House of Lords - Explanatory Note
Child Support, Pensions And Social Security Bill - continued          House of Lords

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Paragraph 15: Termination in cases of failure to furnish information

806. Paragraph 15 provides for regulations enabling a person's entitlement to benefit to be terminated where payment has been suspended in accordance with regulations under paragraph 13 above and the person has subsequently failed to comply with an information requirement or, in the case of paragraph 14 above, the person has persisted in their failure to comply with an information requirement.

807. In line with other social security benefits, in the case of suspension under paragraph 14, it is proposed that regulations would provide that benefit would be suspended until the claimant provides the requested information, up to a maximum period of one month. If at the end of a month the information is not provided then entitlement to benefit would be terminated from the date suspension commenced. In the case of a suspension under paragraph 13, it is proposed that regulations would provide a maximum period of one month following the notification of the information requirement. The one-month period may be extended if special reasons apply.

Paragraph 16: Decisions involving issues that arise on appeal in other cases

808. This paragraph makes provision for cases which turn on a point of law which is to be considered by a court on appeal in another case. The local authority may defer making a decision in such cases, or make it in prescribed cases on such basis as may be prescribed.

Sub-paragraph (1) provides that this paragraph applies where a decision falls to be made (including one revising or superseding an earlier decision) which turns on an issue of law which is being challenged in another case (the "lead case"), through the Courts.

Sub-paragraph (2) provides that the local authority need not make a decision where they consider that the outcome of the lead case might mean there would be no entitlement to benefit.

Sub-paragraph (3) provides that if the local authority considers it possible that the outcome of the lead case might affect the decision in the case in some other way, they (a) need not make the decision while the appeal is pending, except in prescribed cases or circumstances; or (b) may make the decision on such basis as may be prescribed.

Sub-paragraph (4) requires the local authority, where they have made a decision on the prescribed basis, to revise that decision where appropriate, once the lead case is finally decided.

Sub-paragraph (5) defines when an appeal is pending in a lead case for the purposes of this paragraph. Regulations made under this sub-paragraph would cover cases where an appeal has not been brought, or an application for appeal has not been made, but the time limit for doing so has not expired. This would cover the situation where the local authority has received a decision of an appeal tribunal or a Commissioner and is considering whether they should seek leave to appeal against it.

Sub-paragraph (6) provides that the reference to an appeal, or application for leave to appeal, in sub-paragraph (5) includes an application for judicial review to the High Court or its equivalent in the Court of Session.

Sub-paragraph (7) clarifies that the reference to another case in sub-paragraph (1) includes a case involving a decision made by a different local authority, but does not include a case relating to a benefit other than HB or CTB.

Paragraph 17: Appeals involving issues that arise on appeal in other cases

809. Paragraph 17 deals with appeals which turn on an issue of law which is being challenged in another case (the "lead case") through the courts. It allows the local authority to require an appeal tribunal or Commissioner: to refer an appeal case to them instead of deciding it, to stay an appeal case, or to make a decision in an appeal case as if the lead case was decided in the way most unfavourable to the appellant.

Sub-paragraph (1) provides that this paragraph applies where an appeal is made to an appeal tribunal or Commissioner, and that appeal turns on an issue of law which is being challenged in the lead case through the courts.

Sub-paragraph (2) provides that the local authority may serve notice requiring the appeal tribunal or, as the case may be, the Commissioner, to refer the appeal to them, or to deal with the appeal in accordance with sub-paragraph (4) below.

Sub-paragraph (3) provides that the local authority shall, if and as appropriate, revise or supersede the decision in a case referred to them under sub-paragraph (2)(a), in accordance with the decision in the lead case, once that case is finally decided.

Sub-paragraph (4) provides that where the local authority issues a notice under sub-paragraph (2)(b) above, the appeal tribunal or Commissioner shall, having regard to the interests of the appellant, either (a) stay the appeal or (b) decide it as if the lead case were decided in the way most unfavourable to the claimant. A decision in the latter instance would allow any benefit, which would not be affected by the decision in the lead case, to be paid.

