R(IS) 3/94

Mr. D. G. Rice	CIS/485/1992
25.3.93
Housing costs - interest on mortgage for repairs and improvements not falling within paragraph 8 of Schedule 3 to the Income Support (General) Regulations 1987 - whether to be met through income support
In 1989 the claimant, an owner‑occupier, took out a loan of £7,020 for repairs and improvements to the dwelling occupied as the home. On a claim for income support, dated 19 November 1990, the claimant asked for the interest on the loan to be paid as a housing cost. The adjudication officer did not allow any housing costs in respect of the loan. On appeal the tribunal varied the adjudication officer’s decision and allowed interest on £3,510 of the loan, finding that expenditure: on some of the items of repair and improvement fell within paragraph 8 of Schedule 3 to the Income Support (General) Regulations 1987, whereas expenditure on others did not. The claimant appealed to the Commissioner and contended that by reason of paragraph 1(a) of Schedule 3 to the Income Support (General) Regulations 1987, when read in conjunction with paragraph 2, she was entitled to mortgage interest on that part of the loan, taken out for effecting repairs and improvements, not falling within paragraph 8. Accordingly, she was entitled to the interest on the whole loan, and in respect of the part falling outside paragraph 8, she was not restricted to the 50% rate for the first 16 weeks.
Held that:
1. 	the tribunal failed to consider the claimant’s argument, or if they did, to refer to it in their decision, and accordingly their decision must be set aside for breach of regulation 25(2)(b) of the Social Security (Adjudication) Regulations 1986;
2.	paragraph 1 of Schedule 3 only lists the types of expenses that fall to be considered as eligible housing costs (para. 11);
3. 	the expenses listed in paragraph 1 of Schedule 3 are only payable subject to the remaining paragraphs of the Schedule (para. 11);
4. 	in particular paragraph 1(a) and 1(b) of Schedule 3 are restricted by the terms of paragraph 7 and 8 respectively (para. 10).

DECISION OF THE SOCIAL SECURITY COMMISSIONER
 
1. 	My decision is that the decision of the social security appeal tribunal given on 13 December 1991 is erroneous in point of law, and accordingly I set it aside. As it is expedient that I give the decision the tribunal should have given, I further decide that, pursuant to paragraph 8 of Schedule 3 to the Income Support (General) Regulations 1987 [SI 1987 No. 1967], as from 19 November 1990 the claimant is entitled to have included in her applicable amount, subject to the ‘16 weeks rule’, a sum equal to the interest payable on a loan of £3,510 taken out for the purpose of carrying out repairs and improvements to her home.
2. 	This is an appeal by the claimant, brought with the leave of the tribunal chairman, against the decision of the social security appeal tribunal of 13 December 1991. As I was not satisfied that the adjudication officer had in his written submissions dealt adequately with the arguments of the claimant’s solicitors dated 15 November 1991, I directed an oral hearing. At that hearing the claimant, who was not present was represented by Mr. R. Johnson, a solicitor from the Hyson Green Law Centre, whilst the adjudication officer appeared by Mr. N. Butt of the Solicitor’s Office of the Department of Social Security.
3. 	Some time between February and June 1989 the claimant with her husband took out a loan of £7,020 for the purpose of making repairs and improvements to her home. On 19 November 1990 she claimed income support for herself and her children. She sought to have included in her applicable amount the mortgage interest arising on the loan. However, on 19 July 1991 the adjudication officer disallowed the claim. In due course, the claimant appealed to the tribunal, who varied the adjudication officer’s decision and allowed mortgage interest on £3,510 of that loan. They proceeded under paragraph 8 of Schedule 3 to the Income Support (General) Regulations 1987 and for the purpose of computing the eligible interest, allowed expenditure in respect of some items, but not in respect of others. Mr. Johnson did not seek to challenge the tribunal’s decision on this point. Moreover, although, at least on a superficial view of the papers, it might, in my judgment, be said that the tribunal applied regulation 8 unduly generously in favour of the claimant, Mr. Butt did not seek to disturb the tribunal’s finding on the extent of the eligible interest. He considered there was no real question of principle involved and this was a case very much on its own facts. He was, however, concerned that the point now being raised by Mr. Johnson should be dealt with and was content that if Mr. Johnson should fail, to leave undisturbed the tribunal’s assessment of eligible interest under paragraph 8. Accordingly, I propose only to consider the submission put forward by Mr. Johnson.
