulation 6(3) prevents this by providing that the expenses are attributed to the weeks following the weeks over which the salary was attributed. The result is that the total payments received in a month are attributed to a period of a month and a half. 
27.	I have interpreted ‘earnings of the same kind’ in regulation 6(3) as referring to the different types of earnings envisaged by regulation 9. I have not been able, despite some considerable effort, to find any other interpretation.  
28.	So far I have assumed that payments relate to a period. If they do not, regulation 6(2)(b) applies. The effect of that provision is to spread the earnings over the maximum number of weeks in which the threshold of earnings will be exceeded. In other words, it deprives the claimant of benefit for the maximum period possible. 
29.	From these three simple examples, I draw this lesson: the regulations do not necessarily produce an income that is any way tied to the reality of the period for which payments are made or over which they are likely to be spent. 
F.	CG/4172/2001
30.	The issue that I have to decide was considered by Mr Commissioner Turnbull in this decision. This was his reasoning:
‘The holiday pay
‘10.	Reg. 6(2)(a) only applies to this if the holiday pay was payable “in respect of a period”. Otherwise a formula set out in Reg. 6(2)(b) applies. The holiday pay was a sum payable in respect of accrued holiday which the Claimant had not taken. I follow the assumptions of Commissioners in CJSA/3438/1998 and in CJSA/4508/1998 and of a Tribunal of Commissioners in para. 20 of R(SB) 23/84 that the holiday pay was payable “in respect of a period” (i.e. the period of holiday not taken). The legislative provisions under consideration in those cases were not identical to those in this case, but they seem to me to have been sufficiently similar to render them a satisfactory guide for this purpose.
‘11.	As to the start date, in my judgment the Claimant is correct in submitting that this payment was due to be made on 3 July. That is in my judgment what the contract means when it states that payment will be made “on termination of employment.” The Secretary of State submits that it did not fall due until 25 July, when the final salary payment was due. Miss Anderson, in her clear and helpful submissions, argued that “on termination” could be taken to refer to the final wage payment date, and referred me to the next sentence of the contract, stating that “any excess leave taken in the year of termination will be recovered by [the employer] by adjustment of final pay.” However, the fact that that provision is made for adjustment in respect of excess leave does not in my view give the words “on termination” anything other than their ordinary meaning. The start date of the period was therefore 3 July.
‘12.	Considerably more difficulty arises with the end date, by reason of the obscurity of Reg. 6(2)(a), when applied to an item such as holiday pay. The end date is 
“the day before the date on which earnings of the same kind (excluding earnings of the kind mentioned at regulation 9(1)(a) to (j))) and from the same source would, or would if the employment was continuing, next be treated as paid under that regulation.”
Reg. 9(1) sets out a list of types of remuneration or profit which are to be included in “earnings.” That list includes items such as bonus or commission, and also holiday pay. 
‘13.	The difficulty is with the meaning of the words “earnings of the same kind.” The intention behind the part of Reg. 6(2)(a) which I set out in para.12 above seems to be that one looks at the next payment date of the type of earning in question. So, the end date for a bonus payment would be the next expected bonus payment date, not the next ordinary salary payment date. The intention behind the words in brackets seems to be that in determining the end date for an ordinary payment of wages the next payment date for the special items listed in Reg. 9(1) is ignored. But what earnings are “of the same kind” as holiday pay? The intention cannot be that only holiday pay itself is “of the same kind” as holiday pay, because if that were so there would be no end date, because holiday pay can only ever be paid once, and would not be paid if the contract was continuing. The only alternative, and a reasonable one if this provision alone is under consideration, would be that the ordinary salary was earnings “of the same kind” as holiday pay. 
‘14.	However, that conclusion appears to fly in the face of the meaning of those words in Regs 6(3) and (4). They deal with the position where there is an overlap between the periods in which respect of which two or more payments not of the same kind (but from the same source) fall to be taken into account under Reg. 6(2). In that situation an “order of priority” is established by Reg. 6(4). Although that is a somewhat unusual use of the word “priority”, the intention appears to be that the periods which would otherwise overlap take effect successively, in the specified order of “priority”. The first category of payment in the order of priority is “earnings normally derived from the employment.” The next three categories are by reference to some of the specific types of remuneration or profit which listed in Reg. 9(1) as being included in “earnings.” Holiday pay is listed in Reg. 9(1)(d), and so comes last in the order of priority. The problem presented, for present purposes, by Regs. 6(3) and (4) is that it is plain that, for the purpose of those provisions, holiday pay is treated as being not “of the same kind” as earnings normally derived from the employment. That must be so because otherwise Regs. 6(3) and (4) could not – see the opening words of 6(3) – apply so as to establish the intended order of priority between them.
‘15.	But where does that leave my provisional conclusion, set out in para. 13 above, that in Reg. 6(2)(a) holiday pay is earnings “of the same kind” as ordinary salary? Unsatisfactory as it may be, the answer must be that it leaves that conclusion unaffected. I say that that must be the answer because there is no other way of arriving at an end date for the holiday pay, and there must clearly be some end date. I arrive, therefore, at the conclusion that there is no alternative but to construe the words “earnings of the same kind” as having a different meaning in Reg. 6(2)(a) from that which it has in Reg. 6(3) and (4). In the former holiday pay is treated as being as of the same kind as ordinary salary, in the latter it is treated as not being of the same kind. 
‘16.	The effect in the present case is therefore that the end date for holiday pay was 23 July 2000. Subject to the effect of the overlap provisions in Regs. 6(3) and (4), the holiday payment is therefore to be taken into account in respect of the period between 3 and 23 July 2000.’
