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SOCIAL SECURITY BILL

EXPLANATORY AND FINANCIAL MEMORANDUM

INTRODUCTION
  1. This Explanatory and Financial Memorandum relates to the Social Security Bill. It has been prepared by the Department for Social Development in order to assist the reader in understanding the Bill and to help inform debate on it. It does not form part of the Bill and has not been endorsed by the Assembly.
  2. The Memorandum needs to be read in conjunction with the Bill. It does not, and is not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause (or Schedule) does not seem to require any explanation or comment, none is given.
    3. BACKGROUND AND POLICY OBJECTIVES
  3. The Bill makes provision for Northern Ireland corresponding to the social security provisions in the Employment Act 2002 (c. 22). It is a further step in the programme for reform which began with the Social Security (Northern Ireland) Order 1998 and continued with the Welfare Reform and Pensions (Northern Ireland) Order 1999, the Child Support, Pensions and Social Security Act (Northern Ireland) 2000 and the Social Security Fraud Act (Northern Ireland) 2001.
  4. The Bill makes changes to Statutory Maternity Pay (SMP) and Maternity Allowance (MA), which were announced by the Chancellor in his 2001 Budget; these changes will come into effect in April 2003. It also introduces work-focused interviews for partners of people claiming a range of benefits and makes provision for the exchange of information between the Department for Social Development and the Northern Ireland Housing Executive.
    5. CONSULTATION
  5. The maternity changes were announced following responses to the Green Paper "Work and Parents: Competitiveness and Choice" issued in Great Britain by the Department of Trade and Industry in May 2001. No separate Northern Ireland consultation has taken place, but the responses to the consultation were taken into account when developing the social security provisions of the Employment Bill and consequently are reflected in this Bill.
    6. OVERVIEW
  6. The Bill contains 10 clauses and 2 Schedules. It makes amendments to:
COMMENTARY ON CLAUSES

Clause 1: Maternity pay period

Clause 1 amends section 161 of the Contributions and Benefits Act by extending the period for which SMP is payable from 18 to 26 weeks.

Because section 35(2) of the Contributions and Benefits Act links the MA period to section 161, the period for which MA is payable is also extended.

Clause 2: Rate of statutory maternity pay

Clause 2 replaces section 162 of the Contributions and Benefits Act, which sets out the rate of SMP.

In the new section, subsection (1) provides that, as at present, a woman shall be paid at the earnings-related rate (which is 90% of her average weekly earnings) for the first six weeks for which it is payable. But this rate is no longer underpinned to the flat rate. For the remaining 20 weeks the woman will receive a prescribed standard rate of £100 a week, except where this amount exceeds her earnings-related rate, in which case she will receive the earnings-related rate for the entire period.

The effect of this change means that a woman who earns an average of £200 a week will receive SMP at £180 for the first 6 weeks, then £100 for the following 20 weeks. A woman who earns an average of £90 a week will receive £81 a week for the whole period because the earnings-related rate is less than the flat rate.

New subsection (2) provides that, as at present, the earnings-related rate is calculated on the basis of the 8 weeks immediately preceding the 14th week before the expected date of confinement (EDC).

New subsection (3) ensures that, as at present, the standard rate must not be less than the rate of Statutory Sick Pay.

Clause 3: Entitlement to statutory maternity pay

This clause amends section 160 of the Contributions and Benefits Act, which deals with a woman's entitlement to SMP and her employer's liability to pay it.

Clause 4: Rate of maternity allowance

This clause amends section 35A of the Contributions and Benefits Act, which sets out the rate of MA.

Clause 5: Work-focused interviews for partners

Anyone who is a partner of a working age benefit claimant, and who is himself of working age, will be required to take part in a work-focused interview, and where he fails to do so benefit sanctions will apply. This will provide the partner with the opportunity to discuss his skills and experience, the barriers he faces in moving closer to the labour market and the help and support that is available to overcome those barriers. The measure will not place any requirement on a partner beyond taking part in interviews. There will be no requirement to attend courses or seek work.

Clause 5 inserts new section 2AA into the Administration Act. This section builds on section 2A of the Administration Act, which was inserted by Article 54 of the Welfare Reform and Pensions (Northern Ireland) Order 1999, and which introduced the requirement for certain benefit claimants, including lone parents, to attend work-focused interviews. New section 2AA sets out both the circumstances in which a partner of a benefit claimant may be required to take part in a work-focused interview and the consequences for the benefit claimant if that partner fails to take part in such an interview.

