Welfare Reform and Work Act 2016

Commentary on provisions of Act

Section 1: Full employment reporting obligation

71. The section places a duty on the Secretary of State to produce an annual report on the progress towards full employment during this Parliament. The first annual report will set out how full employment is to be interpreted for these purposes, using measures which best reflect the labour market.

72. Subsection (2) provides that this section is repealed on the date of the first dissolution of Parliament after this section comes into force.

Section 2: Apprenticeships reporting obligation

73. The Government has set a target for three million apprenticeships to be started in England during this Parliament. This section requires the Secretary of State to report on progress made towards that target. The section specifies five reporting periods to cover the entire period beginning with 1 May 2015 and ending with 31 March 2020. Information must be published within nine months of the end of each reporting period.

74. The Secretary of State must lay a report in Parliament for each reporting period. The reports will include or reference statistical information about the progress made in the reporting period towards meeting the target, together with any other information about apprenticeships that the Secretary of State considers appropriate. This might include information about policies introduced to support the growth of apprenticeships.

75. As the target relates specifically to this Parliament, the section contains a provision for automatic repeal a year after the final reporting period, allowing time for the final report to be published.

76. "Apprenticeship" is defined in the section as an approved English apprenticeship and certain other statutory apprenticeships. An approved English apprenticeship is an arrangement which takes place under an approved English apprenticeship agreement between employer and apprentice or is an alternative English apprenticeship. The approved English apprenticeship agreement is a combination of paid employment and training towards achievement of a recognised standard. The other statutory apprenticeships relate to apprenticeship frameworks which have not yet been withdrawn by the Secretary of State and are saved by article 13 of and the Schedule to the Deregulation Act 2015 (Commencement No. 1 and Transitional and Saving Provisions) Order 2015 (S.I. 2015/994).

Section 3: Troubled Families Programme

77. This section requires the Secretary of State to prepare a report on progress made by families who receive support as part of the Troubled Families Programme. This report will be based on information from the programme's national evaluation and the payment by results achieved by local authorities.

78. Currently, to be eligible for support as part of the programme, families must have at least two of the six problems laid out in the programme's Financial Framework and have been prioritised for inclusion by the local authority on the basis that they are families who are likely to benefit from an integrated, whole family approach, and are the families who result in the highest costs to the public purse. Local authorities will typically work in partnership with a range of local public service providers, including those in the voluntary and community sector, to offer the necessary services to their local troubled families. This support aims to achieve significant and sustained progress across each family, compared with all the family members' problems at the point of engagement with the programme; and to move adults in these families off benefits and into continuous employment.

79. The progress report is to be prepared by the Secretary of State before the end of each financial year and laid before Parliament.

80. The operating terms of the Troubled Families Programme may change over the lifetime of the programme. To accommodate this, the Secretary of State is required to issue a notice specifying the measures which the Secretary of State will report against before the start of each financial year.

Section 4: Children living in low-income households

81. This section places a duty on the Secretary of State to publish data annually, but not to report to Parliament, on the percentage of children living in four low-income households. The four low-income households are those commonly referred to as in relative low-income, combined low-income and material deprivation, absolute low-income, and persistent low-income. These terms are defined in the section as the percentage of children in the United Kingdom:

    1. who live in households whose equivalised net income for the relevant financial year is less than 60% of median equivalised net household income for that financial year (relative low-income);
    2. who live in households whose equivalised net income for the relevant financial year is less than 70% of median equivalised net household income for that financial year, and who experience material deprivation (combined low-income and material deprivation);
    3. who live in households whose equivalised net income for the relevant financial year is less than 60% of median equivalised net household income for the financial year beginning 1 April 2010, adjusted to take account of changes in the value of money since that financial year (absolute low-income);
    4. who live in households whose equivalised net income has been less than 60% of median equivalised net household income in at least 3 of the last 4 survey periods (persistent low-income).

