CIS/0731/2008

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. This appeal by the claimant succeeds. In accordance with the provisions of section 14(8)(a) of the Social Security Act 1998 I set aside the decision of Cheltenham tribunal of 10th October 2007. I substitute my own decision. This is to the effect that, for the purposes of the claimant’s entitlement to income support, her income from the Public Lending Right (“PLR”) scheme is to be treated as earnings. 

2. I remit to the Secretary of State matters concerning calculation and payment of any arrears of income support and/or other benefit consequent upon my decision. If the parties are unable to reach agreement on this they are at liberty to refer the matter back to the Commissioner for determination (although this only relates to the consequences of my decision, not to the decision itself). 

3. The claimant was born on 29th April 1952. She has been in receipt of income support since the middle of July 2004 on the basis that she has been incapable of work because of a spinal condition. She has no other relevant regular income. However, she is a published author of books and has received payments under the PLR scheme. This is a statutory scheme providing for authors to receive payments in respect of the number of times their books have been borrowed from public libraries, and is a form of compensation for any associated loss of sales because readers borrow their books rather than buying them.

4. On 6th February 2006 the claimant reported that she had received a payment of £1267.80 from the PLR scheme in respect of the year ending in July 2006 (page 39). Somewhat surprisingly the officials dealing with the matter did not know what PLR is (page 7). On 3rd October 2006 the Secretary of State made a supersession decision and reduced the amount of income support to which the claimant was entitled after treating this sum as income for a period of one year and dividing by 52 to give a weekly equivalent. It is not clear whether the new decision was made with effect from 7th February 2006 (paragraph 14 on page 1E) or 3rd October 2006 (paragraph 4 on page 1B) but it was only implemented from the latter date. The Secretary of State did not offset any expenses against this income, although there is evidence in the file of relevant expenses incurred by the claimant.

5. On 25th October 2006 the claimant appealed to the tribunal against this decision to reduce the amount of income support to which she was entitled. On 4th April 2007 the matter came before the tribunal consisting of the District Chairman of the tribunal. The Secretary of State was not represented. Some evidence was taken from the claimant but the tribunal adjourned the matter to enable the claimant to seek advice and representation. The claimant obtained the impression, which she passed on to the CAB from which she sought advice, that the District Chairman was going to treat the PLR income as self-employed earnings from which expenses would be deducted (CAB letter on pages 28 to 29). Clearly the tribunal had not made a final decision otherwise the matter would not have been adjourned, and equally clearly no preliminary expression of views could bind the tribunal that finally made the decision.

6. On 10th October 2007 the matter was finally considered by the tribunal, consisting of a different District Chairman. The tribunal confirmed the decision to treat the PLR payment as income other than earnings, and therefore not to be reduced by expenses incurred, but clarified that it was to be taken into account from 7th February 2006. On 15th January 2008 that District Chairman granted the claimant’s application for leave to appeal to the Commissioner against the decision of the tribunal. The appeal was accepted for consideration on 17th March 2008 by Mr Commissioner Turnbull. The Secretary of State opposes the appeal and supports the decision of the tribunal.

7. New regulations have been made with effect from 7th April 2008 to govern the treatment of PLR payments for benefit purposes, but they are not retrospective in effect. On the other hand neither the amended provisions nor the fact that the regulations have been amended govern the way in which the previous version of the regulations, which is what I have to consider, are to be interpreted and applied. 

8. Income support is a means tested benefit that takes account of certain income and makes up the difference between that income and certain amounts fixed by regulation. 
The treatment of income is governed by the Income Support (General) Regulations 1987. Regulation 29 deals with the treatment of, amongst other matters, “income which does not consist of earnings”, and that is how the PLR has been treated by the Secretary of State and the tribunal in the present case. Regulation 30 deals with cases “where a claimant’s income consists of earnings from employment as a self-employed earner”. Regulation 30(1) deals with the method of calculating weekly income, but this method does not apply in cases covered by section 30(2). Regulation 30(2) deals with “royalties or sums paid periodically for or in respect of copyright” and provides a slightly different method. Regulations 37 to 39 govern the calculation of earnings of self-employed earners, including payments that come within regulation 30(2), but does not deal with income other than earnings.

9. It is significant that regulation 30 deals with the method of turning payments of income into weekly equivalents but does not specify how much of that income is to be taken into account. Thus there are really three stages or questions for the purposes of the present case: (a) does the income count as earnings? (b) if so, how much of the income do regulations 37 to 39 say is to be taken into account? (c) how is that amount of income to be allocated to each week under regulation 30? The fact that PLR does not come within regulation 30(2) is not relevant to question (a), because it could still come within the general rule in regulation 30.

10. Regulation 38(1)(a) provides that the earnings to be taken into account in the case of a self-employed earner is the net profit, after the deduction of certain expenses. These expenses cannot be deducted from income other than earnings. That is why, in the present case, it is important to decide whether PLR payments are earnings or income other than earnings.

11. I find the tribunal’s reasoning difficult to understand:

“There was no continuing profit … She was still writing, but was generating no current income …”.

It seems to me that was to misunderstand the nature of self-employment as a writer and to start with the conclusion in order to justify the conclusion. The tribunal also misunderstood how regulation 30 works, wrongly assuming that the exclusion of any reference to PLR in regulation 30(2) meant that PLR is not capable of coming within the general rule in regulation 30.

12. The tribunal also considered the treatment of PLR under the State Pension Credit Act 2002, which seems to categorise PLR separately from earnings, but even if that is what it does (which I do not have to decide in the present case), the same provisions do not appear in respect of income support.

13. The Secretary of State argues that PLR is a separate payment that arises from a statutory right rather than by being “gainfully employed”. However, the fact that a right to payment arises under a statute does not prevent that payment from being earnings, and it seems to me that although differently defined there is no essential difference from the point of view of the author whether payment comes in the form of a cheque for a PLR payment or a cheque for a royalty payment on sales that have taken place. In both cases the payment is for past work performed in the course of the business of being an author.

14. For the above reasons this appeal by the claimant succeeds to the extent indicated.

H. Levenson
Commissioner
31st July 2008