The work-focused interview will concentrate on job potential and provide the partner with access to a wide range of help and information on work, benefits and services such as childcare. It is intended to encourage the partner to take further steps towards labour market participation. However, any action a partner may choose to take, beyond taking part in the interview, will be entirely voluntary.

New section 2AA allows regulations made by the Department to prescribe that where a higher rate of a specified benefit is payable to a person by reference to his partner, then the claimant's benefit may be reduced by way of a sanction if the partner fails to take part in a work-focused interview when requested to do so.

Allowing this requirement to be set out in regulations will permit adjustments to be made to the arrangements in the light of experience of work-focused interviews in general.

Subsection (1) allows the Department to make regulations requiring partners of claimants for certain benefits to take part in work-focused interviews in certain circumstances. Once a claimant's entitlement to benefit has been established, his partner may be required to take part in a work-focused interview. If the partner does not take part in the interview without good cause when required to do so a benefit sanction will apply. Given that the majority of jobseekers find work within the first six months of a claim, it is initially intended that a partner will be required to attend an interview at the six-month stage of a claim. It is considered that this will help focus resources on those partners who are thought to need more help in finding work. However, the timing of the interviews will be further considered in the light of experience of work-focused interviews for benefit claimants.

Subsection (2) lists the benefits to which the partner work-focused interview requirements will apply. These are IS, JSA (except joint-claim JSA), IB, SDA and ICA.

Subsection (3) sets out the circumstances in which a higher rate of a benefit is deemed to be payable to a person by reference to his partner, thus making the partner subject to the requirement to take part in an interview.

Subsections (4) to (6) contain the regulation-making powers referred to in subsection (1).

Subsection (4) deals with a wide range of matters.

Subsection (5) deals with the calculation and application of any reduction in benefit.

Subsection (6) enables regulations to prescribe the circumstances in which the requirement for a partner to take part in a work-focused interview is not to be applied. This is so that the interview can be waived or deferred until a later date if that is necessary or appropriate in any case. There will be certain people for whom a work-focused interview will not be appropriate. There is no intention to set out in regulations the categories of people for whom an interview will not be appropriate. Such decisions will be made on a case by case basis, depending on the circumstances of the individual.

Subsection (7) defines the terms used in the section. A "work-focused interview" is the interview in which almost all partners of claimants of the benefits listed in subsection (2) will be asked to take part. The purpose of such an interview is to assist or encourage a partner to improve his employment prospects over time and to identify and overcome any barriers to work through training or specialist support so that where appropriate he can move towards education or taking up employment, whether paid or unpaid. To this end an interview may cover such areas as previous employment records, capacity to undertake work, the in-house financial support available and help in areas such as childcare, housing and training.

Clause 6: Use of information for, or relating to, employment and training

Clause 6 amends sections 116C and 116D of the Administration Act which govern the supply of information to and from the Department, the Secretary of State for Work and Pensions and the Northern Ireland Housing Executive.

Clause 6(2) amends section 116C of the Administration Act to include specific references to child support and employment or training in relation to the information which the Department must supply to the Northern Ireland Housing Executive.

Subsection (3) makes a similar amendment to section 116D in relation to the information which the Northern Ireland Housing Executive must supply to the Department.

Subsection (4) amends the definition of the Department by extending the sections of the Administration Act in which a reference to the Department includes a reference to the Department for Employment and Learning.

Clause 7: Amendment of the Deregulation and Contracting Out (Northern Ireland) Order 1996

Clause 7 makes a series of amendments to Article 17 of the Deregulation Order.

Subsection (2) amends paragraph (1) by substituting for the reference to Chapter I of Part I of the Deregulation and Contracting Out Act 1994 a reference to section 1 of the Regulatory Reform Act 2001. This is consequential on the amendments made to the Deregulation and Contracting Out Act 1994 by the Regulatory Reform Act 2001.

Subsection (3) adds the Child Support, Pensions and Social Security Act 2000 and the Social Security Fraud Act 2001 to the list of Great Britain social security legislation in paragraph (2).

Subsection (4) substitutes for paragraph (4) provision dealing with Assembly control of orders made under Article 17.

Clause 8: Minor and consequential amendments and repeals

Clause 8 introduces Schedule 1, which contains a number of minor and consequential amendments and Schedule 2, which contains repeals.

Paragraph 1 of Schedule 1 introduces amendments to the Contributions and Benefits Act made by paragraphs 2 to 4.

Paragraph 2 amends section 35 (state maternity allowance) by:

Paragraph 3 inserts definitions of "the maternity allowance threshold" and "specified" into section 35A (appropriate rate of maternity allowance).

