CLAUSE 66 - SHARING OF FUNCTIONS AS REGARDS CLAIMS
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
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
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
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
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
- 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
- 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
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
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
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
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.