82. The data on children in low-income households must be published by 31 March 2017 and thereafter annually. The data published must relate to the most recent financial year, for which data is available.

83. The approach taken regarding the terms used will be set out in the relevant publication.

84. The section also provides that the publication itself may set out how and when the baseline year of 1 April 2010 for the absolute low-income data will be adjusted. This may eventually be necessary to take account of changes to the value of money and to prevent this data becoming meaningless over time.

Section 5: Workless households and educational attainment reporting obligations

85. This section places a duty on the Secretary of State to report annually against measures of worklessness and educational attainment in England. The detail of these measures and related definitions will be taken directly from relevant official statistics so far as practicable, as defined by section 6(1) of the Statistics and Registration Service Act 2007.

86. The section requires the Secretary of State to lay a report before Parliament annually setting out data on the measures of worklessness and education.

87. The section requires the worklessness measures to be based, so far as practicable, on data published in relevant official statistics, such as the Office for National Statistics release currently titled "Working and Workless households". The report will identify the proportion of children living in workless households (i.e. where no adult is in employment), and the proportion of children in long-term workless households (i.e. where no adult has been in employment for at least the last 12 months).

88. The section also requires the educational attainment measures to be based, so far as practicable, on data published in relevant official statistics, such as the Key Stage 4 attainment data published by the Department for Education, in the Statistical First Release currently titled "GCSE and equivalent attainment by pupil characteristics".

Section 6: Social Mobility Commission

89. This section sets out how the Social Mobility and Child Poverty Commission is reformed as the Social Mobility Commission and describes its functions.

90. The Commission has a duty to promote social mobility in England. It will provide an independent scrutiny and advocacy role on social mobility in England.

91. It has a duty to report its views on progress in improving social mobility in the UK and to publish this report annually.

92. The Commission will continue to report on the measures taken by the relevant Northern Ireland department in relation to its strategy to ensure that as far as possible children in Northern Ireland do not experience socio-economic disadvantage.

93. It no longer has a duty to report on the measures taken by Scottish Ministers in relation to their strategy to ensure that as far as possible children in Scotland do not experience socio-economic disadvantage. Nor will it continue to report on the measures taken by Welsh Ministers in accordance with the Welsh strategy.

94. A Minister of the Crown may direct the Commission to carry out any other activity relating to improving social mobility in England and Northern Ireland.

95. The members of the Commission are to be:

    1. a chair appointed by a Minister of the Crown;
    2. after the appointed day for Northern Ireland, a member appointed by the relevant Northern Ireland department;
    3. any other members appointed by a Minister of the Crown; and
    4. a Minister of the Crown may appoint one of the members as the deputy chair.

96. A Minister of the Crown may, if the Commission so requests, carry out or commission research for the purpose of the carrying out of the Commissions functions.

Section 7: Other amendments to the Child Poverty Act 2010

97. This section amends the Child Poverty Act 2010 (to be cited as the Life Chances Act 2010) to remove the measures, targets, duties and other provisions, including:

    1. the statutory targets and measures (sections 1-7, 15, 17 and schedule 2);
    2. the Social Mobility and Child Poverty Commission (sections 8 to 8C);
    3. the duties placed on the Secretary of State to consult on, review, lay and publish a triennial child poverty strategy (sections 9 and 10);
    4. the duty placed on Scottish Ministers to consult on, review, lay and publish a triennial child poverty strategy (section 11 and section 13 as it relates to Scottish Ministers and the Scottish strategy); and
    5. the duties placed on local authorities (sections 19 to 25).

98. This section makes additional amendments to section 12 of the Child Poverty Act in order to remove references to the targets (which are repealed by this Act) and to maintain as now the period during which the relevant Northern Ireland department is required to produce its strategy.

99. The section replaces references to "the target year" with specific dates as a consequence of targets being removed by this Act.

100. The section retains definitions of child, parent and parental responsibility in respect of the on-going duties of the relevant Northern Ireland department to publish its strategy.

