House of Lords - Explanatory Note
Social Security Contributions (Transfer Of Functions, Etc.) Bill [H.L.] [H.L.] - continued          House of Lords

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Clause 22: further transfers

204.     Normally transfers of functions between Government Departments are done by an Order in Council made under powers in the Ministers of the Crown Act 1975, rather than through primary legislation. Experience of these operational and policy transfers may suggest that further adjustments of the DSS/ Inland Revenue boundary are sensible. Clause 22 provides a mechanism for making these adjustments in a similar manner to Orders made under the Ministers of the Crown Act, rather than by returning to Parliament with another Bill.

205.     Subsection (1) creates the power to transfer functions by Order in Council. The transfer can be from the Secretary of State to the Inland Revenue or vice versa. No power is provided to transfer responsibilities between the Secretary of State and the Treasury since this can already be achieved by an Order under the Ministers of the Crown Act 1975. Subsection (2) sets the limits on the scope of such Orders to ensure that clause 22 does not provide a general power to transfer functions between the Inland Revenue, the Treasury and the Department of Social Security. These Orders can transfer functions which relate to contributions and the NIF (other than those relating to collection function under section 1(1) CBA, or control and management of the NIF as set out in section 161 SSAA), SSP, SMP and Part III of the PSA. Under subsection (1)(d)(i) these Orders can transfer decision-making responsibilities relating to the transferred functions. Under subsection (1)(d)(ii) these Orders can transfer the mechanism for deciding on these issues between the provisions of Part II of this Bill - which allows for decisions to be made by the tax appeal Commissioners - and Chapter II of Part I of the SSA - which allows for decisions by the unified appeal tribunals.

206.     Subsection (3) sets out which decisions may be affected by an Order.

207.     Subsection (4) allows for consequential or transitional measures in an Order, including on contractual and other legal issues.

208.     Subsection (5) provides for a "certificate of transferred property" procedure as in clause 20 (3).

209.     Subsection (6) interprets how the power applies in respect of the equivalent Northern Ireland legislation.

Clause 23: Northern Ireland

210.     This clause deals with making corresponding provision in Northern Ireland. National Insurance contributions in Northern Ireland are collected by the Contributions Unit of the Northern Ireland Social Security Agency of DHSS(NI), although in practice much of the work is done on behalf of the Unit by the Contributions Agency. It is intended that the Contributions Unit should be transferred to the Inland Revenue at the same time as the Contributions Agency is transferred. However, the transfer of contributions functions in Northern Ireland needs separate provision because of the provisions of the Northern Ireland Act 1998 excepting NICs and related matters, such as National Insurance rebates to pension schemes, from the powers of the Northern Ireland Assembly. It is expected that an Order in Council under that Act will temporarily transfer responsibility NICs in Northern Ireland from the DHSS(NI) to the Secretary of State for Social Security. This temporary transfer will cover the period between the date the Northern Ireland Assembly becomes effective and the transfers under this Bill.

211.     Clause 23 of this Bill then provides for the onward transfer of functions to the Inland Revenue. This is to be made by Order in Council.

212.     This Order is likely largely to replicate the provisions of this Bill, but for Northern Ireland legislation. Subsection (2)(c) allows the Order to contain consequential, transitional or other modifications of enactments. It also permits the transfer of civil servants from the Northern Ireland Civil Service to the Home Civil Service.

213.     Clause 23 again provides a "certificate of transfer of property" procedure.

Clause 24: orders and regulations

214.     This clause provides that orders and regulations are to be made by statutory instrument subject to the negative resolution procedure. Subsections (3) to (5) follow other social security legislation (e.g. section 189 (4) and (5) SSAA 1992; section 175 (3) and (4) CBA1992) in making clear that regulations may make different provision within the classes to which the specific regulation-making power relates, and may make incidental or transitional provisions.

Clause 25: savings, transitional provisions, consequential amendments and repeals

215.     The clause introduces Schedules 7, 8 and 9.

Schedule 7: Savings and transitional provisions

216.     Paragraph 1 provides that

  • any actions commenced by the Contributions Agency on behalf of the Secretary of State prior to the day appointed for the operational transfer but still in train will remain valid after the transfers to the Inland Revenue and the Treasury.

  • any appointment, authority, decision, approval or consent given in relation to any matter being transferred to the Inland Revenue or the Treasury prior to the day appointed for the operational transfer remains valid and is to be treated as if it had been made by the Inland Revenue or the Treasury.

  • any secondary legislation or other document made before the transfer shall continue to have effect. References to the Secretary of State are to be treated as references to the Inland Revenue; and references to DSS or its officers as references to the Inland Revenue and its officers.

The drafting here follows precedents in Orders made under the Ministers of the Crown Act 1975.

217.     Paragraph 2 relates to the various documents and forms which are in use by the Contributions Agency which will have been printed and be ready for use as Inland Revenue forms from the day appointed for the operational transfer. Given the scale of the reprinting task, it ensures that if an old form has to be used any legal consequences of the form cannot be challenged purely on procedural grounds. To do so paragraph 2 allows any references to the Secretary of State or any officer of DSS to be construed as far as necessary as references to the Inland Revenue or as officers of the Inland Revenue.

