DECISIONS OF THE SOCIAL SECURITY COMMISSIONER
1.	My decisions are given under section 14(8)(a)(i) of the Social Security Act 1998:
I SET ASIDE the decisions of the Fox Court appeal tribunal, held on 18 October 2006 under references U/42/242/2006/05556-05559, because they are erroneous in point of law.
I give the decisions that the appeal tribunal should have given, without making fresh or further findings of fact.
My DECISIONS are to remit the decisions under appeal to the Secretary of State to be redecided in accordance with these directions:
•	the money in the claimant’s Nationwide account was held on trust and did not form part of her income or capital;
•	payments of the claimant’s fostering Fee and Boarding Out Allowance initially formed part of her income and then became capital in accordance with R(IS) 3/93;
•	payments made in advance did not become income until the week to which they related;
•	the diminishing capital rule must be applied (regulation 14 of the Social Security (Payments on account, Overpayments and Recovery) Regulations 1988. 
Any dispute about the implementation of these directions may be referred to me or to another Commissioner.

REASONS
2.	The main question in these cases is whether the savings made by a foster carer to meet future expenditure in respect of a foster child count as income or capital for the purposes of the carer’s entitlement to income support. This devolved into two issues. Did the claimant hold the accumulating funds on trust for the local authority or her foster children? If not, at what point did the funds become capital? I have decided that the tribunal did not go wrong in law on this question. 
3.	There were also two other issues, relating to matters that were before the tribunal but not dealt with in its decision. I have decided that the tribunal went wrong in law by failing to deal with these issues. That is why I have had to set aside the tribunal’s decision. There was no dispute on how the tribunal should have dealt with these issues.  
The oral hearing
4.	I held an oral hearing of these appeals on 25 March 2008. The claimant was represented by Mr Simon Howells of the Cambridge House Law Centre. The Secretary of State was represented by Mr Henry Hendron on behalf of the Solicitor to the Department of Work and Pensions. I am grateful to both of them for their arguments at the hearing. 
How the issue arises
5.	I respectfully agree with what Mr Commissioner Powell wrote in CIS/4062/1999:
‘5.	… Foster carers provide an immensely important service by providing homes for children. Such children are almost always vulnerable, often very young and frequently damaged in one way or another. Good foster carers are probably in short supply.’
6.	The claimant has acted as a foster carer for young asylum seekers and refugees from Eritrea. Local authorities differ in the payments they make to foster carers. All pay for out-of-pocket expenses. Some also pay a fee to the carer. This may simply be for the care provided or it may include a retainer while the carer is not currently fostering a child. The payments made by the Royal Borough of Kensington and Chelsea were explained by its Fostering Team Manager:
‘The payments made to a foster carer in this Authority are made up of 2 elements the Boarding Out Allowance for the child and a Fee to the foster carer:
a)	The Boarding Out Allowance is paid to meet the costs of caring for a child e.g. clothing, food, travel, pocket money and there is a clear expectation that it is spent on the child etc.
b)	A Fee paid to the carer for the tasks they do e.g. the physical acts of caring for a child such as cooking, feeding and other tasks such as attending social work meetings etc.’
7.	For 2006-2007, the weekly fee paid by the Royal Borough was £151.10. The weekly Boarding Out Allowance varied according to the age of the child: age 0-4 = £156.37; age 5-10 = £178.25; age 11-15 = £222; and age 16+ = £269.52.
8.	The claimant did not spend all the money that she received from the local authority in the week to which it related. The result was that sums accumulated. She also received payments from relatives of the foster children to be used for their benefit in due course, which she put into a separate account. 
9.	While acting as a foster carer, the claimant received payments of income support and jobseeker's allowance. She did not disclose the accumulating funds to the Secretary of State. When the Secretary of State discovered what had happened, four overpayment decisions were made in respect of income support for the inclusive period 28 May 1996 to 29 April 2002 and of jobseeker's allowance for the inclusive periods from 30 April 2002 to 9 September 2002, 23 September 2002 to 17 March 2004 and 2 August 2004 to 25 October 2004. The total overpayment came to £6750.64 and the Secretary of State decided that the whole amount was recoverable on the ground that the claimant had failed to disclose the amount of her capital. 