101. The section updates the ‘general interpretation’ section of the Child Poverty Act to explain relevant terms.

Section 8: Benefit cap

102. The section amends section 96 of the Welfare Reform Act 2012 which provides for the amount of welfare benefits to which a claimant or a couple can be entitled to be capped by reference to a relevant amount in a prescribed manner.

103. Subsection (2) amends subsection (5) of section 96 of the Welfare Reform Act 2012 and inserts new subsections (5A) and (5B). Subsection (5) allows for regulations to determine the benefit cap's "relevant amount", which will be the weekly level of the cap that will be applied for housing benefit and the monthly level that will be applied for universal credit. This determination is to be made by reference to the annual limit of entitlement for a single person or a couple and lone parent.

104. Subsection (5A) provides that the annual limit for the benefit cap should be £20,000 or £13,400 except in Greater London where it is set at £23,000 or £15,410.

105. Subsection (5B) gives the Secretary of State a power to make regulations that specify which limit applies to couples or single people of a prescribed description. The Secretary of State intends to use this power to prescribe that the lower amounts will apply to single people and the higher amounts will apply to couples and lone parents. The Secretary of State is also granted the powers to allow him to make regulations that define when a person is or is not resident in Greater London and that provide for the monthly or weekly figures derived from the annual limit can be rounded where appropriate.

106. Subsection (3) omits the existing section 96(6) to (8) of the Welfare Reform Act which require the setting of the "relevant amount" (the level of the cap) with reference to estimated average earnings.

107. Subsection (4) amends section (10) of section 96 of the Welfare Reform Act 2012, and defines "welfare benefits" for the purposes of the benefit cap as:

     1. bereavement allowance
     2. child benefit
     3. child tax credit
     4. employment and support allowance
     5. housing benefit
     6. incapacity benefit
     7. income support
     8. jobseeker's allowance
     9. maternity allowance
     10. severe disablement allowance
     11. universal credit
     12. widowed mother's allowance
     13. widowed parent's allowance
     14. widow's pension

108. Subsection (5) repeals section 96(11). This is consequential to the amendments to section 96(10).

109. Subsection (6) omits the existing section 97(3) of the Welfare Reform Act 2012 which required the first regulations laid under the powers of section 96 to be subject to the affirmative procedure. As the first set of regulations has already been made, the removal of the word "other" from section 97(4) of the Welfare Reform Act 2012 is consequential to the removal of section 97(3) of that Act.

110. Subsection (7) makes a consequential change to paragraph 52 of Schedule 12 to the Pensions Act 2014.

111. Subsections (8) and (9) provide that regulations made in relation to commencement of subsections (1) to (6) may make such transitional provision or savings as the Secretary of State considers necessary. They also provide that Regulations may stipulate that the amendments need not take effect until the Secretary of State provides by notice that they should, that the amendments may take effect at different times for different persons or description of persons and that regulations may make provision about the issuing of notices.

112. Subsection (10) provides that any regulations under subsection (8) do not require consultation with Local Authority Associations under section 176 of the Social Security Administration Act 1992.

113. Subsections (11) and (12) provide that any regulations made under subsection (8) must be made by statutory instrument which would be subject to the negative procedure.

Section 9: Review of benefit cap

114. The section inserts a new section 96A, Benefit cap: review, into the Welfare Reform Act 2012.

115. The new section 96A(1) commits the Secretary of State to at least one review of the benefit cap in each Parliament to decide whether it is appropriate to change or maintain one or more of the annual limits specified in subsection 96(5A).

116. Notwithstanding the requirement in the new section 96A(1), the new section 96A(2) allows the Secretary of State at any other time to review any or all of the annual limits in section 96(5A) to decide whether it is appropriate to change or maintain one or more of the annual limits.

117. The new section 96A(3) provides that when reviewing the cap the Secretary of State must take into account the national economic situation, as well as any other factors which the Secretary of State considers relevant.