4. 	Mr. Johnson’s case was that by reason of paragraph 1(a) of Schedule 3, when read in conjunction with paragraph 2, the claimant was entitled to mortgage interest on that part of the loan, taken out for effecting repairs and improvements, not falling within paragraph 8. Accordingly, the claimant was entitled to the interest on the whole loan, and in respect of the part falling outside paragraph 8, she was not restricted to the 50% rate for the first 16 weeks.
5. 	Paragraph 1 of Schedule 3 reads as follows:
“1. Subject to the following provisions of this Schedule, the amounts which may be applicable to a person in respect of mortgage interest payments or other prescribed housing costs under regulation 17(1)(e) or 18(1)(f) (applicable amounts) are
(a)	mortgage interest payments;
(aa)	interest payments under a hire‑purchase agreement to buy the dwelling occupied as the home;
(b)	interest on loans for repairs and improvements to the dwelling occupied as the home;
(c)	payments by way of rent or ground rent relating to a long tenancy and, in Scotland, payments by way of feu duty;
(d)	payments under a co‑ownership scheme;
(e)	payments under or relating to a tenancy or licence of a Crown tenant;
(f)	service charges;
(g)	where the dwelling occupied as the home is a tent, payments in respect of the tent and the site on which it stands;
(h)	payments analogous to those mentioned in this paragraph.”
The loan was secured on the claimant’s home, and Mr. Johnson contended that the interest payable in respect thereof, insofar as it did not fall within sub‑paragraph (b), was a mortgage interest payment within sub‑paragraph (a).
6. 	Paragraph 2 provides as follows:
“2. Subject to the following provisions of this Schedule, the housing costs referred to in paragraph 1 shall be met where the claimant, or if he is one of a family, he or any member of his family is treated as responsible for the expenditure to which that cost relates in respect of the dwelling occupied as the home which he or any member of his family is treated as occupying.”
It should be noted that, although paragraph 1 describes the payments there listed as “the amounts which may [my emphasis] be applicable”, paragraph 2 speaks of such amount in terms that they “shall [my emphasis] be met”, Mr. Johnson argued, accordingly, that, reading paragraphs 1 and 2 together, mortgage interest payments had to be allowed as part of the claimant’s applicable amount.
7. 	Mr. Johnson accepted that both paragraphs were “subject to the following provisions of this Schedule” and in this connection paragraphs 7 and 8 are relevant. They read as follows:
“7.- (1)	 Subject to the following sub‑paragraphs of this paragraph, the following amounts shall be met under this paragraph-
(a) ...
(b)	except where sub‑paragraph 1(a) applies, if the claimant or, if he is a member of a couple, or if a member of a polygamous marriage, he and any partner of his are aged under 60-
(i)	where the claimant has been in receipt of income support in respect of a continuous period of not less than 16 weeks, 100 per cent of the eligible interest in his case;
(ii)	in any other case, 50 per cent of the eligible interest in that case.
(2) ...
(3)	Subject to sub‑paragraphs (3A) to (6), in this paragraph ‘eligible interest’ means the amount of interest on a loan, whether or not secured by way of a mortgage or, in Scotland, under a heritable security, taken out to defray money applied for the purpose of-
(a)	acquiring an interest in the dwelling occupied as the home; or
(b)	paying off another loan but only to the extent that interest on that other loan would have been eligible interest had the loan not been paid off.
(3A) For the purpose of this paragraph any reference to a loan includes a reference to payments specified in paragraph 1(aa).
(4)	[The formula to be applied in calculating the weekly amount of eligible interest].
8.‑ (1)	There shall be met under this paragraph an amount in respect of interest payable on a loan which is taken out, with or without security, for the purpose of-
(a)	carrying out repairs or improvements to the dwelling occupied as the home; or
(b)	paying off another loan but only to the extent that interest on that other loan would have been met under this paragraph had the loan not been paid off,
and which is used for that purpose or is to be so used within 6 months of the date of receipt or such further period as it is reasonable, and the amount to be met under this paragraph shall be calculated as if the loan were a loan to which paragraph 7 applied.
(2)	...