Fostering payments
10.	The fostering of children and payment to foster carers are authorised by section 23 of the Children Act 1989. In so far as relevant, it provides:
‘Provision of accommodation and maintenance by local authority for children whom they are looking after
23.-(1) It shall be the duty of any local authority looking after a child-
(a)	when he is in their care, to provide accommodation for him; and
(b)	to maintain him in other respects apart from providing accommodation for him.
(2)	A local authority shall provide accommodation and maintenance for any child whom they are looking after by-
(a)	placing him (subject to subsection (5) and any regulations made by the Secretary of State) with-
	(i)	a family;
	(ii)	a relative of his; or
	(iii)	any other suitable person, 
	on such terms as to payment by the authority and otherwise as the authority may determine (subject to section 49 of the Children Act 2004)’.
The trust issue
11.	I deal with this issue first, because if money is held on trust, it is neither income nor capital in the claimant’s hands. 
12.	Mr Howells conceded that any unspent part of the Fee became capital at the end of the week to which it related. However, he argued that savings from the Boarding Out Allowance to meet future expenditure did not. This was because the Allowance was held on trust for the claimant’s foster children and, to the extent that it was not so spent, for the local authority. Mr Hendron argued that the circumstances of the payments were incompatible with the nature of a trust. 
13.	The view of the local authority’s Fostering Team Manager was set out in his letter:
‘3.	If the carer did not spend all of the Boarding Out Allowance in one week then the carer would generally be expected to save the money for a child and to use it at other times when it was needed. There is no general agreement of exact amounts that will be saved. In this way money might accrue on the child’s behalf. Though we give some guidance as to how the allowance should be spent there is flexibility in the system to suit the fostered child’s needs and the situation of individual foster carer’s households. We do not monitor every pound given or how it was spent. In this Authority the foster carers are not generally required to produce receipts to account for how the Boarding Allowance was spent or not. 
4.	I cannot share your contention that the Authority retains a legal right to the Boarding Out Allowance once paid to the foster carer and that the carer only holds the allowance in “trust”. In my view, once the allowance is paid to the foster carer the money belongs to the foster carer. However, the basis of the payment is that the Boarding Out Allowance will be spent on the foster child. Should a foster carer not spend the money on a foster child then we could ask for the money back but as indicated above, I doubt my Authority’s legal right to demand it. Of course should a carer do this, then as previously stated, the Authority would almost certainly cease payments and seek to de-register the foster carer because they were not conforming to the expectations of the care provided to the foster child for which the money is paid.’
14.	That letter indicates the expectations of the local authority and some of the practicalities of the arrangement. It is not, of course, decisive on the legal nature of the arrangement. That is a matter of law for me. 
15.	I consider first whether there was a trust of the Boarding Out Allowance from the moment of payment to the claimant. 
16.	A trust may arise in order to give effect to the intentions of the parties or it may be imposed on the parties by law. However it arises, a trust of money involves a particular fund or a specific amount of money. The amount of the Allowance is clear when it is paid. However, the amount spent on the children and the amount outstanding cannot in practice be known with precision. Some items of expenditure will be readily identifiable. For example, a child’s pocket money or bus fare to school can be itemised to a penny. But other expenditure will not be kept separate from general household expenditure. For example, it is unlikely that a foster child’s food will be purchased separately from the rest of the household. The additional costs of heating and lighting are even clearer examples; they simply cannot be isolated. Accordingly, the argument that the Allowance is from the outset held on trust must fail for lack of certainty in the subject matter of the trust. 
17.	I now consider whether there was a trust of any outstanding amount as calculated and identified by the claimant. She could declare a trust of such money or one might be imposed on her by law. For this purpose, it would be irrelevant whether the sums saved were originally part of the Allowance or came from the claimant’s own money. 
18.	It was certainly the expectation of the local authority that sums saved would be spent on the foster children. I am also sure that that is what the claimant intended. There has been no suggestion that she was using the Allowance improperly or that the children fostered with her did not receive proper care. Although the claimant did mingle the moneys with her own, that would not prevent a trust arising or being imposed if the specific amount in the account could be identified. However, the way the money was held was an indication of the claimant’s intentions. She was keeping the money for the children, but she was not separating it out from her other money as would be expected if she were creating a specific fund to be used exclusively for the foster children and nothing else. It is significant that she treated money paid by the relatives of the foster children for their ultimate benefit differently by keeping a separate account. In the circumstances, she has not declared a trust of a particular sum for her foster children. 