Sub-paragraph (5) requires the local authority, if appropriate, to supersede any decision of the appeal tribunal or Commissioner under sub-paragraph (4)(b) above once the lead case is finally decided.

Sub-paragraph (6) sets out where an appeal is pending in a lead case for the purposes of this paragraph. Regulations to be made under this sub-paragraph would cover cases where an appeal has not been brought, or an application for leave to appeal has not been made, but the time limit for doing so has not expired. Regulations would cover the situation where the local authority has received a decision of a Commissioner or court and is considering whether there appears to be an error of law in the decision and whether they should seek leave to appeal against it.

Sub-paragraph (7) provides that the reference to an appeal to a Commissioner in sub-paragraph (1)(a) includes a reference to an application for leave to appeal to a Commissioner. It also clarifies that the reference in sub-paragraph (1)(b) to a different case includes a reference to a case involving a different local authority, but does not include a case relating to a benefit other than HB or CTB. It further provides that the reference to an appeal or an application for leave to appeal in sub-paragraph (6) includes an application for judicial review to the High Court or its equivalent in the Court of Session.

Sub-paragraph (8) defines "appellant" for the purposes of sub-paragraph (4).

Sub-paragraph (9) enables regulations to be made to supplement provision in this paragraph.

Paragraph 18: Restrictions on entitlement to benefit in certain cases of error

810. Paragraph 18 provides that, where the outcome of an appeal overturns an understanding of the law previously applied, with the effect that decisions in other cases are wrong, restrictions may be imposed on arrears which would otherwise fall to be paid. It also defines the terms used.

Sub-paragraph (1) identifies those cases where entitlement to benefit is restricted because an understanding of the law has been overturned by a decision on appeal (a "relevant determination"). Sub-paragraph (2) identifies cases to which subsection (1) does not apply.

Sub-paragraph (3) provides that cases identified in accordance with sub-paragraph (1) above, are to be decided, as far as the period before the appeal decision is concerned, as though that relevant determination had not overturned the earlier understanding of the law.

Sub-paragraph (4) makes clear that appeal decisions of the courts, which determine that provisions in statutory instruments are themselves unlawful, are relevant determinations for the purpose of sub-paragraph (1)(a). That is to say that, even though a provision in a statutory instrument is found to be ineffective by a decision on appeal, cases will be determined on the basis that it is effective so far as the period before that determination is concerned.

Sub-paragraph (5) provides that the restriction on the payment of arrears applies regardless of whether a claim or application for revision or supersession is made before or after the date of the determination of the appeal in the lead case.

Sub-paragraph (6) defines "the court" for purposes of this paragraph.

Sub-paragraph (7) clarifies that references to entitlement to benefit also covers a) entitlement to any increase in the rate of benefit and b) also that entitlement includes new, revised, increased benefit or rates of benefit.

Sub-paragraphs (8) and (9) allows regulations to be made to prescribe how the date of the relevant determination is to be determined.

Paragraph 19: Correction of errors and setting aside of decisions

811. This paragraph permits regulations to be made defining circumstances in which accidental errors in decisions may be corrected, and provides for setting aside decisions in specified cases where there is procedural irregularity.

Sub-paragraph (1)(a) provides for regulations to be made for the correction of accidental errors in a decision or record of decision given by the local authority, an appeal tribunal or a Commissioner. Thus "slips of the pen" (such as mis-written dates) can be corrected. Sub-paragraph (1)(b) provides for regulations to be made for the appeal tribunal or Commissioner to set aside a decision and re-hear a case in the interests of justice if a procedural error has occurred in the service or receipt of documents, or if a party to the proceedings was not present at the hearing.

Sub-paragraph (2) provides that any power exercised under this provision shall not derogate from any other power to correct or set aside decisions.