218.     Paragraph 3 provides for the Inland Revenue to account for NICs to the DSS in any gap between the operational and policy transfer dates.

219.     Paragraph 4 provides that regulations made under section 9(2) of the Social Security Contributions and Benefits Act 1992 must be made by the Treasury instead of the Secretary of State for Social Security if paragraph 9 of Schedule 3 to this Bill comes into effect before section 51(4) of the Social Security Act 1998.

Schedule 8: further consequential amendments

220.     This Schedule makes consequential amendments to the Debtors (Scotland) Act 1987 and the Social Security Contributions and Benefits Act 1992.

Schedule 9: Repeals and revocations

221.     This Schedule sets out the various legislation which is being repealed or revoked as a result of the Bill.

    Part I lists the repeals to other Acts which take effect on such days as may be appointed.

    Part II shows the regulations which are to be revoked on such days as may be appointed.

Clause 26: Interpretation

222.     Clause 26 sets out two basic definitions used throughout the Bill.

Clause 27: Short title, commencement and extent

223.     This clause sets out which provisions come into force on:

  • Royal Assent, so that secondary legislation under this Bill's powers may be made before the day appointed for the operational transfer;

  • an appointed day.

224.     The Bill provides for multiple appointed days. The expectation is that operational transfer will occur in April 1999 and that the main policy transfer will occur on a single date, not before 1 April 1999.

225.     The commencement order or orders may contain transitional provisions.

226.     Since this Bill principally amends legislation only extending to Great Britain, its territorial coverage is mostly limited to Great Britain. Exceptions primarily relate to amendments to United Kingdom-wide tax law.


227.     The Bill has no impact on revenues raised by NICs or income tax, or on social security benefit expenditure. The Bill deals principally with the administrative transfer of functions from the Secretary of State for Social Security to the Inland Revenue and the Treasury. The administrative expenses of the Contributions Agency and those incurred in discharging policy functions in relation to NICs are currently met from the NIF; and will continue to be so after the transfer. The financial implication of the Bill is therefore to transfer existing expenditure between Departments rather than to lead to any overall increase or decrease in costs.

228.     There will be costs in preparing for the transfer - training staff, making the necessary amendments to Information Technology systems and so on. The additional, transitional, cost of transferring the Contributions Agency to the Inland Revenue is estimated at £16.7 million in 1998/99, £17.1 million in 1999/00 and £4.8 million in 2000/01. Apart from policy development costs of £0.3 million the remaining costs in 1998/99 prior to Royal Assent are specifically authorised for payment from the Consolidated Fund by section 78 of the Social Security Act 1998. It is estimated that expenses of £14.8 million will be incurred under section 78. Early offsetting savings are estimated at £0.8 million in 2000/01 rising to £3.3 million in 2002/03 and thereafter. Further significant savings are expected in the medium to long term.

229.     Setting up the new decisions and appeals process under Part II of the Bill is not expected to have any net impact on public finances. The expected costs of setting up the new Unified Appeals Tribunals under the SSA included provision for the costs of appeals relating to SSP, SMP and contributions matters. As a result of Part II, broadly £0.5 million of these costs will be incurred instead by the Lord Chancellor's Department (which funds the tax appeal Commissioners).

230.     Clause 19 makes specific accounting corrections to section 177 of PSA and section 172 of the Pension Schemes (Northern Ireland) Act 1993 governing the financing of National Insurance rebates to money purchase schemes. For the financial year 1998/99 this has the effect of authorising the payment of around £82 million in respect of these rebates from the NIF into the Consolidated Fund, corresponding to the expenditure paid from the Consolidated Fund during 1998/99. After Royal Assent, and for subsequent years, the rebates will be paid from the NIF. Although in theory this imposes a new charge on the National Insurance Fund, the intention has always been for the rebates to be funded from the NIF. Indeed the Government Actuary has always taken account of these rebates in his forecasts for the Fund, and until the structural changes were made the rebates were classed as revenue forgone from the Fund.


231.     It is estimated that as a direct result of the transfer there could be a saving of around 200 jobs countrywide in the combined organisation over the first two years.


232.     The Bill does not impose any compliance costs on business, other than any need to change any references in future correspondence to read "Inland Revenue" rather than "Contributions Agency". The Bill is expected to ease burdens on businesses, charities and the voluntary sector by enabling them to sort out their tax and contributions through a single organisation; these benefits will emerge over time after the initial transfer takes place. No regulatory impact assessment is therefore required.


233.     A number of the provisions of the Bill (principally those conferring, or concerning, powers to make subordinate legislation) will come into force on Royal Assent. The power correcting the defect in the legislation governing the financing of national insurance rebates also comes into force on Royal Assent. The remaining provisions are to come into effect on one or more days appointed by the Secretary of State by order.


234.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The statement has to be made before Second Reading. On 25 November 1998 Lady Hollis of Heigham, the Parliamentary Under-Secretary for Social Security, made the following statement:

In my view the provisions of the Social Security Contributions (Transfer of Functions, etc.) Bill are compatible with the Convention rights.

Annex A & B


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Prepared: 27 november 1998