118. The new section 96A(4) allows the Secretary of State, if he considers it appropriate after carrying out a review of the annual limits, to increase or decrease one or more of the annual limits by regulations.

119. The new section 96A(5) provides that any amendments to the annual limit can come into force on different days for different areas, cases or purposes.

120. The new sections 96A (6) and (7) provide similar powers to subsections (8) and (9) of section 8 and provide that regulations made under subsection (6) may make such transitional provision or savings as the Secretary of State considers necessary and, in particular, may stipulate that the amendments to the limits made pursuant to section 96A(4) need not take effect until the Secretary of State provides notice that they should, that the amendments may take effect at different times for different persons or description of persons and may make provision about the issuing of notices.

121. The new section 96A(9) provides for the circumstances of an early Parliamentary election taking place in accordance with section 2 of the Fixed-term Parliament Act 2011. In such circumstances the duty to review the annual limits provided by the new section 96A(1) is to be disregarded.

122. Subsections (2), (3) and (4) make consequential amendments to section 97 of the Act.

123. Subsection (5) inserts a new subsection (4A) into section 97 that provides that any regulations which amend an "annual limit" in section 96(5A) of the Act, following a review pursuant to inserted section 96A(1) and (2) will be subject to the affirmative Parliamentary procedure.

124. Subsections (6) and (7) omit section (5) of section 97 of the Act and section (7A) of section 150 of the Social Security Administration Act 1992 and so remove the obligation on the Secretary of State to review each year the level of the benefit against the level of average earnings.

Section 10: Benefit cap regulations and the Social Security Advisory Committee

125. This section provides that sections 96 and 97 of the Welfare Reform Act 2012 are included within the definition of "relevant enactments" in section 170 of the Social Security Administration Act 1992 ("the Act"). The section also amends Schedule 7 to the Act with the effect that regulations made pursuant to those sections are required to be referred to the Social Security Advisory Committee for consideration pursuant to section 172 of the Act, with the exception of section 96A. This is because the amendment to Schedule 7 of the Act provides that the requirement does not apply to regulations made under section 96A of the Welfare Reform Act 2012.

Section 11: Freeze of certain social security benefits for four tax years

126. This section provides for a freeze of certain social security benefits for four tax years and introduces Schedule 1, paragraph 1 of which defines the relevant sums.

127. Subsection (1) provides that for each of the tax years ending with 5 April 2017, 5 April 2018, 5 April 2019 and 5 April 2020 ("the four tax years"), each of the relevant sums is to remain the same as it was in the tax year ending 5 April 2016.

128. Subsection (2) provides that for each of the four tax years the rates of child benefit are to remain the same as they were in the tax year ending 5 April 2016.

129. Under section 150(1) of the Social Security Administration Act 1992, the Secretary of State for Work and Pensions must in each tax year review the sums of benefits and pensions in order to determine whether they have retained their value in relation to the general level of prices obtaining in Great Britain estimated in such manner as the Secretary of State thinks fit. Subsection (3) provides that the review in each of the four tax years preceding the tax years in which the benefits are to be frozen need not cover any of the relevant sums or the rates of child benefit.

130. Under section 150(2) where it appears to the Secretary of State that prices have increased relative to the value of benefits and pensions the Secretary of State must make an up-rating order, which is subject to the affirmative procedure. Subsection (4) provides that a draft up-rating order laid before Parliament under section 150(2) in each of the four tax years preceding the tax years in which the benefits are to be frozen (e.g. a draft up-rating order that applies to a tax year in which benefits are to be frozen) need not cover any of the relevant sums or the rates of child benefit.

131. Subsection (5) requires, in each of the four tax years preceding the tax years in which the benefits are to be frozen, the Secretary of State to lay before Parliament a copy of a report by the Government Actuary on the likely effect of the freeze of each of the relevant sums on the National Insurance Fund in the following tax year (i.e. the years of the freeze), so far as the freeze of the relevant sum relates to any sum payable out of the Fund.