19.	Nor can I see any basis on which the law would impose a trust in these circumstances. Money is not held on trust just because it is set aside for a particular purpose or a particular person. The effect of a trust is that money can only be used for those purposes or persons. It cannot allow for unexpected domestic contingencies that have to be met for the benefit of the household as a whole. But there is nothing inherent in the arrangement between the claimant and the local authority that prevented her making use of the money at her disposal as she thought fit, provided that over time the foster children received the benefit of the Allowance. There is no need to protect the funds set aside for the children. The claimant was doing nothing improper. She was merely making use of the ‘flexibility in the system to suit the fostered child’s needs and the situation of individual foster carer’s households.’ 
20.	My conclusion is that the Boarding Out Allowance was held as part of the claimant’s general pool of income and capital. That allowed her the flexibility to use the money as her needs and those of the children required without restricting the use of any particular portion to specific purposes. 
21.	The tribunal decided that no trust arose and was right to do so. It did not go wrong in law on this issue. 
The income and capital issue
The legislation
22.	The payments made by the local authority to the claimant as a foster carer were income when received, but were disregarded as such under paragraph 26 of Schedule 9 to the Income Support (General) Regulations 1987 and paragraph 27 of Schedule 7 to the Jobseeker's Allowance Regulations 1996. The issue for me is whether they subsequently became part of the claimant’s capital for the purposes of these benefits. The distinction between income and capital is not drawn in the legislation, but has been extensively discussed in the case law of the Commissioners and the courts. 
The case law
23.	In R(IS) 3/93, the Commissioner decided (paragraphs 22 and 23) that income metamorphosed into capital at the end of the period in respect of which it was paid. His reasoning is not entirely explicit, but is easily discerned. At paragraph 20, he quoted a passage written by Mr John Mesher (now Mr Commissioner Mesher) that ‘Resources are to be either income or capital. There is nothing in between.’ Then at paragraph 23, he quoted regulation 29(2)(a) of the Income Support (General) Regulations 1987, which provides that income is to be taken into account for the period equal to the period to which it relates. (Regulation 94(2)(a) of the Jobseeker's Allowance Regulations 1996 makes equivalent provision for jobseeker's allowance.) The final stage of his reasoning is not spelt out, but it is clear from the combination of the two passages I have mentioned. Since earnings are income for a specified period, they must cease to be income once that period has expired. And if they are no longer income, they must be capital. 
24.	In CIS/0515/2006, the Commissioner took a different approach. He did not refer to R(IS) 3/93, but reasoned in this way:
‘How should the decisions be taken
32	As with all complicated issues, it is best to start with basic principles. First, we are looking at actual capital. That means the whole of the capital and any income treated as capital: Income support (General) Regulations 1987. But that does not mean that every £1 put into a building society account in the name of the individual is automatically converted into capital, as the person who drew up the schedule to the decision of 30 03 2005 appears to have assumed. 
33	There are a series of fundamental mistakes in the way that the schedules have been drawn up. One is that they have treated every credit as becoming capital when paid into an account, regardless of the source of the payment in or the nature of the account. This is inconsistent with the approach on which the tribunal was told that the schedule was drawn up. 
34	I must also consider if the approach of the schedule, or that of the submission, is good law. The secretary of state's representative recited regulations 29 and 32 of the Income Support (General) Regulations 1987 and paragraph 7(1) of Schedule 10 to those Regulations as authority for the approach to be taken to the payments in of benefit. The relevance of Regulation 29 is limited to the signposting in regulation 29(5). Regulation 31 states, so far as relevant, when benefits are treated as paid.  Regulation 32 adds to the rules about the weekly amount of income. There is nothing in those regulations dealing with the time at which past income becomes capital. Schedule 10 lists exclusions from the general rule in regulation 46 that all capital is to be included. Neither define capital. Nor would I expect them to. Paragraph 7(1) provides that arrears or concessionary payments of benefit are excluded from capital for 52 weeks from receipt. In other words, lump sum payments of benefit fall to be treated as capital if the claimant still has them 52 weeks later. There is no other express guidance in the Regulations relevant to the approach taken by the secretary of state's representative to the conversion of unspent benefit from income to capital. The regulations cited do not support the proposition in the submission to the tribunal.
