HC Deb 23 February 1988 vol 128 cc272-8

Motion made, and Question proposed, That this House do now adjourn.[Mr. Kenneth Carlisle.]

11.42 pm
Mr. Richard Holt (Langbaurgh)

Imagine the excitement in a household when a woman discovers that there is to be an addition to her family — a first child. She looks forward eagerly to the day when the baby will be born and to the benefits that will go with it. Then she finds that her application for maternity benefit is denied because of two things in juxtaposition: she has changed her job, and her present job is paid monthly rather than weekly. As a consequence, she is disbarred from receiving maternity allowance. Doubtless she will say, "That's a bit rough. I've been working for 10 years and paying my contributions. I deserve it." But she is not thinking like the bureaucrat with the bureaucratic mind, who, like Shylock, reads only about the pound of flesh and not about the blood.

My constituent, whose baby is now 14 months old, wrote to me to say that she has been disbarred from receiving maternity allowance because she does not satisfy the requirements. It appears that the requirements are twofold. First, the person must satisfy the strategic conditions appropriate to the nature of the benefit — retirement, incapacity, unemployment and so on. Disputes on that are determined by an independent adjudicating authority. It is a bit difficult to dispute the fact that someone is pregnant. It is reasonably easy to agree on whether a person is pregnant.

The second criterion is laid down in section 93(1) of the Social Security Act 1975. I cannot for the life of me believe that, whichever party was in power—it happened to be the Labour party—it was the intention of the legislators that a person could be disbarred from an allowance simply because he or she was paid monthly, not weekly.

To be eligible for the maternity allowances, a woman must have paid 50 benefit credits in the year preceding the delivery of the child. But if it so happens that one works for 49 weeks before 1 April, and the fiscal year begins on 6 April, that crucial week between 1 and 6 April becomes the 50th week of one's qualifying period. If, because one becomes a monthly paid employee, one's employer determines that one's credits are not paid over to the state until 30 April, because that is the nature of paying people on a monthly basis, one is deemed not to have paid one's credits for the first week of April or the last week of the preceding fiscal year, or, more crucially, the 50th qualifying week in order to obtain benefit. Therefore, one is disbarred.

That is lost in the mish-mash of bureaucratic language. I am told that the Secretary of State's determination is binding. Once the Secretary of State has made a determination, that is the end of it. I have a copy here of the Secretary of State's determination in the case of my constituent, Mrs. Watson. It says that she does not satisfy the second criterion for maternity allowances. That is cut and dried. At the same time, my constituent is told that she can appeal. How does one appeal when one has been told beforehand that the matter is cut and dried and that the law does not allow for any appeal?

In the past few years, I have had another case involving the Department of Health and Social Security. It started in 1985. A constituent of mine and his wife came to see me because he believed that his retirement benefit had been wrongly calculated, and he asked me to investigate. I did, and I found that the ministerial decision was that the DHSS was right and my constituent was wrong.

Last week, quite out of the blue, nearly three years later, my constituent received a letter and inside was a handsome cheque. On the back of the letter it said that on a point of law my constituent should not have been disqualified from his benefit.

I wonder whether, on a point of law, Mrs. Watson should not have been disqualified from her benefit. I wonder whether anyone has ever tested this in a court of law. I wonder whether that is what Parliament wanted. The logic of section 4(2) of the Social Security Act 1975 is that liability for the payment of national insurance contributions arises at the time earnings are paid, regardless of the period to which they relate.

Let us take the case of the lady who is a retained sales agent in the furniture industry—I know one such person — and is paid on commission only, at quarterly intervals. God help her if she becomes pregnant, because the chances of her getting the 50 weeks in before the three months are pretty negligible. Mathematically, I believe that they are almost impossible. So, by definition and by law, anyone who is over one month in a payment period and who is female and becomes pregnant must lose her benefits and allowances.

I may have approached the issue in a slightly lighthearted manner, but it is quite serious. I cannot believe that this is what was intended when the law was framed, or that the Government really want to leave such a stupid loophole, so that they now find themselves on the hook. I am sure that they wish to heaven that they could find a way out for Mrs. Watson, as they did for Mr. Gaines-Burrill, on a point of law, and send a handsome cheque for four hundred quid to my constituent, who has so far been denied it.

I shall leave the matter to my hon. Friend, to whom I have been writing and talking for several months, both semi-formally and privately over a cup of tea. I know that he is sympathetic; however, I also know that he is only the Minister, and as such has not the powers to rise above the bureaucrats and tell them that they have got it wrong. They will want to wave at him the piece of paper that says, "This is the law, dated 1975." There are two things that my hon. Friend can do, if he is to do anything. He can bring in legislation to change the law, or he can resign. Either way, I want him to tell me how I can face anyone else who comes along to me and says, "I am in a terrible state. I am paid monthly, and I am pregnant."

