SUBORDINATE LEGISLATION (CONFIRMATION AND VALIDATION) BILL (NO 3) Social Security (Rates of Benefits and Allowances) Order 2011 (SR 2011/16)

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1 L '... i2 l ~,'!:. '.; MINISTRY OF SOCIAL DEVELOPMENT Te Manatü~ Whakahiato Ora Ministry of Social Development, Bowen State Building, Bowen Street, Wellington 6011, PO Box 1556, Wellington 6140 Facsimile: July 2011 UNCLASSIFIED Mr Charles Chauvel, MP Chairperson Regulation Review Committee Room Parliamentary Library Parliamentary Buildings WELLINGTON By amanda.wall@parliament.govt.nz Dear Mr Chauvel SUBORDINATE LEGISLATION (CONFIRMATION AND VALIDATION) BILL (NO 3) On 14 July 2011, the Clerk of the Committee invited the Ministry of Social Development (the Ministry) to make a submission on why confirmation and validation of an order administered by the Ministry is warranted. This order is the: Social Security (Rates of Benefits and Allowances) Order 2011 (SR 2011/16) The Clerk also requested that the Ministry advise the reason for originally including a confirmation and validation requirement in the empowering legislation. The Ministry's submission is attached as an appendix to this letter. The Ministry does not wish to be heard on this submission but will be happy to appear before the Committee or supply any further information if required.~f Rupert Ablett Ha pso Chief Legal Ad ~isor, child, youth and family y~. ~ familya communityservices tamaiti, terangatahi, ratonga d whānau, d hapori taeatuki tewhānau ~dl~ ~TUDYLINK Hoto Akoranga ~ ::Work and Income Te Hiranga Tangata

2 Appendix Ministry of Social Development's Submission on the reasons for validating the Social Security (Rates of Benefits and Allowances) Order 2011 (SR 2011/16) Back.qround 2011/16) increased the rates of most benefits and pensions to reflect a 3.75% increase in the New Zealand Consumers Price Index (CPI) from the year ending December It made a further supplementary increase to the rates of New Zealand superannuation. The order was made under three provisions: sections 61H and 61HA of the Social Security Act 1964, and section 15 of the New Zealand Superannuation and Retirement Income Act The latter provision applies sections 61H(3) to (6) of the Social Security Act to an Order in Council made under it. Sections 61H(3) and (4) set out the effect of not validating and confirming an order. The New Zealand superannuation adjustments are required to be made as at 1 April in each year under section 15 of the New Zealand Superannuation and Retirement Income Act Section 61 HA of the Social Security Act 1964, as inserted by the Social Security (New Work Tests, Incentives, and Obligations) Amendment Act 2010, makes the same provision for certain benefits. Effect of not validatin,q and confirminq the order Expiry 4 5 Section 61H(3) of the Social Security Act 1964 provides that an Order in Council made under that section expires 12 months after it is laid before the House under the Regulations (Disallowance) Act 1989 unless it is validated and confirmed by an Act of Parliament passed before that date. 2011/16) was laid before the House on 25 February If the order is not validated and confirmed before 25 February 2012 it will expire. Rates of benefits and NZS would revert on that date back to the rates that applied on 31 March This would cause confusion, hardship and inconvenience to people dependent on these payments. It would also cause administrative complexities, and increased costs for the Ministry arising from these complexities as it would need to contact beneficiaries and superannuitants to explain that the rates of their benefits were being reduced and why this was occurring. This in turn would lead to a significant number of enquiries and complaints on the matter. Retrospective invalidation 7 As noted in paragraph 3, the Government is required by law to adjust the rates of New Zealand superannuation and certain benefits as at 1 April in each year. Other adjustments of rates and thresholds will continue to be made by regulation as a matter of convention.