G.	The status of that decision as a precedent
31.	The system of precedent operated by the Social Security Commissioners was that set out in R(I) 12/75:
‘21.	In so far as the Commissioners are concerned, on questions of legal principle, a single Commissioner follows a decision of a Tribunal of Commissioners unless there are compelling reasons why he should not, as, for instance, a decision of superior Courts affecting the legal principles involved. A single Commissioner in the interests of comity and to secure certainty and avoid confusion on questions of legal principle normally follows the decisions of other single Commissioners … It is recognised however that a slavish adherence to this could lead to the perpetuation of error and he is not bound to do so.’ 
32.	According to Carnwath LJ in Cadogan v Sportelli [2008] 2 All ER 220:
‘99.	… It will be principally for the new [upper] tribunal to lay down guidelines as to the precedent effect of its decisions for different purposes.’
33.	The Upper Tribunal has not yet had a chance to consider how precedent will apply to its decisions or to decisions of the bodies replaced by that Tribunal. I will assume that in the meantime the approach set out in R(I) 12/75 continues. On that basis, I should follow CG/4172/2001 unless I am satisfied that it is wrong. 
H.	The argument for the claimant
34.	Mr Richards’ argument was this. 
35.	There are three principles of interpretation that are relevant: (i) legislation must be interpreted as a whole; (ii) the same words should, if possible, be given the same meaning wherever they appear; (iii) words are not used for no purpose. 
36.	Applying those principles produced this result. As it was impossible to identify any end date for a period of accrued holiday pay, it was impossible to fix a ‘number of benefit weeks’ for regulation 6(2)(a). Accordingly, the proper course was to attribute them to ‘a benefit week’. 
I.	The argument for the Secretary of State 
37.	Mr Heath undertook a detailed examination of the context, content and purpose of the regulations and of Mr Turnbull’s decision. As a result of that, he submitted that Mr Turnbull’s decision was sustainable. That seemed less than a ringing endorsement of the reasoning and outcome. No doubt, that reflects the difficulty of the legislation rather than Mr Turnbull’s interpretation. 
J.	Why I reject Mr Richards’ argument
38.	I have rejected Mr Richards’ argument for these reasons.
39.	First, it is not the natural meaning of the language of regulation 6(2)(a). To me, it does not naturally divide after ‘a benefit week’. The natural break comes after ‘or such number of benefit weeks’. The following words then determine the number of benefit weeks. 
40.	Second, to me the natural meaning is expressed by reading the words ‘a period equal to a benefit week or such number of benefit weeks’ as ‘a period equal to such benefit week(s)’. That reading makes Mr Richards’ approach impossible.
41.	Third, if Mr Richards’ is correct the natural layout of regulation 6(2)(a) would be to split it like this:
‘(a)	in a case where it is payable in respect of a period, shall be a period equal to-
	(i)	a benefit week; or 
	(ii)	such number of benefit weeks as comprise the period commencing on the date on which earnings are treated as paid under regulation 7 (date on which earnings are treated as paid) and ending on the day before the date on which earnings of the same kind (excluding earnings of the kind mentioned at regulation 9(1)(a) to (j)) and from the same source would, or would if the employment was continuing, next be treated as paid under that regulation’.
But that is not the approach taken to the drafting.
42.	Fourth, Mr Richards’ approach produces a sensible outcome in the circumstances of this case. The claimant had seven days accrued holiday pay at the end of his employment and this is attributable to one benefit week. That is a close fit. However, if a claimant saved the entire holiday entitlement of four or six weeks, this would be attributed to a single benefit week. I put this to Mr Richards, who answered that this was unrealistic as most people took their holiday and did not leave it to accrue. Accordingly, the number of days would in practice be small. He may be right about what is likely, but my analysis does not suggest that this legislation is intended to produce outcomes that closely reflect the reality of how payments are made and spent. 
43.	Fifth, in view of these reasons I cannot say as a matter of precedent that it would lead to the perpetuation of error to follow Mr Turnbull’s approach. 
K.	Regulation 6(2)(b)
44.	Left entirely to my own devices, I would have been tempted to decide that, within the meaning of regulation 6(2), accrued holiday pay was not paid in respect of a period. That would mean that regulation 6(2)(b) would apply. 
45.	I have not taken that course for three reasons. First, in Chief Benefit Officer v Cunningham [1985] ICR 660, Waller LJ (at page 665) said that one day accrued holiday pay was paid for a period. Second, neither party argued that regulation 6(2)(b) applied. Third, regulation 6(2)(b) operates to attribute a payment to the maximum number of weeks over which the claimant can be excluded from benefit. Mr Richards argued that the claimant had an entitlement under section 70 to a carer’s allowance and that a provision that deprived him of it should be interpreted restrictively. I do not accept that argument. Section 70 does not confer an entitlement. It sets out the basic conditions and provides for more detailed provisions to be made by regulations. Regulation 6 is one of those regulations. However, given that the provision does operate harshly on claimant and the Secretary of State has not argued that it applies, I do not consider it appropriate to apply regulation 6(2)(b). 
L.	Disposal
46.	I dismiss the appeal, but with no satisfaction that I have got to the bottom of how these provisions are intended to operate. Either my understanding is at fault or there is a defect in the drafting. As I said at the hearing, I will give permission to appeal to the Court of Appeal if asked. 

Signed on original
on 25 November 2008	Edward Jacobs
Upper Tribunal Judge