Select Committee on Delegated Powers and Deregulation Seventeenth Report



CLAUSE 66 - SHARING OF FUNCTIONS AS REGARDS CLAIMS AND INFORMATION

360. This clause inserts a new section 7A into the Social Security Administration Act 1992. The new section contains two delegated powers in new section 7A(1) and 7A(2) enabling regulations to provide for central and local government to work together in the delivery of social security benefits. In particular, it enables regulations to provide new functions for local authorities enabling them to accept claims for benefits which are administered by central government, to forward those claims to the relevant administering authority and similarly to collect and forward information and evidence relevant both to claims and awards of benefit. It also enables regulations to provide for central government to carry out the same functions in relation to Housing Benefit and Council Tax Benefit, for which local authorities have administrative responsibility.

361. It is proposed to use these powers to enable claimants to combine claims for several benefits on a single claim form. The form may include claims for benefits administered centrally and others administered locally, such as a combined claim for Income Support and Housing Benefit. It is also intended that the regulations will enable claimants to make enquiries about benefits to which they are, or may be, entitled through a single point of contact, whether it be, for example, the Benefits Agency or the local authority.

362. The new section does not make any changes to current responsibilities for determining benefit entitlement. The proposed regulations will provide for claims to be passed to the relevant body for processing. For example, claims made to a local authority for social security benefits other than Housing Benefit or Council Tax Benefit (such as a claim for Jobseeker's Allowance or Income Support) would be forwarded to the Benefits Agency for assessment.

363. The Department believes that the level of technical detail required providing for central and local government to work together in the delivery of social security benefits is appropriate to secondary legislation. Secondary legislation will also enable changes to be made more easily in the light of operational experience and to react to changes in benefit rules and local or central government administration.

364. Subsection (1)(a) enables regulations to provide for claims for Housing Benefit and Council Tax Benefit to be made to an office other than a local authority. It is intended that the office will be specified in the regulations. For example, in the case of pilots under proposals for a work-focused interview (the ONE service) (see also clauses 52, 53 and 67), the specified offices will be the local Benefits Agency or Employment Service, or offices run by private or voluntary sector providers on their behalf.

365. It is intended that regulations described in subsection (1)(b) will provide for the mirror image of arrangements under subsection (1)(a) by enabling claims for specified social security benefits and war pensions, and applications for child support, to be made to local authorities.

366. Subsection (2)(a) enables regulations to provide for claims made under the provisions of subsection (1) and information provided in connection with those claims, whether by the claimant or by a third party (for example, the claimant's partner), to be forwarded to the appropriate body to assess the claim.

367. Subsection (2)(b) enables regulations to provide for the obtaining and receiving of information about social security matters from people making claims for Housing Benefit, Council Tax Benefit or any prescribed benefits, or from a third party in connection with such claims. The regulations would also provide for the forwarding of such information. The intended regulations would enable a claimant, or partner, to transact routine social security business, such as reporting a change of personal circumstances, through a single point of contact. For example, a claimant would be able to report changes affecting his Income Support claim to the local authority, which would then forward the details and any supporting evidence to the Benefits Agency.

368. Subsection (2)(c) enables regulations to provide for the recording and holding of information and evidence relating to social security matters. These regulations will enable an office to hold information which relates to benefits for which it has no administrative responsibilities. This situation would arise, for example, where a single claim form is used for a mixture of centrally and locally administered benefits, such as an integrated claim for Income Support and Housing Benefit. The form may be stored by the Benefits Agency, but the Agency has no administrative responsibility for the Housing Benefit claim.

369. Subsection (2)(d) enables regulations to provide for advice and information to be given to claimants on a range of social security matters. It is proposed that regulations made under this subsection will allow local authorities greater access to information held on Benefits Agency systems than is currently the case, in order to deal with claimants' enquiries concerning their claims to social security benefits administered by the Benefits Agency.

370. Subsection (3) provides that subsections (2)(b) (obtaining, receipt and forwarding of information) and (2)(d) (the giving of advice and information about social security matters) apply whether or not the original claim was made under the provisions of subsection (1). It also ensures that those subsections apply both to people making initial claims to Housing Benefit, Council Tax Benefit or any prescribed benefits, and to those to whom awards have already been made.

371. Subsection (4) defines terms used in the clause. In particular, subsection (4)(d) defines a "relevant benefit" for the purposes of the new section 7A as Housing Benefit, Council Tax Benefit or any other "prescribed" benefit. For example, it is proposed that Income Support, Jobseeker's Allowance, widow's and bereavement benefits, Incapacity Benefit, Severe Disablement Allowance and Invalid Care Allowance will be prescribed in regulations as "relevant benefits" for the purposes of the ONE service.

CLAUSE 67 - SUPPLY OF INFORMATION FOR CERTAIN PURPOSES

372. Clause 67 enables the Secretary of State to prescribe by regulations how, when and by whom, social security information held by or on behalf of central or local Government may be supplied and used. The clause will facilitate cross Government working. The regulations to be made under this power will, in particular, deal with:

  • the work-focused interview (clause 52);
  • Employment Zones (clause 55); and
  • the information that can be used in operating the New Deal for Lone Parents, the New Deal for Disabled People, the New Deal for Partners of Unemployed People and the new Personal Capability Assessment.

