Select Committee on Delegated Powers and Deregulation Seventeenth Report


ANNEX 1

WELFARE REFORM AND PENSIONS BILL 1999

Memorandum from the Department of Social Security

INTRODUCTION

1. This memorandum identifies provisions for delegated legislation in the Welfare Reform and Pensions Bill 1999. The memorandum:

  • explains the purpose of the delegated powers taken;
  • describes why matters are to be left to delegated legislation; and
  • explains the procedure selected for each power and why it has been chosen.

THE WELFARE REFORM AND PENSIONS BILL

2. The Welfare Reform and Pensions Bill 1999 contains a range of measures relating to social security benefits, pensions and national insurance contributions.

3. It introduces reform in 4 key areas:

  • pensions;
  • bereavement benefits;
  • measures to keep people in touch with the labour market; and
  • incapacity and disability benefits.

PENSIONS

4. Stakeholder pension schemes will be a new form of pension provision which are designed to offer many more people the opportunity to save for retirement. The Bill sets out the definition of stakeholder pension schemes and arrangements for their regulation. It also includes requirements for certain employers to designate a stakeholder pension scheme and facilitate access to it.

5. The Bill contains provisions on pension sharing which are designed to allow couples to reach a fairer financial settlement on divorce or nullity of marriage.

6. The Bill also contains measures to improve the regulatory framework for occupational and personal pensions by enhancing the protection afforded to scheme members and to tidy up technical problems arising from the previous pensions legislation.

BEREAVEMENT BENEFITS

7. The proposals in the Bill will replace the current Widows' Benefits with new bereavement benefits that will be paid to both men and women. The Bill will provide new widows and widowers who satisfy the qualifying conditions with a lump­sum payment of £2,000. Widowed parents will then receive a continuing weekly benefit until their youngest child ceases to be dependent; those without children will receive a weekly benefit for six months only. These provisions introduce no new delegated powers.

MEASURES TO KEEP PEOPLE IN TOUCH WITH THE LABOUR MARKET

8. The Bill includes a number of provisions designed to keep people in touch with the labour market.

9. The Bill supports the introduction of a work-focused interview into the benefit system. These new arrangements are designed to ensure a more streamlined service by providing claimants with a single point of contact for all of their benefit requirements and for advice and support in finding work.

10. The Bill includes provisions to introduce Employment Zones which are designed to provide the opportunity to offer flexible support to a number of long-term unemployed Jobseeker's Allowance claimants in areas of greatest need.

11. The Bill also includes proposals for a new requirement for joint claims for Jobseeker's Allowance from couples, the main purpose of which is to give both partners in a couple the same opportunity to receive help and guidance to return to work and to go onto employment programmes.

MODERNISING THE BENEFITS STRUCTURE FOR PEOPLE WITH DISABILITIES OR LONG-TERM ILLNESSES

12. Proposals in the Bill will amend the National Insurance contribution conditions for new claims and to provide for some account to be taken of occupational and personal pensions when determining entitlement to Incapacity Benefit. The Bill also makes provision for the All Work Test to be replaced by a new Personal Capability Assessment. The new assessment will provide information about a person's capabilities as well as the degree of their incapacity and that information can be used by them and their personal adviser to help plan a possible route to greater independence.

13. The Bill provides for the abolition of Severe Disablement Allowance. Those disabled early in life, and who claim benefit before the age of 20 (or 25 if a higher education student or trainee), will be allowed access to Incapacity Benefit without having to satisfy the Incapacity Benefit contribution conditions. Existing Severe Disablement Allowance claimants will continue to receive the benefit. It is the intention that recipients aged under 20 at the point of change will become entitled to long-term Incapacity Benefit a year later.

14. Three further proposed changes to disability benefits are included in the Bill. It:

  • gives a power to prescribe conditions of entitlement to Attendance Allowance in regulations to provide greater future flexibility and alignment with Disability Living Allowance;
  • extends entitlement to the higher rate mobility component of Disability Living Allowance to 3 and 4 year-old severely disabled children with serious mobility problems; and

amends the wording which refers to awards made for life.

OTHER MEASURES

15. Other measures in the Bill will:

  • allow hardship payments in Jobseeker's Allowance to be paid to a third party;
  • introduce a requirement for a National Insurance Number to claim Child Benefit;
  • allow for the sharing of information between the Inland Revenue and Child Support Agency;
  • provide a power to incur preparatory expenditure in advance of future legislation;
  • provide a power to pilot an under-occupation scheme for persons on Housing Benefit;
  • change the structure of national insurance contributions for employees;
  • make improvements to maternity allowance;
  • make a number of minor changes to National Insurance Contributions and correct omissions and make technical additions to the Social Security Contributions (Transfer of Functions, etc.) Act 1999;
  • provide that certain overpayments of benefits made before 1 June 1999 cannot be recovered from the recipient; and
  • make changes to the National Insurance liability for some of those who have set up service companies.