Section 12: Freeze of certain tax credit amounts for four tax years

132. This section freezes certain relevant amounts of working tax credit and child tax credit for the tax years ending 5 April 2017, 5 April 2018, 5 April 2019 and 5 April 2020. The relevant amounts are to remain the same as they were in the tax year ending 5 April 2016 and the relevant amounts are defined in paragraph 2 of Schedule 1 (see subsection (3) ) .

133. Subsection (2) specifies that the review under section 41 of the Tax Credits Act 2002 (which shows whether certain benefits have retained their value in each tax year) that is undertaken in each of the four tax years during the freeze, need not cover any of the relevant amounts.

Section 13: Changes to child tax credit

134. The section makes amendments to section 9 of the Tax Credits Act 2002 which makes provision for the maximum rate at which a person or persons may be entitled to child tax credit (CTC).

135. Subsection (2)(a) amends section 9(2)(a) of the Tax Credits Act 2002 by substituting wording so that it provides for an element (defined in section 9(3) as the family element), which must be included in the prescribed manner of determination of the maximum rate of CTC, in respect of every person or persons entitled to CTC who is or are responsible for a child or qualifying young person born prior to 6 April 2017.

136. Subsection (2)(b) inserts a new paragraph (c) into subsection (2) of section 9 of the Tax Credits Act 2002 to provide for a new element ("the disability element") which must be included in the prescribed manner of determination of the maximum rate of CTC in the case of a child or qualifying young person who is disabled or severely disabled. This disability element will ensure that the equivalent of the higher amount of the individual element of CTC for disabled and severely disabled children will continue to be available from 6 April 2017. The disability element will be payable in respect of all disabled children or qualifying young persons regardless of their date of birth and whether they are the first, second, third or subsequent child or qualifying young persons in the family.

137. Subsection (5) substitutes a new paragraph (c) into section 9(5) of the Tax Credits Act 2002 so as to provide that the prescribed manner of determination of the maximum rate of CTC may include provision for the disability element of CTC to vary according to whether the child or qualifying young person is disabled or severely disabled.

138. Subsection (3) inserts new wording in subsection (3) of section 9 of the Tax Credits Act 2002 to define the element provided for in new section 9(2)(c) as the disability element of CTC.

139. Subsection (4) inserts two new subsections (3A and 3B) into section 9 of the Tax Credits Act 2002.

140. New subsection (3A) of section 9 of the Tax Credits Act 2002 provides for new subsection (3B) to apply in a case of a person or persons entitled to CTC who is or are responsible for a child or qualifying young person born on or after 6 April 2017.

141. New subsection (3B) of section 9 of the Tax Credits Act 2002 provides that the prescribed manner of determination in relation to the person or persons to whom new subsection (3A) applies must not include an individual element of CTC in respect of a child or qualifying young person born on or after 6 April 2017 unless they are claiming the individual element for no more than one other child or a prescribed exception applies. An exception will apply, for example, to protect instances of multiple births where a family would otherwise have exceeded two children in a family. Section 67 of the Tax Credits Act 2002 provides that for the purposes of Part 1 of the Tax Credits Act 2002, "prescribed" means prescribed by regulations.

Section 14: Changes to child element of universal credit

142. This section amends section 10 of the Welfare Reform Act 2012 in relation to the calculation of an award of Universal Credit. Subsection (2) inserts a new subsection into that section 10 which provides that an award of universal credit will only include amounts (the "child element") in respect of a maximum of two children or qualifying young persons for whom a claimant is responsible.

143. The limit of two will not apply to the additional amount that is paid in respect of a child or qualifying young person who is disabled. Subsection (3) amends the section 10(2) of the Welfare Reform Act 2012 to allow the Secretary of State to make regulations providing for the inclusion of this amount for each disabled child or qualifying young person for whom the claimant is responsible.