373. The Department considers secondary legislation suitable for this purpose. This is because of the level of technical detail involved; and the need to keep abreast of the current prototypes, pilots and any future innovative arrangements, and to be able to react promptly to their evaluation and results.

374. Subsection (1) of clause 67 provides for regulations to specify when, how, by whom and what social security information may be supplied and used.

375. It is intended that the regulations will prescribe information flows in the following types of circumstances:

Work-focused interviews (see also clause 52) - information obtained on the claimant's initial contacts with Government (which may, for example, be the Benefits Agency, the Employment Service or a Local Authority) will be passed to a personal adviser for use in the work-focused interview. The personal adviser is the person who conducts the interview and may be employed by central or local government, a private contractor or a voluntary organisation. It is intended that the regulations will provide that information relevant to the person's claim, which is obtained at this interview, may be passed by the personal adviser to the Benefits Agency, the Employment Service, the Child Support Agency or to a local authority as necessary.

New Deal for Lone Parents is a non-statutory scheme which provides lone parents on Income Support with access to a personal adviser for help with training, jobsearch, in-work benefits and advice about childcare. It is intended that the regulations will enable:

  1. information which is provided for lone parents' benefit claims to be used by the New Deal for Lone Parents personal adviser (who will be working for the Employment Service, or in some cases in voluntary sector organisations) for use in work-focused interviews;
  2. information relevant to the benefit claim which is obtained at the work-focused interview to be passed by the personal adviser to the Benefits Agency or the Child Support Agency.

New Deal for Partners of Unemployed People is also a non-statutory scheme which offers partners access to their own personal adviser and appropriate Employment Service funded schemes (for example, training schemes). It is intended that the regulations will enable information provided on a person's claim for benefit to be used to contact a claimant's unemployed partner so as to offer guidance and assistance with employment.

Personal Capability Assessment (see also clause 56). It is intended that the regulations will enable information about the claimant's employment prospects obtained at the Personal Capability Assessment to be passed to and used by the personal adviser conducting the work- focused interview.

376. Subsection (5) gives further detail as to how regulations under subsection (1) may allow for information supplied to be used for the purpose of amending or supplementing information held by the person to whom it is supplied. It is intended that regulations will set out that, where information is used in this way, it may be further supplied and used to the same extent as the information which it amends or supplements may be supplied or used. For example, the Personal Adviser may establish during a work-focused interview that a disabled client would benefit from specialist skills training, such as keyboard skills for computing, and will contact the Disabled Employment Adviser to update and supplement the records.

SCHEDULES 9 AND 10 - NEW THRESHOLD FOR PRIMARY CLASS 1 CONTRIBUTIONS

377. Clause 68 introduces Schedule 9 which provides for structural changes to the National Insurance contributions scheme by amending sections 5, 6, 8 and 9 of the Contributions and Benefits Act 1992, sections 41, 42A and 177 of the Pensions Schemes Act 1993, section 162 of the Administration Act 1992 and consequential amendments to the Income and Corporation Taxes Act 1988 and the Contributions and Benefits Act 1992. Equivalent provisions for Northern Ireland are contained in clause 69 and Schedule 10.

378. Section 5 (1) of the Contributions and Benefits Act currently provides for the setting of the upper and lower earnings limits by reference to which liability for primary (employees') contributions arises and the earnings threshold above which liability for secondary (employers') contributions arises. Paragraph 1 of Schedule 9 substitutes a new section 5, subsection (1) of which applies the concept of the earnings threshold to a new, higher starting point for payment of primary contributions to be known as the primary earnings threshold. In the same way that section 5 (1) currently includes the power to specify the annual primary limits and secondary earnings threshold by regulations, the amendment will extend the regulation-making power to the primary earnings threshold.

379. Apart from prescribing the values of the lower and upper earnings limits and the secondary earnings threshold (as already provided by the 1998 amendment), it is intended the regulations will be used to give legislative effect to the references the Chancellor made in his 9 March Budget statement to the primary earnings threshold in his announcement about reform of National Insurance contributions from April 2000. In line with the Chancellor's statement, the primary earnings threshold will be £76 per week and, as was also made clear, the threshold will be brought into line with the secondary earnings threshold from April 2001 so that the regulations will be used to prescribe the threshold for the tax year 2001/02.

380. A new section 5 (4) provides for regulations to prescribe equivalent amounts to the limits and thresholds in subsection (1) where the employees' earnings periods are other than weekly. This is an extension to the weekly primary threshold of the existing formula for determining equivalent amounts to the specified weekly values of the lower and upper earnings limits.

381. Specifying the limits and thresholds by regulations follows a well established precedent - it enables them to be adjusted annually in the light of movement in earnings without recourse to primary legislation.