11.51 pm
The Parliamentary Under-Secretary of State for Health and Social Security (Mr. Michael Portillo)

I congratulate my hon. Friend the Member for Langbaurgh (Mr. Holt) on obtaining tonight's Adjournment debate, and on pursuing the cause of his constituent so assiduously. As he says, he has taken up the matter with me on numerous occasions, both in correspondence and in conversations face to face, and I do not think that any constituent could have had a better advocate than Mrs. Watson has had tonight.

Mrs. Watson has certainly been most unfortunate in not qualifying for maternity allowance, and she has failed to do so by a hair's breadth. She claimed the allowance from her local social security office at Eston on 13 October 1986. To qualify under the rules that then applied, a women needed to satisfy two contribution conditions. The first was that in any one tax year she must actually have paid contributions equivalent to 25 times the lower earnings level at which national insurance contributions become payable, and Mrs. Watson satisfied that condition. The second was that she must in the relevant tax year have paid or been credited with contributions the equivalent of 50 times the lower earnings level. The relevant tax year is governed by the benefit year in which the claim occurs.

In Mrs. Watson's case, the relevant income tax year was 1984–85. Mrs. Watson was unemployed for most of that year. She was signing at the local unemployment office until 30 March 1985: that covers a total of 51 weeks. However, as Mrs. Watson went abroad for two weeks and was not available for work, she received unemployment credits for only 49 weeks. That still leaves one week unaccounted for—the very last week in the tax year.

Mrs. Watson started to work with South Tees health authority on 1 April 1985. Her employer paid wages monthly on the last working day of each month; Mrs. Watson's first pay day was, accordingly, 30 April 1985. As such, liability for contributions would fall in the new tax year, 1985–86. Her employment did not therefore assist her contribution record for 1984–85.

My hon. Friend has argued strongly that, because Mrs. Watson worked for the last week of the 1984–85 tax year, part of the contribution paid on 30 April 1985 should be reallocated to that year. I perfectly understand his reasoning, but unfortunately the legislation does not work in that way. Legislation cannot just be set aside in quite the way that my hon. Friend might like.

Liability for the payment of national insurance contributions arises at the time earnings are paid, regardless of the period to which they relate, as my hon. Friend accurately repeated. The extent of the liability is then determined by the interval at which the earnings are paid, known as the "earnings period". Thus, if, like Mrs. Watson, a person is paid regularly at monthly intervals, contributions are calculated by reference to a monthly earnings period and liability arises only on the date on which the earnings are actually paid.

There are a number of reasons for adopting that procedure. It evens out the liability for contributions, ensuring that, for a monthly-paid employee, there will be 12 payments of contributions in a year. More importantly, to ask employers to calculate contributions over split periods would impose a real burden on them which could not be justified for the handful of employees who might benefit from it.

In passing, I advise my hon. Friend that, whereas Mrs. Watson has been unlucky in this case and has fallen just short of a contribution record for a year, of course the way in which the contributions fall might in another case have helped her to make up the contributions in the following year if she had been deficient. One can fall either side of that line.

All this means, of course, that Mrs. Watson's contribution record for 1984–85 was 49 credits and she was one short of satisfying the contribution tests and qualifying for maternity allowance. I fully accept my hon. Friend's comment that, had she delayed starting work by one week, she would almost certainly have been entitled to a further unemployment credit and hence satisfied the test. It is, of course, an inevitable consequence that wherever one draws the line, someone may fall the wrong side of it.

My hon. Friend may feel that Mrs. Watson should have been better advised about this situation, but of course, that would have meant predicting that 18 months later she was likely to become pregnant and would seek to draw maternity allowance. To recognise the significance of the missing credit 18 months before is not a realistic proposition.

As my hon. Friend knows, Mrs. Watson appealed against the adjudication officer's decision disallowing her maternity allowance. By law, questions relating to contribution conditions are reserved for determination by the Secretary of State, although in practice those decisions are given through specially authorised officers of the Department. Mrs. Watson subsequently applied for a formal decision from the Secretary of State regarding satisfaction of the condition for 1984–85. All aspects relevant to the second contribution test were considered afresh.

In coming to a decision, the officer for the Secretary of State is strictly bound by the provisions of the Social Security Act and regulations. He has no power to waive or relax those provisions in any circumstances or in any particular case. The decision was that Mrs. Watson did not satisfy the second contribution condition.

However, it was open to Mrs. Watson to appeal to the appeal tribunal, which she did. As a matter of fact, it was just this morning that the appeal tribunal heard the case and gave the decision that there was no title to maternity allowance.

The combination of circumstances faced by Mrs. Watson was unusual. I reassure my hon. Friend that in 1986 there were 350,000 successful maternity allowance claims, so he can put the case into context.