DELEGATED POWERS

16. The Bill contains 215 powers to make delegated legislation. A list of these is attached as an annex to this memorandum.

17. It may be helpful to the Committee to discuss here the overall approach to the drafting of the legislation which has an impact on the number of delegated powers in the Bill.

18. The Department has followed the precedent in current legislation relating to social security and pensions matters (for example, the Contributions and Benefits Act 1992, the Pensions Act 1995 and the Jobseekers Act 1995) by setting out the overall legislative framework on the face of the Bill and providing for regulations to set out the matters of detail. This provides flexibility for the Department to amend the detailed rules more easily in the light of operational experience or other developments, without having to take up a substantial amount of parliamentary time to amend primary legislation.

19. In addition, where the Bill amends or supplements existing legislation, similar delegated powers have been taken. For example, the Bill provides for the introduction of joint claims to Jobseeker's Allowance for couples through making a number of changes to the Jobseekers Act. Many of the sections in the Jobseekers Act which are being amended provide for delegated powers under which regulations have been in existence for some time. In these cases, the Bill is not taking any novel regulation-making powers, but simply extending current powers to joint claims.

20. The Committee will also note that nearly half of the delegated powers in the Bill concern the proposals on pension sharing for divorcing couples. Many of these are regulation-making powers concerned with requirements imposed on pension arrangements, including occupational and personal pension schemes. Such schemes are themselves complex and varied, containing detailed provisions as to the types of benefit to be provided to members and their dependants and as to the way in which the scheme is to be funded and administered.

21. As a consequence of pension sharing, the Bill imposes a number of new requirements on pension arrangements. Given the complexity and variety of arrangements, the requirements will necessarily themselves be detailed and it would, the Department believes, be inappropriate to attempt to deal with every aspect of such requirements, and for every circumstance, in primary legislation. To do so, with all the variants that would be needed, would produce primary legislation of great complexity, length and detail. And it would still be impossible to be sure that all possible variants, now and for the future, had been covered.

22. There will, moreover, be a need to change the detailed requirements from time to time. It is particularly important for powers to be provided to make exceptions and modifications to the requirements so as to avoid over-regulation or inappropriate regulation. So, as in the Pensions Act 1995, the Department has, therefore, sought to avoid the primary legislation in this area being enormously lengthy and prescriptive and proposes to leave to secondary legislation technical matters and matters where flexibility is necessary.

23. A similar approach has been taken for stakeholder pension schemes. As mentioned in paragraph 4 above the Bill provides the legislative framework for stakeholder pension schemes. It is intended that the more detailed issues will then be dealt with in regulations. This is an approach adopted with previous pensions legislation - for example, the Pensions Act 1995. It allows for the legislative provisions for stakeholder pension schemes to be flexible enough to allow adjustments in the light of consultation and experience of operating schemes.

24. Two of the provisions in the Bill are subject to affirmative resolution by both Houses of Parliament. Firstly, any regulations made under section 30DD (3) (b) and (c) of the Contributions and Benefits Act (as inserted by clause 58 of this Bill) concerning the definition of pension income. This is in line with the procedures for defining pension income in Jobseeker's Allowance which are subject to the affirmative procedure. Secondly, the power to uprate the £30 earnings threshold to qualify for Maternity Allowance (which is provided for in clause 48(7) and paragraph 32 of Schedule 8 of this Bill). This matches the general provisions for uprating in social security benefits, which are also subject to the affirmative procedure.

25. All of the other regulations made under the powers in, or introduced by, this Bill will follow the negative resolution procedure as the Department considers that none of the considerations set out in paragraph 78 of the Second Report of the Joint Committee on Delegated Powers ("the Brooke Report") apply.

26. Clause 70 make changes to the National Insurance liability for some of those who have set up service companies. Clause 71 makes equivalent provisions for Northern Ireland. It is intended that this measure will come into force on 6 April 2000. The clauses include measures which parallel tax provisions which it is intended to present to Parliament in the next Finance Bill. In order to ensure the simplest possible systems for business to operate it is necessary to keep the tax and National Insurance Contribution rules in alignment. Subsections (9) of both clause 70 and 71 therefore propose a Henry VIII power that will enable adaptation of these clauses by Order in the event of any modification of the statutory provisions relating to income tax. In line with previous precedents, this power will enable changes to the clause to be made by Order only in the event that the parallel tax proposals change. This power is discussed in some detail in paragraphs 412 to 413 of this memorandum.


 
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