382. Paragraph 2 of Schedule 9 restates section 6 of the Contributions and Benefits Act 1992 to provide that primary contributions are payable where earnings exceed the primary threshold rather than, as currently, the lower earnings limit.

383. Subsection (3) restates the existing regulation making power in section 6 (2) of the Contributions and Benefits Act 1992 to prescribe exceptions to the general provision that Class 1 primary National Insurance Contributions are not payable by individuals after they have reached pensionable age. For example, this is used to make regulation 20A of the Social Security (Contributions) Regulations (SI 1979/591) which concerns the treatment of earnings normally paid before pensionable age but actually paid after pensionable age, and regulations 21 and 22 in the same statutory instrument concerning abnormal pay practices.

384. The new subsection (6) also updates the current regulation making power in section 6 (5) of the Contributions and Benefits Act 1992, which provided for reduced primary and secondary Class 1 National Insurance contributions in respect of individuals who were outside Part VI of the Employment Protection (Consolidation) Act 1978, to refer to the equivalent provision in Part XI of the Employment Rights Act 1996. For example, the primary and secondary Class 1 contribution rates have been reduced in the past for certain mariners who had no redundancy rights.

385. It is believed that these provisions are appropriate to secondary legislation because regulations will more easily accommodate future changes in employment legislation.

386. Paragraph 3 introduces a new section 6A to the Contributions and Benefits Act to ensure that the introduction of the primary threshold, changing as it does the starting point for payment of primary contributions, will not affect the current right of employees to contributory benefits and Jobseeker's Allowance where their earnings reach the lower earnings limit. This will be achieved by deeming a payment of contributions in the band of earnings between the lower earnings limit and the primary threshold or their prescribed equivalents.

387. The new section contains a regulation-making power to prescribe exceptions and modifications to this means of protecting employees' rights. Subsection (4) will thus enable regulations to be made to ensure that benefits rights of specified groups are not enhanced as a result of the deeming provision. Where individuals would currently not be liable for National Insurance contributions and do not build up benefit entitlement, it is intended that regulations will provide that these deeming provisions shall not apply. For example, it may be a condition that individuals are required to satisfy the same residence and presence conditions as those individuals who are actually liable for National Insurance contributions. The regulation-making power will thus be exercised to ensure that the deeming of contributions will be granted only to employees earning between the lower earnings limit and the primary threshold who, but for the introduction of the primary threshold, would be liable to pay primary contributions.

388. Specifying the relevant exceptions and modifications will require a degree of technical detail which is more appropriate to secondary legislation. It will also enable the provisions to be adapted more easily to take account of any future changes to the benefits system.

389. Paragraphs 6(3) and 7(3) introduce a regulation-making power in relation to recovery of rebates in respect of salary related and money purchase contracted-out schemes respectively. Current provisions set the employee and employer rebates by reference to percentages of earnings in excess of the lower earnings limit. But with the introduction of a higher starting point for payment of primary National Insurance contributions, as specified by the primary earnings threshold, there will be a narrower range of earnings over which National Insurance contributions liability will arise. This raises the possibility that the amount to be recovered in rebate may be higher than the total National Insurance contribution liability to be discharged.

390. The amendments to sections 41 and 42A of the Pension Schemes Act 1993 provided by paragraphs 6(3) and 7(3) make provision for off-setting the rebates against contributions due and, where the rebate exceeds the contributions due, the employer may obtain payment of the remaining balance by application to the Inland Revenue. It is intended that the way in which the Inland Revenue will make payment, and the timing of such payments, will be prescribed in regulations. In addition, the regulations will provide for the recovery of overpayments from the employer. The regulation-making power will be exercised to prescribe accordingly with effect from April 2000.

391. The level of detail required to put in place appropriate arrangements makes this suitable for secondary legislation. Furthermore, regulations will better accommodate any future changes to the structure of National Insurance contributions.

CLAUSES 70 AND 71 - EARNINGS OF WORKERS SUPPLIED BY SERVICE COMPANIES ETC

INTRODUCTION

392. Following the Chancellor's Budget announcement, this clause provides for a new power to counter the risk of avoidance of National Insurance contributions where an individual (the worker) provides personal services through an intermediary. The legislation in this Bill will be matched by tax legislation that will, in specified circumstances, require the client to operate Pay As You Earn (PAYE) on the payments made to, or in respect of, the worker. The Chancellor announced in his Budget that these measures would take effect from 6 April 2000. Consequently, the regulations to be made under this clause would come into force from that date. Equivalent provisions for Northern Ireland are contained in clause 71.

393. Clause 70 concerns the situation where the worker is engaged by a business (the client) through a third party (such as a service company). This is illustrated below. In the absence of such a third party, the relationship between a client and a worker would determine the employment status for the purposes of both tax and National Insurance. Liability would then be assessed according to whether the person was employed or self-employed. However, where a worker is engaged through one or more third parties, it is possible to escape any direct contractual relationship between client and worker. This provides scope for the avoidance of tax and National Insurance and can lead to a loss of employment protection for the worker.


 
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