Sub-paragraph (3) defines "relevant provision".

Paragraph 20: Regulations

812. This paragraph makes provision in respect of subordinate legislation. It provides, in particular, that regulations made under paragraph 6(2)(e) or (4) in respect of decisions against which no appeal lies shall be subject to affirmative resolution.

Paragraph 21: Consequential amendments of the Administration Act

813. Paragraph 21 amends sections 5 and 6 of the Administration Act to provide for regulations with respect to the provision of information and evidence needed to determine whether a decision on an award of HB/CTB should be revised or superseded.

Paragraph 22: Consequential amendments of the Social Security Act 1998

814. This paragraph provides for the repeal of sub-sections 34(4) and (5) (reviews of HB/CTB determinations) and section 35 (suspension of benefit in prescribed circumstances) of the Social Security Act 1998, which are replaced by the provisions of this Schedule. The paragraph also amends Schedules 1 and 4 to that Act to extend the payment of travelling and other expenses to people attending appeal tribunals and hearings before a Commissioner under the provisions of this Schedule.

Paragraph 23: Interpretation

815. This paragraph defines terms used in this Schedule, and provides for regulations to specify the circumstances in which a person is, or is not, to be considered as a person who is affected by any decision of a local authority. It also clarifies that decisions of persons authorised to carry out functions of, or providing services to, a local authority, are to be treated as decisions of that local authority for the purposes of this Schedule.

DISCRETIONARY PAYMENTS

Clause 68: Discretionary financial assistance with housing

816. Under these provisions local authorities will have discretion to provide people entitled to Housing Benefit and Council Tax Benefit (HB/CTB) with additional financial assistance with their rent or Council Tax. These payments will help alleviate exceptional hardship people may incur where their rent is above that met by Housing Benefit, and to cater for unforeseen exceptional circumstances, such as non-payment of wages.

817. The provisions will provide for discretionary housing payments made by the local authorities to be paid in addition to benefit entitlement. The decision to make payments will be discretionary. The local authority will decide whether to make payment and the level of each payment based on the circumstances of each individual case. The total amount a local authority will be able to spend on the discretionary scheme in any one year will be part of the framework of the scheme determined by the Secretary of State but the decision to pay on any particular case will be for the local authority. People requesting help from the discretionary scheme will be able to ask local authorities to review their decision if for whatever reason they are dissatisfied.

818. Subsection (1) provides for regulations which will enable local authorities to make discretionary payments to people in receipt of HB/CTB.

Subsection (1)(a) and (b) provide for regulations to be made conferring powers on local authorities to consider making payments to people entitled to HB/CTB who appear, to the local authority, to need further financial assistance to meet their housing costs. It is also intended that the regulations will set out the information that will be required by local authorities to make decisions; and the provision for people to ask for decisions to be reviewed. Decisions about the people to help, the financial amount, and the period for which such help shall be given, will be for the local authorities to determine.

819. Subsection (2) provides for the regulation-making powers which will set out the conditions and circumstances under which these payments may be considered.

Subsection (2)(a) provides for regulations to be made for the circumstances under which discretionary housing payments may be made. It is intended that the regulations made under this power will enable local authorities to consider making payments to tenants other than local authority tenants entitled to HB and for all others entitled to CTB in certain circumstances.

Subsection (2)(b) enables regulations to be made to provide that decisions about whether to help any particular persons, the amount of the payments and the period for which the help should be given, will be for local authorities.

Subsection (2)(c) enables regulations to be made imposing a limit on the amount of the discretionary housing payment that may be made in any particular case. It is intended that the regulations will specify that the additional financial help given to any person should not exceed the eligible rent (contractual rent less ineligible charges) as prescribed by the HB scheme, or where the help is for the paying of council tax, not higher than the amount a person would otherwise be entitled to under the rules of the CTB scheme.