144. Subsection (4) amends section 10(4) of the Welfare Reform Act 2012 to provide that the Secretary of State may make regulations to allow for an amount to be included in the child element for a child or qualifying young person in certain circumstances where the number of children or qualifying young persons exceeds two, for example in the case of a multiple birth prior to which the claimant was responsible for fewer than two children or qualifying young persons.

145. Subsection (5) amends the Universal Credit Regulations 2013 to remove the distinction between the first and subsequent children or qualifying young persons in the rate of the child element. This means there will be a single rate for the child element instead of the current situation where there is a higher rate payable for the first child or qualifying young person which corresponds with the family element in child tax credit.

146. Subsection (6) provides that the Secretary of State may make regulations for transitional or transitory or savings provision. For example, it is intended that savings will be made so that existing claimants who are already receiving the child element in respect of more than two children or qualifying young persons at the point the section comes into force will continue to receive an amount in the child element in respect of each of them, and a higher rate of child element for their first child or qualifying young person, such that they will not see a reduction in the child element of their award where there is no change in circumstances. However, such claimants will not be entitled to any further amounts for new children or qualifying young persons for whom the claimant becomes responsible after the implementation date where this would cause the limit of two to be exceeded, and the higher rate will cease to be payable once the claimant ceases to be responsible for the first child or qualifying young person.

Section 15: Employment and support allowance: work-related activity component

147. The section amends Part 1 of the Welfare Reform Act 2007 which introduced employment and support allowance (ESA).

148. Subsection (2) amends section 2 of the Welfare Reform Act 2007 to remove provision for payment of a work-related activity component in relation to contributory ESA.

149. Subsection (3) amends section 4 of the Act to remove provision for payment of a work-related activity component in relation to income-related ESA.

150. Subsection (4) provides the Secretary of State with the power to make regulations for transitional and savings purposes in connection with subsection (2) and (3). The intention is that these regulations will include provision for claimants who are already in receipt of the work-related activity component in ESA to continue to receive that component.

151. Subsection (5) provides that regulations under subsection (4) may provide for the work-related activity component to be payable to existing incapacity benefit, severe disablement allowance and income support claimants who have not yet had their awards converted to ESA and are placed in the work-related activity group following conversion.

152. Subsections (6) and (7) provide that the regulations under subsection (4) must be made by statutory instrument subject to the negative procedure.

Section 16: Universal credit: limited capability for work element

153. The section makes similar provision for UC claimants as section1 5 for ESA claimants. It amends section 12 of the Welfare Reform Act 2012 which provides for an award of universal credit to include an amount in respect of such particular needs or circumstances as may be prescribed in regulations.

154. It removes the provision in section 12(2)(a) that the fact that a claimant has limited capability for work is a need or circumstance that may be prescribed.

155. The intention is that regulations made under existing provisions of the Welfare Reform Act 2012 will remove provision for the limited capability for work element but that this will not apply to claimants who are already in receipt of that element.

Section 17: Universal credit: work-related requirements

156. This section changes the conditionality for responsible carers in universal credit to the following effect:

     1. those with a child aged 3 or 4 will be subject to all-work related requirements;
     2. those with a child aged 2 may be required to undertake work-focused interview requirements and work preparation requirements;
     3. those with a child aged 1, as now, may be required to undertake work-focused interview requirements only.

Section 18: Loans for mortgage interest etc.

157. This section enables owner-occupiers who are receiving an income-related benefit to claim help towards their liability to make owner-occupier payments by way of a loan.

158. Subsection (1) specifies that the Secretary of State ma, by regulations, provide for loans to be made in respect of a person’s liability to make owner-occupier payments in respect of accommodation that they occupy as their home.

159. Subsections (2) and (3) enable the Secretary of State to specify in the regulations the conditions that will govern eligibility to receive a loan which may, in particular, include that a claimant is entitled to receive jobseeker's allowance, income support, employment and support allowance, state pension credit or universal credit.