3 /16) will therefore be revoked on 1 April 2012 by another Order in Council that makes those adjustments. Section 61H(4) of the Social Security Act 1964 provides that if an Order in Council is revoked by a subsequent Order in Council made before the close of the 31st day of December in the subsequent calendar year, it is deemed to be invalid in respect of the period it purported to have effect unless it is validated and confirmed by an Act of Parliament passed before that date. This would mean that the recipient of such payments would be liable to repay the Ministry the difference between the increased rates or amounts in the orders and the rates or amounts that applied immediately before they came into force. This would result in financial hardship for many beneficiaries and New Zealand superannuitants and would also cause administrative complexities for the Ministry. Original reason for inclusion of a confirmation and validation req uirement 11 The Regulations Review Committee ("RRC") has also asked why Acts in general, and the Social Security Act 1964 and the New Zealand Superannuation and Retirement Income Act 2001 in particular, provide for subordinate legislation to iapse (expire or be deemed to be revoked) at an identified time unless earlier confirmed by Act of Parliament. 12 The Legislation Advisory Committee ("LAC") identifies the standard controls on the making of regulations, including the ability of the House of Representatives, under the Regulations (Disallowance) Act 1989, to disallow, amend, or replace regulations presented to it. 13 The LAC adds that the additional control of a confirming provision (resulting in lapse unless Parliament confirms the regulations by Act) "may be necessary where the delegated power is a significant one." The desirability of including a confirming provision in the empowering statute should be examined when the power to make the following kinds of regulations is being provided: emergency regulations: regulations imposing a financial charge in the nature of a tax: regulations amending the empowering statute or another statute: regulations that deal with issues of policy under the authority of broad empowering provisions." i 14 Confirmation provisions have been recommended and enacted in recent Bills.2 15 The reason why the Social Security Act 1964 and the New Zealand Superannuation and Retirement Income Act 2001 in particular contain a provision for confirmation by Act appears to be because they provide the power 1 Guidelines on Process & Content of Legislation (2001 ed as amended) at [10.2.2] and Appendix 5. 2 Examples include the Policing Act 2008 s 27 and Schedule 1 (orders amending policing roles), and the Criminal Procedure (Reform and Modernisation) Bill (243 2) cl 383(1)(g) and (h), (3), and (4) and Schedule 1 (regulations adding or removing "category 4 offences"). 2

4 to make regulations that amend the empowering statute, namely by increasing or decreasing the amounts of certain social welfare payments and reductions. 16 Section 61H was inserted into the Social Security Act by the Social Security Amendment Act 1983 against the following background 16.1 The Social Security Act 1964 (and its predecessor, the 1938 Act), provided for amounts prescribed in the Act to be paid for particular benefits; 16.2 Over the years prior to 1983 it had been government policy and practise to review the level of benefits every 6 months in line with increases in the cost of living (ie. per the consumer prices index)3, to increase the rate of benefit paid in line with the review, and then to change the Social Security Act retrospectively; In his 1983 annual report the Controller and Auditor General criticised "The procedure of increasing benefit rates every 6 months without legislative authority and relying on validating legislation later in the same year";~ 16.4 In response the government decided to change the Social Security Act so "that in future increases will be implemented by Order in Council. Every such Order in Council will be laid before Parliament not later than the sixteenth sitting day of Parliament after the day on which the order was made. The new rates will be validated by legislation in the same year, as is done at present";" 16.5 The 1983 Amendment Act permitted "altering the rate of any benefit set out in [the] Schedules" by Order in Council. The Labour opposition opposed this amendment, largely on the basis that the new provision might authorise decreases in benefits The Labour government in 1987 amended section 61H to limit the changes that could be introduced by Order in Council to increases in the rates of benefits and allowances. While the provision has been amended may times since 1987, it has retained this limitation. As currently drafted it can only be used to the advantage of those receiving assistance under 3 Annual Report of the Department of Social Welfare HanSard Reports on the 1983 Amendment Act. An example of this process is the Social Security Amendment (No 2) Act 1980 which was enacted on 21 January 1981 and provided in section 5 that "(1) In respect of the period commencing on the 9th day of January 1980 and ending with the 22nd day of July 1980, the principal Act shall have effect as if each provision of that Act specified in the first column of the First Schedule... had been amended by omitting every expression set out in the second column of that Schedule opposite the reference to that provision, wherever that expression occurs, and substituting in each case the expression set out opposite to it in the third column of that Schedule. (2) This section and the First Schedule... shall be deemed to have come into force on the 9th day of January 1980." 5 Hon VS Young, speaking on the first reading of the Social Security Amendment Bill 1983 (1983 Hansard, 3565) 6 Above n 5,3565 6,

5 the Act and not, for example, to decrease benefits or increase stand down periods. 17 It is noted that the procedure under the Regulations (Disallowance) Act 1989 was not in place at the time of the 1983 amendment to the Social Security Act, nor when section 61H was amended in 1987.