Subsection (2)(d) enables regulations to be made to restrict the period for which discretionary housing payments are made. It is intended that the payments will be considered for the same period as help with rent or council tax through the HB/CTB schemes.

Subsection (2)(e) enables regulations to be made to set out the way in which people should apply for discretionary payments and the way in which local authorities should deal with those claims. The regulations may, for example, require local authorities to deal with the claims timeously and to notify their decisions within a set time.

Subsection (2)(f) enables regulations to be made to enable local authorities to gather such relevant information from the people as is reasonably required to enable them to make a decision.

Subsection (2)(g) enables regulations to be made in respect of the circumstances in which discretionary housing payments could cease, for example, where the person is no longer entitled to housing benefit or council tax benefit, and will enable the recovery of overpayments.

Subsection (2)(h) enables regulations to be made to provide for local authorities to review their decisions in particular circumstances.

820. Subsection (3) provides that regulations made under this section should be subject to negative procedure. Subsection (4) provides supplementary incidental powers to be used when making regulations under the provisions of this section. Subsection (5) enables regulations to be made for different areas or different local authorities should the need arise.

821. Subsection (6) amends section 176(1) of the Social Security Administration Act 1992 to require consultation with representative organisations, for example, the Local Authority Associations, prior to the making of regulations under the above provisions.

822. Subsection (7) defines the terms used.

Clause 69: Grants towards the cost of discretionary housing payments

823. Under these provisions, local authorities will have the power to make discretionary payments in certain circumstances. These payments will be cash-limited in order to ensure that the discretion is used prudently. Powers will allow Central Government to provide authorities with financial assistance with the scheme both in terms of the scheme's administration and the payments made under it.

824. This clause makes financial provision in respect of the housing discretionary payment scheme. It provides for the receipt and distribution of money by the Secretary of State to authorities in order to enable them to make discretionary housing payments, but with a ceiling on the total which they can spend.

825. Subsection (1) makes provisions for each authority to be given central Government funding towards their discretionary housing payments, and administrative expenditure.

826. Subsection (2) makes provision in respect of the calculation and payment of the amount of housing discretionary payments by applying certain provisions of section 140B and 140C of the Administration Act.

827. Subsection (3) enables the Secretary of State, by order, to make provision for an upper limit to be set, or to impose subsidiary limits, on the amount which authorities can spend on discretionary payments in any financial year. Subsection (4) provides that the order may specify those limits or provide for the way in which the limit should be determined. Subsection (5) provides for the Parliamentary control of the order made under this section, by providing for the negative procedure to be followed.

828. Subsection (6) provides supplementary incidental powers to be used when making Orders under the provisions of this section. Subsection (7) enables regulations to be made for different areas or different local authorities should the need arise.

829. Subsection (8) defines the terms used.

RECOVERY OF HOUSING BENEFIT

Current position

830. For tenants in the private rented sector, Housing Benefit may be paid direct to the landlord or his managing agent in prescribed circumstances. Currently approximately 56% of private sector tenants and 86% of registered social landlord tenants have their benefit paid direct to their landlord or agent.

831. Tenants in receipt of Housing Benefit are required to notify the local authority of any change in their circumstances that could affect their entitlement, for example, a change of address or change in income. Landlords and agents receiving benefit direct are also required to notify the local authority of any change in their tenants circumstances that they might reasonably be expected to know could affect the tenant's entitlement to Housing Benefit.

832. Local authorities often face problems recovering Housing Benefit debts if tenants simply disappear. Housing Benefit legislation, therefore, allows local authorities, where benefit is paid direct, the discretion to recover an overpayment from either the tenant or the landlord or agent (as the person to whom benefit was paid). The result of this is that, in cases of tenant fraud, local authorities may, and often do, recover the debt from the landlord or his agent. Although such a recovery re-opens the tenant's rental liability to the landlord, creating rent arrears, in practice it means that the fraudulent tenant often suffers no consequence for their action. This can act as a disincentive to landlords and their agents to report suspected fraud, when they know that they could find themselves repaying any subsequent overpayment.