35	How is saved benefit to be identified as capital? The standard way of approaching a similar question in a business or tax context is by looking, as all proper commercial accounts do, at the “balance sheet” at the end of each year or other period. It is the difference between one year and the next that is to be treated as capital. (That is, indirectly, the approach of paragraph 7(1)). In this case, it could be approached by asking what the actual capital held is at the end, say, of each calendar year or tax year. If this discloses totals that are clearly above the capital limits, then that would be clear evidence of excess capital. If not, then a closer look may be needed. 
36	Test it this way. A claimant has her pension or benefit paid into a building society account monthly, as the government now encourages. She is in credit in her account by a small amount, but one rather larger than her monthly benefit income. She withdraws or transfers out various sums for her living expenditure over the course of the month. She is good at keeping her expenditure broadly within her income. So at the end of the average month she has about the same sum in credit at the end of the month as at the beginning of the month. How much capital does she have: the day to day floating balance, the sums left over at the end of each month, or the amount in her account when it is checked, say, at the end of each tax year? 
37	The answer is clearly not the day to day floating balance. Her benefit cannot become capital on the day it is paid into the account, unless it is clear that the account is one for long term savings (such as an ISA account). That is not true of most of the accounts relevant to this case. In the ordinary way, the money she receives and then spends within the month cannot be regarded as capital. 
38	I also reject the proposition that if she holds over some benefit from one month to another (perhaps saving for a holiday two months ahead) that those short term savings left over at the end of each month become capital. A longer view must be taken than that. A good practical rule may be the 52 weeks allowed in paragraph 7(1). Or the matter may be looked at by identifying total capital from time to time as suggested above, with a view to identifying increases in sums held from one date to another for which there is no clear explanation. So if the sums are paid into accounts such that they cannot be withdrawn without a penalty in the short term (such as fixed term or tax privileged savings) then they may become capital on payment in. If the sums accumulate in an account over a period, but for a specific reason (such as saving over a longer period to afford an overseas trip to see relatives) and the expenditure is made for that purpose, then that would not be capital. But if sums accumulate from one year to the next, and the claimant has no specific plans to spend them in the short term, then they will at some point become capital. When precisely that point occurs is a question of fact.  
39	It follows equally that payments from an account are not payments away of capital just because they are withdrawals from such an account. The example above shows this. And the broader look indicated in the previous paragraph would avoid that fallacy also. Alternatively, a close look could be taken at a few specific periods, and the position generalised from them.
40	I test this by reference to the schedules in the decisions in this case by taking a random example: May and June 1999. (I emphasise that I took this example from the middle of the period without any view about the out turn: I merely did a random short audit of the information to test its reliability). 
41	At the beginning of May, according to the schedule to the decision of 30 03 2005, Mrs S’s capital was £29,532.08. During the two months, she paid in £350. She paid out £500. The capital at the end of the two months is taken as £29,712.08. That was the formal decision of the Secretary of State. In other words, despite spending £150 more than she paid in, her capital went up by £350. On what did she live during those two months? The decision maker’s answer (in the submission to the tribunal) was that Mrs S’s benefits were paid into a named specific account, and that payments into and withdrawals from that account were both ignored. I find (to my surprise) that this is just not correct in fact. Each of the entries for May and June 1999 in the schedule to the decision of 30 03 2005 is drawn directly from the very building society account that the Secretary of State’s submission to the tribunal said was ignored in order to take account of living expenses. (Compare document 50 with document 259). The evidence simply does not support the schedule when read with the submission. The terms of the decision of the Secretary of State converted the whole of her payments into her accounts in those two months into capital as they were paid in, and no deductions were allowed for any payments out. As Mrs S’s representative strongly contended, the effect was that she was not allowed any living expenses at all for those two months. She was in effect treated as saving the lot simply because she used a building society account to handle her affairs. There was no assistance for her in the decision of 14 06 2005. Later, she was able to find one receipt for a telephone bill paid on 1 June 1999 of £79.99. That was allowed, so her capital went down by that sum, but only that sum. Nothing else was allowed.’