I now want to make the important point that, from April 1987, the old rules that applied to Mrs. Watson have been scrapped. My hon. Friend called on me a moment ago to do something about this and I think that at one point he invited me to resign, so I assure him that the rules have already been scrapped. Instead, we have today statutory maternity pay, paid by the employer. We have also changed the rules for maternity allowance, which may still be payable where there is no entitlement to statutory maternity pay.

Under the new provisions, an employer is required to pay statutory maternity pay to an employee who has worked for him for at least six months up to and including the 15th week before her baby is due and whose average weekly earnings in the last eight weeks of that period are above the lower earnings limit — currently £39. If a woman does not qualify for statutory maternity pay, perhaps because she has recently changed jobs, she will be entitled to maternity allowance providing she has worked and paid full-rate contributions in at least 26 of the 52 weeks ending with the 15th week before the baby is due: in other words, a recent record of being in employment, quite different from the more distant record of contributions credited—the position that Mrs. Watson was trying to satisfy.

The distant reference period for qualification, which applied to Mrs. Watson's case, is no longer relevant today. Therefore, she is doubly unfortunate in that she failed narrowly to satisfy the former test and, if her baby had been due a few months later, she would have been eligible under the new rules. I hope that my hon. Friend does not consider that I am rubbing salt into the wound by telling him that if she were in a similar position today she would undoubtedly qualify either for statutory maternity pay or for maternity allowance. I am sorry that I am only able to give that disappointing answer to my hon. Friend, although I believe that he will be happy to know that the rules have been changed.

Let me say a word about the case of Mr. Gaines-Burrill. My hon. Friend has written to me about this matter and I owe him a response in due course. Mr. Gaines-Burrill claimed a dependency increase for his wife in January 1985 following his retirement. At that time, the adjudication officer disallowed the dependency claim on the grounds that Mrs. Gaines-Burrill was in receipt of an occupational pension of £85 per week that could be treated as earnings and that she was not to be regarded as dependent upon her husband. The adjudicating authorities at that time were satisfied that this decision was correct in law.

A social security commissioner's decision of June 1987 disturbed that view. The commissioner held that for certain benefits, including retirement pension, an occupational pension can be treated as earnings only if the dependant receiving it was at the same time engaged in employment. We were then faced with the problem that an estimated 1,700 past claims, similar to that of Mr. Gaines-Burrill, had been wrongly decided in the period between November 1984 and June 1987.

All practical steps were taken to identify the wrongly decided cases from departmental records. Mr. Gaines-Burrill was one of those identified and the earlier wrong decision of January 1985 was referred back to the adjudication officer for a revised decision. The adjudication officer's revised decision, following the social security commissioner's decision, was notified to Mr. Gaines-Burrill and at the same time arrears for the maximum period of 12 months allowed by the law were paid into his bank. Unfortunately, the notification of the decision was not sent to Mr. Gaines-Burrill until a week after he had received his arrears.

Mr. Holt

I am an innocent who believes that the law is the law. If the Department made a mistake in law according to the commissioner, and therefore had to pay the back pay, how can that total amount of back pay be negated to a maximum of 12 months by a subsequent element of law? Which law predominates—a law that says that a mistake was made and therefore that the total amount of money should have been paid or the overrider that says a year is a maximum?

In that case, if the adjudicating officer had not pulled his finger out and had not woken up for six years, Mr. and Mrs. Gaines-Burrill would still only have the benefit for one year and would have lost the benefit of five years. As it is, they have lost the benefit of 22 months and I do not see that there is anything fair in that. I should like that explained.

Mr. Portillo

I was coming to precisely that.

The Government believe that the commissioner's decision introduces an inconsistency into the law by treating a substantial occupational pension as though it were not earnings for the purpose of determining whether a person is dependent. In the Social Security Bill that is currently being considered in another place, we seek powers to reintroduce the consistency until the commissioner's decision is generally understood and applied.

What I am about to say is a matter of speculation, but the Government's view of the law as we now understand it, following the social security commissioner's decision, is that the law is so inconsistent that that must be changed. It does not make sense to us that one should regard some earnings as earnings but disregard an occupational pension. A person with an occupational pension of £85 cannot be regarded as being dependent on her husband. Although this is speculation, if the Government had become aware, before the social security commissioner's decision, that the law was as it has now turned out to be, we would probably have sought to put the law right earlier.

That is why it was right that, last year, we took powers to limit to 12 months the arrears payable in cases where an adjudication officer had decided a case in line with what was thought to be the law, but where that view was subsequently overturned by a commissioner's decision on a point of law. Otherwise, claimants would receive several years of benefit in respect of a matter which neither the Government nor Parliament had intended to be the norm and which had not been dealt with because the social security commissioner had not yet reached a decision. It has always been understood to be something quite different.

I shall write to my hon. Friend the Member for Langbaurgh about the case of Mr. Gaines-Burrill, but I hope that the debate has given him an opportunity to understand the matter.

Question put and agreed to.

Adjourned accordingly at five minutes past Twelve o'clock.

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