The measure in the Bill

833. Clause 70 makes provision to amend section 75(3) of the Social Security Administration Act 1992* (the "Administration Act"). Section 75(3) currently provides for recovery to be made in all cases from the person to whom it was paid or such other person as may be prescribed. Landlords and agents fall under the first category as the person to whom benefit is paid. The new clause will allow for exceptions to be made in regulations to the provision that overpayments are recoverable from the person to whom benefit was paid. Regulations will prescribe that where the landlord or agent has reported suspected tenant fraud, the local authority cannot recover from the landlord/agent to whom it was paid but can recover from the tenant. However, in cases where the landlord is shown to have acted maliciously or is in collusion with the tenant, local authorities will retain their discretion to recover the overpayment from either party.

Clause 70: Recovery of housing benefit

834. This clause replaces subsection (3) of section 75 of the Administration Act, which provides the powers which specify from whom an overpayment of Housing Benefit may be recovered.

New subsection (3)(a) provides that an overpayment is recoverable from the person to whom the benefit was paid, but allows for exceptions to this to be prescribed in regulations. This will allow for regulations to provide for an exception in the case where a landlord or agent has reported suspected tenant fraud, and subsequent investigations have found no evidence to indicate the landlord had acted maliciously or had been in collusion with the fraudulent tenant.

New subsection (3)(b) provides that in addition to the overpayment being recovered from the person to whom the benefit was paid, it may also be recovered from such other person as prescribed in regulations. This replicates the existing power in the current subsection (3). Regulations currently prescribe that, in addition to the person to whom benefit was paid, recovery can also be sought from the claimant, or such other person who misrepresented or failed to disclose a material fact that resulted in the overpayment of benefit. The intention is to continue with these provisions in the new regulations.

CHILD BENEFIT

Clause 71: Child benefit disregards

835. Child benefit is only payable to a person who is responsible for a child in any given week. Section 143 of the Social Security Contributions and Benefits Act 1992 sets out the meaning of "person responsible for a child". One of the necessary conditions is that the child is living with that person in that week. Various days of absence can be disregarded in determining whether the child is living with that person. Subsection (3)(c) prescribes that such days shall include days in which, in prescribed circumstances, the child is in residential accommodation following arrangements made under statutes specified in the current legislation, one being the Social Work (Scotland) Act 1968.

836. The intended effect of section 143(3)(c) and the regulation made under that power is to provide for Child Benefit to be payable in respect of children who live away from home, in residential accommodation, solely on account of a physical or mental illness or disability. The introduction of the Children (Scotland) Act 1995, which repealed parts of the Social Work (Scotland) Act 1968, had the unintended effect of excluding payment of Child Benefit in respect of a small group of disabled children in Scotland. This clause restores the legislative basis for payments of Child Benefit in respect of this group, which are currently being made on an extra statutory basis.

SOCIAL SECURITY ADVISORY COMMITTEE

Clause 72: Social Security Advisory Committee

837. The Social Security Advisory Committee (SSAC) gives advice and assistance to the Secretary of State in connection with his duties under the "relevant enactments". This clause amends section 170 of the Social Security Act 1992 and inserts additional provisions to be treated as relevant enactments for the purposes of scrutiny by SSAC. The same applies in Northern Ireland under provisions relating to "relevant Northern Ireland enactments".

838. Subsection (1) lists those provisions in the Bill that shall now be inserted into the Social Security Administration Act 1992 and treated as "relevant enactments" for the purposes of scrutiny by SSAC.

839. Subsection (2) provides for those provisions to be replicated in Northern Ireland, and therefore treated as relevant Northern Ireland enactments for the purposes of SSAC scrutiny.