Precedent
25.	In R(IS) 13/01, Mr Commissioner Rowland applied Colchester Estates (Cardiff) v Carlton Industries plc [1986] Ch 80 to the Commissioners’ jurisdiction for this proposition:
‘4.	… where there are two conflicting decisions of equal status and the earlier decision was fully considered in the later decision, the later decision should be followed unless the judge was convinced that the later decision was wrong …’
26.	Mr Howells argued that, although Mr Williams did not refer to R(IS) 3/93, he must have been aware of it and had in effect considered and rejected the reasoning in that case. 
27.	I reject that argument, because Colchester has been disapproved in Re Taylor (a bankrupt) [2007] Ch 150. The correct approach now is for a judge 
‘46.	… to make his decision on the merits of the submissions put before him, giving appropriate weight but no more to authorities which may be persuasive but which, by law, are not binding. The point is of particular importance where the issue of law is one of jurisdiction. … It is in the exercise of discretion, not rulings on “black-letter law” that consistency at first instance has a particular inherent value.’
The Employment Appeal Tribunal had already taken this approach in Digital Equipment Co Ltd v Clements (No 2) [1997] ICR 237.
Which decision should I follow?
28.	I prefer the authority of R(IS) 3/93 for these reasons. First, it is a reported decision, which shows that the majority of the Commissioners at the time considered that it was at least broadly correct. Second, I consider that its reasoning is sound. Given that a resource has to be either income or capital, it must become capital when it is no longer income. Mr Williams did not deal with that point. Third and particularly relevant to this case, the income support legislation failed to carry forward an express provision in supplementary benefit law that disregarded savings made out of income in order to meet personal living expenses and the expenses of the home. (It is quoted in R(IS) 3/93 at paragraph 24.) Income support replaced supplementary benefit in April 1988 and was, of course, a new benefit. However, there is sufficient continuity in the income and capital provisions of the two schemes to make it significant that no equivalent disregard was adopted in income support. Fourth, the approach in CIS/0515/2006 draws on the Commissioner’s experience in business and tax. In those contexts, it may be appropriate to identify capital on an annual basis. However, income support is a weekly benefit and a much shorter timescale is appropriate. The timescale fixed by R(IS) 3/93 is consistent with the allocation of income to a particular period. 
29.	I also accept two points made by Mr Hendron. The first related to the need for savings from income. The amount of the claimant’s capital did not become significant until it reached the threshold at which a tariff income was attributed to it (£3,000). So long as it remained below that amount, it was irrelevant to the claimant’s entitlement. It only became relevant when the claimant’s savings reached that point. And with that amount of savings, the claimant could avoid to buy what was needed immediately and replace the amount spent from future income rather than save for expenditure in the future. She was not, therefore, penalised for saving in order to provide appropriate care for the children in her charge. Mr Hendron’s second point was that Mr Howells’ approach, although not Mr Williams’s, would allow claimants to avoid the capital limits altogether by identifying matters for which they were saving. That is a valid point, although there is no suggestion that this is what the claimant has done.
The tribunal’s reasoning
30.	The tribunal applied R(IS) 3/93 in preference to CIS/0515/2006 and was right to do so. It did not go wrong in law on this issue. 
How the tribunal went wrong in law
31.	The tribunal went wrong by failing to deal with two issues that were before it. 
32.	One concerned the claimant’s Nationwide account holding money which she said was paid to her by the relatives of children in her care for their benefit. Mr Howells argued that this money was held on trust by the claimant. Before the hearing at the tribunal, the Secretary of State conceded that the money in this account was held on trust for the children and did not form part of the claimant’s capital. Mr Hendron repeated that concession at the oral hearing before the Commissioner. The chairman may have assumed that this issue was no longer before him, but it needed to be made clear.
33.	The other issue concerned the advance payments made by the local authority to the carer. Mr Howells argued that these payments could not be taken into account, as either income or capital, before the period to which they related. Mr Hendron agreed. The chairman may have assumed that this was caught by his directions to the Secretary of State, but he did not make this clear.
34.	My decisions reflect the agreement of the parties on those issues. 

Signed on original
on 03 April 2008	Edward Jacobs
Commissioner