[2023] UKUT 193 (AAC)

The Secretary of State submits that to interpret regulation 64(3) as I have done would make the housing benefit scheme administratively unworkable and invite numerous, potentially opportunistic, claims.

I disagree.

It must be remembered that the majority of students are wholly excluded from housing benefit by regulation 56(1). It is only those who fall within the regulation 56(2) exceptions who will be able to make claims to which local authorities will have to give detailed consideration.

I doubt that there will be many such students who have sincere and principled non-financial objections to either receiving a loan or the payment of interest. It will not even be all the Muslims among them. The work of the First-tier Tribunal often involves the detailed consideration of a claimant’s finances and I know from my years as a District Tribunal Judge that many who profess the Islamic faith nevertheless hold interest-paying savings accounts or have taken out interest-paying loans or mortgages.

I appreciate that the objection is not merely to the number of valid claims, but to the opportunity that interpreting regulation 64(3) as I have done would allegedly provide to students for false claims that they held sincere and principled reasons for declining a student loan.

What that objection ignores is that in order to make an opportunistic claim based on regulation 64(3), students would actually have to decline the student loans for which they were eligible.

In the context of a system where it is anticipated that two-thirds of such loans will never be fully repaid, such students would have to give up the advantages of a loan that would pay their tuition fees and give them hundreds of pounds a week towards their maintenance in return for a much smaller amount of non-repayable housing benefit.

Moreover, the housing benefit scheme would then present such students with further problems.

First, housing benefit is not calculated on the full amount of a claimant’s contractual rent but on a notional rent that is intended to ensure that housing benefit only meets rents in the bottom third of the local rental market. Moreover, most students under 30 will find that benefit is calculated on the basis of a notional “single room rent”, irrespective of the extent of the accommodation they actually occupy.

Second, for most students the only way of maintaining themselves without a loan would be to work.

Regulation 64(3) only applies to students who fall within the exceptions in regulation 56(2). Many such students will in practice not be able to work—or will only be able to work to a limited extent—by reason of their illness or disability.

For those who are able, time spent working reduces the time available to study. Moreover, their earnings would be taken into account in the housing benefit calculation thereby reducing or extinguishing their entitlement to benefit.

Third, students without a loan will also have to find £9,000 to pay their tuition fees at the beginning of each academic year.

Students who forego a loan in order to claim housing benefit will have to save that money from their earnings. They are likely to have difficulty borrowing such a large amount without paying interest. Even those whose claims are opportunistic will need to avoid borrowing at interest, because to do so would expose their opportunism.

That means they will have to work more hours than would be necessary if their only aim were to maintain themselves. The extra money they earn by doing so will increase their income for housing benefit purposes and reduce their entitlement correspondingly.

Finally, if a student does manage to save enough to pay tuition fees, those savings will reduce benefit entitlement still further as soon as they exceed £6,000 because of the tariff income rule: see regulation 52.

In short, students who decline to take out a student loan (which in future they may not have to repay in full) are choosing to make their lives considerably more difficult in return for an amount of non-repayable housing benefit—which is likely to be small and may be nil—and the certainty of paying for their education now. Those students who do so for opportunistic reasons need to take a course in mathematics.

For those reasons, I do not consider that interpreting regulation 64(3) as I have done is likely to lead to a flood of claims, far less a flood of opportunistic claims. I do, however, accept that—as part of deciding what steps would be reasonable—local authorities will have to decide whether a claimed objection to taking out a loan or paying interest is principled and held sincerely and conscientiously.

What I do not accept is that the system thereby becomes unworkable.

Whether someone holds a particular belief is a question of fact. Like many facts—for example the level of pain a person experiences—it cannot be directly known. But it can be inferred on a balance of probabilities from other evidence. Sitting in the First-tier Tribunal, I have myself refused appeals relating to other aspects of the housing benefit scheme on the basis that a claimed religious belief was not conscientiously held. That issue was no more difficult to decide than many other factual issues with which the First-tier Tribunal is faced, and less difficult than some. By definition, local authority decision-makers also have to face those equally- and more-difficult issues.

Local authorities routinely require housing benefit claimants to produce their bank and building society statements as part of their claim. If those statements show that a claimant has an interest-bearing savings account, a mortgage (other than an Islamic mortgage) or a credit card, that is likely to be the end of the matter. And if there is any doubt, the local authority may require the production of credit card and mortgage statements.

Otherwise, for the reasons summarised at paragraph 160 above, where students deliberately accept the disadvantages of living without a loan, that very fact will often be evidence that any claimed objections to paying interest are conscientiously held.

Finally, if the position is still insufficiently clear, then under the principles established by the House of Lords in Kerr v Department of Social Development, [2004] UKHL 23 (also reported as R 1/04 (SF)), it is for claimants to establish that their objections to taking out student loans are principled and conscientiously held and are not merely an attempt to obtain a perceived financial advantage.

All the information that is relevant to whether a claimant could have acquired a loan by taking reasonable steps will be in the knowledge and power of that claimant. As Mr Commissioner Henty said in CIS/5321/1998, (Footnote: ⁶) “a claimant must to the best of his or her ability give such information … as he reasonably can, in default of which a contrary inference can always be drawn”.

Put another way, local authorities that cannot tell from the evidence presented whether the reason a claimant did not acquire a student loan was because the steps required to do so were unreasonable in his case, will simply decide that issue against him and take the notional loan into account as income.