PART IV: NATIONAL INSURANCE CONTRIBUTIONS

BACKGROUND

The current position

840. Earnings-related National Insurance contributions (NICs) are paid by both employees and employers on all cash earnings which reach a set amount. These contributions go into the National Insurance Fund to pay for contributory benefits. However, employees pay no NICs on most non-cash earnings (payments, or benefits, in kind). A fuller account of the NICs system, is included in the glossary.

841. Since 1991, Class 1A NICs, which are an employer-only charge, have been liable on car and fuel benefits provided for the employee. But most other non-cash benefits are provided NIC-free. Some benefits, which are readily convertible assets, such as shares or gold bars, as well as non-cash vouchers, are already subject to Class 1 NICs paid by both employers and employees. Such benefits are set out in Schedules 1A, 1B and 1C to the Contributions Regulations 1979.

842. All benefits in kind are subject to income tax as emoluments either under section 19 or Part V of the Income and Corporation Taxes Act 1988 (ICTA).

Recent developments

843. The Chancellor announced in the March 1999 Budget that all taxable benefits in kind not already subject to NICs would become liable to a Class 1A charge from April 2000. This will align more closely the tax and NICs treatment of provided benefits such as private medical insurance, beneficial loans or assets transferred to the employee.

844. This will implement a recommendation of the Task Force chaired by Martin Taylor, ex-Chief Executive of Barclays plc., in the report The Modernisation of Britain's Tax and Benefit System.

The measures in the Bill

845. The new measures contain provisions which are intended to make all non-cash earnings received by directors or employees earning £8,500 or more per year subject to Class 1A (employer-only) NICs, unless they are already subject to Class 1 NICs, or Class 1B NICs (if they are minor benefits which are included in a PAYE Settlement Agreement, an administrative arrangement under which an employer accounts directly to the Revenue for tax and NICs on minor or irregular payments).

846. The extended Class 1A charge follows the shape of the existing charge on car and fuel benefits. The Class 1A due will be calculated using the valuation figures already required for tax purposes which an employer enters on a P11D form - a report to the Inland Revenue of the value of benefits in kind provided throughout the tax year* to each employee. This is intended to keep extra reporting requirements to a minimum.

847. The new measures provide powers for Treasury Ministers to make regulations to except particular items or reduce the Class 1A liability where appropriate. The clauses also give powers to prescribe penalties for failure to pay Class 1A NICs correctly and other matters, such as dates and forms of records, surrounding collection of the NICs.

848. The Bill also includes measures to move the liability for Class 1A NICs on benefits in kind provided by a third party from the direct employer of the recipient to the third party provider. Typically, this would arise where a manufacturer wishes to reward or incentivise the salespeople in retail outlets that sell his products, for example by providing them with holidays, goods or sometimes non-cash vouchers. The staff are likely to be employed by the retailer, not the manufacturer. Currently, the employer is liable for NICs on these benefits, possibly without his knowledge, and without any involvement in their provision. In general, the third parties have indicated their willingness to meet NICs liabilities of providing incentive awards, as they can do for tax.

849. The measures in the Bill provide a mechanism to do this, by moving the liability for the Class 1A NICs on provided benefits and any related tax to that third party. This new liability is to be a voluntary commitment for the tax year 2000-2001. If the third party chooses not to pay the Class 1A NICs, the liability will rest with the employer, but in future tax years, the liability will be compulsory for the third party.

850. To remove all need for the employer to be involved, regulations that will come into force on 6 April 2000 will make non-cash vouchers that are provided by a third party liable to Class 1A NICs, rather than Class 1 NICs as at present (SI 2000/761 in GB and 2000/758 in Northern Ireland).

851. A further provision allows any emolument received from employed earner's employment which is subject to Schedule E tax also to be treated as earnings for National Insurance. This is intended to be used to clarify the NICs treatment of items bought using a company credit card or similar form of purchase. It could also be used for tax/NICs alignment, such as to introduce the NICs regulations relating to the proposed new all-employee share plan.

 
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Prepared: 6 April 2000