Paragraph 4 amends section 160 (statutory maternity pay - entitlement and liability to pay) by inserting a reference to section 162(1) in subsection (10)(b). This amendment is consequential on the substitution of section 162 by clause 2.

Paragraph 5 introduces amendments to the Administration Act made by paragraphs 6 to 9.

Paragraph 6 amends section 2B by inserting a definition of "relevant decision" and references consequential on the insertion of new section 2AA by clause 5.

Paragraph 7 amends section 2C by inserting references consequential on the insertion of new section 2AA by clause 5.

Paragraph 8 amends section 5A by inserting references consequential on the amendments made by clause 6.

Paragraph 9 amends section 166 to provide that the first regulations to be made under section 2AA shall be subject to the confirmatory procedure.

Paragraphs 10 and 11 make minor amendments to the Social Security (Northern Ireland) Order 1998 and the Welfare Reform and Pensions (Northern Ireland) Order 1999 respectively consequential on the insertion of section 2AA into the Administration Act.

Clause 9: Commencement

The Bill introduces a number of measures, not all of which will come into operation at the same time.

Subsection (1) provides for the provisions listed to be brought into operation, possibly on different days and for different purposes, by order made by the Department. Those provisions which are not specified come into operation on Royal Assent.

Subsection (2) allows an order under subsection (1) to make such transitional provisions and savings as the Department may consider necessary.

Subsection (3) provides for regulations, subject to negative resolution, to make such transitional provisions and savings necessary for the purposes of, or connected with, the coming into operation of clause 2 or 4.

Clause 10: Short title and interpretation

Clause 10 sets out the title of the Bill and contains definitions of various terms and expressions used in the Bill.

FINANCIAL EFFECTS OF THE BILL
  1. The costs to the Exchequer of the SMP provisions are estimated to be £8.8 million in the financial year 2003-04. This cost assumes that 85% of eligible women take advantage of the extended period. It is estimated that around 90% of SMP recipients will benefit in full from the new measures so that each woman in comparison with the level of SMP currently paid will be entitled to £1253.60 more by way of SMP payments.
  2. Initial estimates indicate that the cost of the introduction of work-focused interviews for partners is likely to be less than £1 million. The impact on benefit expenditure of increased numbers of partners of benefit claimants taking up work cannot be estimated at this stage. It is impossible to predict such behavioural changes with any certainty until the new system has been operated and evaluated.
  3. It is estimated that there will be no significant financial effects from the use of training and employment information provisions.
    4. EFFECTS ON EQUAL OPPORTUNITY
  4. The Bill will not unlawfully, unfairly or unjustifiably discriminate, directly or indirectly, against specified sections of the community.
    5. HUMAN RIGHTS ISSUES
  5. The provisions of the Bill are compatible with the provisions of the Human Rights Act 1998.
    6. EQUALITY IMPACT ASSESSMENT
  6. The provisions of the Bill have been considered under the nine categories set out in section 75 of the Northern Ireland Act 1998.
  1. In these circumstances it is not possible to carry out an equality impact assessment. It will be necessary to assess the impact of this provision after it has been in place for some time.

    2. SUMMARY OF THE REGULATORY APPRAISAL
  2. The only measures in the Bill which will have any effect on business are the changes to SMP. The flat rate weekly payment will increase to £100 or 90% of the woman's average weekly earnings, whichever is the lesser, and the maximum payment period will increase from 18 to 26 weeks. The notice that a woman must normally give her employer before receiving SMP will increase from 21 to 28 days.
  3. The aim of these measures is to make it easier for women to achieve a better balance between paid work and family life.
  4. There are direct benefits to mothers in the form of payments made to them of around £8 million per year. The benefits for an individual mother will depend on her individual circumstances. The benefit of £100 a week is above the earnings threshold for National Insurance contributions. Recipients will therefore have to pay National Insurance contributions. This will benefit the National Insurance Fund, each mother paying £1.35 per week.
  5. It is estimated that the increase in rate of SMP will cost larger employers in the region of £0.5 million as they are only able to claim 92% of the payments to mothers whereas small employers are eligible to reclaim the total amount of the payments. Some employers, especially larger ones, will have to change their payroll systems. The costs of this change are unlikely to be significant because many employers use standard software packages which are routinely up-dated.

    6.
    LEGISLATIVE COMPETENCE
  6. At Introduction the Minister for Social Development had made the following statement under section 9 of the Northern Ireland Act 1998:

    "In my view the Social Security Bill would be within the legislative competence of the Northern Ireland Assembly."

DEFINITIONS