(3)	In this paragraph ‘repairs and improvements’ means major repairs necessary to maintain the fabric of the dwelling occupied as the home and any of the following measures undertaken with a view to improving its fitness for occupation-
[there then follows a list of relevant measures]
(4)	...”
8. 	Mr. Johnson contended that, to the extent that mortgage interest related  to items of repair or improvement falling outside paragraph 8, that paragraph had no relevance, and if it had no relevance, likewise paragraph 7 which imposed the 16 weeks rule had no relevance. The interest in question could simply be met in full under paragraph 1(a). If Mr. Johnson’s contention was right, it gave rise to somewhat startling consequences. The language of regulation 8 restricts the availability of  interest on loans to certain types of repairs and improvements. The implication is that, where the repairs and improvements lie outside the definition therein contained, the relevant mortgage interest will not be allowable. It would be somewhat startling if such interest were allowable instead under regulation 1(a). It would be equally startling if, whereas the interest allowable for the restricted category of repairs and improvements under paragraph 8 resulted in the application of the “16 weeks rule” pursuant to paragraph 7, interest arising out of loans for repairs and improvements of a non‑essential nature shook free of this restriction. 
9. 	Further, if Mr. Johnson’s argument were to prevail, similar consequences would flow from paragraph 7. That paragraph contemplates interest being included in the applicable amount only in the circumstances set out in sub paragraph (3). And when this is the case the ‘16 weeks rule’ will apply. It would be somewhat startling if a claimant were at liberty (say) to raise money by mortgaging or further  mortgaging his home already acquired, and then, relying on paragraph 1(a), escape the ‘16 weeks rule’. Income support is the benefit of last resort, and one would not expect to find a provision, which enabled mortgage interest payments to be included in the applicable amount, where they related to loans raised for purposes other than the essential ones contemplated by paragraphs 7 and 8. Moreover, if a claimant is entitled to have interest included in his applicable amount under 1(a), how is the weekly amount to be calculated? In the case of loans sanctioned by paragraph 7 or 8, a formula is set in paragraph 7(4). The absence of any formula in paragraph 1(a) suggests that it was never contemplated that this particular paragraph would by itself ever confer any interest entitlement.
10.	Mr. Butt contended that no difficulty arose once it was realised that sub paragraphs (a) to (h) of paragraph (1) were nothing more than heads of entitlement,  heads which were expanded and fully explained in the subsequent paragraphs. Thus head (a) was dealt with under paragraph 7, head (aa) under sub-paragraph (3A) of paragraph 7, head (b) under paragraph 8, and heads (c) to (h) under paragraph 9. Sub‑paragraph (1) of the last paragraph incidentally, reads as follows:
“9.‑ (1)	Subject to sub‑paragraph (5), there shall be met under this paragraph the amounts, calculated on a weekly basis, in respect of the housing costs specified in paragraph 1(c) to (h) subject to the deduction specified in sub‑paragraph (2).”
Mr. Butt contended that if paragraph 1 was interpreted in the above manner, no difficulty arose. In particular, heads (a) and (b) were not all‑embracing. They were restricted in their effect by the terms of paragraphs 7 and 8 respectively. Moreover, if the matter was approached in this way, there were no absurd anomalies, and income support assumed its proper function of being the benefit of last resort. It did not confer entitlement to recoupment of interest arising out of non‑essential loans.
11. 	I accept Mr. Butt’s submission. Paragraph 1 does no more than set out the relevant heads of entitlement, which are explained and expanded in the subsequent paragraphs of the Schedule.
12. 	Unfortunately, the tribunal appear not to have considered Mr. Johnson’s argument when it was put before them, or if they did, they failed to refer to it in their decision. Accordingly, I must set aside their decision as being erroneous in point of law for breach of regulation 25(2)(b).
13. 	However, it is unnecessary for me to remit the matter to a new tribunal for rehearing. I can conveniently substitute my own decision. For the reasons set out above, I reject Mr. Johnson’s contention as to the effect of paragraph 1(a); and as to the issue of how sub‑paragraphs (h) to (k) of paragraph 8 should be applied I reaffirm the approach of the tribunal.
14.	 Accordingly, my decision is as set out in paragraph 1.

Date: 25 March 1993	(signed) Mr. D. G. Rice
	Commissioner