160. Subsections (4) to (7) enable the Secretary of State to set out further detail about the loans scheme in regulations including: provision about the liabilities in respect of which a loan can be made; the method for calculating the amount of loan which can be made; and that the loan will be secured by a charge over land.

161. Subsection (8) provides that the term "owner-occupier payments" will be defined in regulations. This definition will make provision about mortgage interest payments and payments under alternative finance arrangements.

162. Subsections (10) and (11) provides that the regulations must be made by statutory instrument subject to the negative procedure.

Section 19: Further provision

163. This section enables the Secretary of State to set out further detail about the loans scheme in the regulations made under section18.

164. Subsection (2) enables the Secretary of State to specify the circumstances in which a person is to be treated as liable or not liable to make owner-occupier payments and the circumstances in which a person is to be treated as occupying or not occupying their home.

165. Subsection (3) enables the Secretary of State to provide for the following in the regulations: how a person can apply for a loan; the requirements which they must satisfy before a loan can be made (such as receiving financial advice); provision about entering into an agreement with the person receiving a loan; when and how a loan must be repaid; other terms upon which a loan is made; that interest will be charged on the loan and the rate; that administration charges will be charged; and provision enabling substituted security be taken in cases where a person moves to another property.

166. Subsection (4) provides that the regulations may require that loans are paid direct to the claimant’s mortgage lender and subsections (7) to (9) set out what constitutes a "qualifying lender" for these purposes. This provision mirrors the existing legislative provisions in section 15A of the Social Security Administration Act 1992 which will be repealed under section 20, and will help to ensure the continued forbearance of lenders.

167. Subsection (5) enables the regulations to provide for the Secretary of State to delegate the exercise of certain functions under the regulations to a third party.

168. Subsection (6) states that the relegations may include provision requiring information and documents to be provided and allowing for information to be disclosed.

Section 20: Consequential amendments

169. This section makes consequential amendments to certain provisions which concern the payment of support for mortgage interest as a benefit.

170. Subsections (1) and (11) repeal certain provisions relating to the payment of support for mortgage interest direct to lenders out of a claimant’s entitlement to a relevant benefit. Payment of support for mortgage interest loans will instead be paid direct to lenders pursuant to provision made under section 19(4) of the Act.

171. Subsection (2) amends section 170 of the Social Security Administration Act 1992 so that regulations relating to support for mortgage interest loans are referred to the Social Security Advisory Committee for consideration.

172. Subsections (3) to (7) make amendments to certain rules in the Social Security Act 1998 which concern decision-making and appeals so that the rules apply to decisions about loans in the same way as they apply to decisions about benefits.

173. Subsections (8) and (9) amend section 3A(5)(a) of the State Pension Credit Act 2002 and section 11(3)(a) of the Welfare Reform Act 2012 respectively, which concern the meaning of "payments in respect of accommodation", by omitting the reference to mortgage payments. This is because mortgage payments will no longer be paid as part of a claimant’s award of universal credit or pension credit, and will instead be offered as a loan under section 18(1) of the Act.

174. Subsection (10) amends section 131 of the Welfare Reform Act 2012 to allow the Department to supply information about support for mortgage interest loans to persons who are concerned with the provision of welfare services. This will ensure that claimants of support for mortgage interest loans can access certain "passported" benefits in the same way as they can under the current scheme.

Section 21: Transitional provision

175. Subsection (1) provides powers to make transitional, transitory and savings provision by way of regulations in relation to the transition from the current provision of support for mortgage interest as a benefit to the new scheme of loans. This will ensure that the Government can manage the introduction of support for mortgage interest loans as it sees fit, in particular the migration of those who currently get support for mortgage interest as a benefit to the new loan system.

176. Subsection (2) enables the regulations to provide for the temporary exclusion of the making of a loan under section 18. Subsection (3) provides that the temporary exclusion can continue until such time as is specified in a notice issued by the Secretary of State.

177. Subsection (4) enables the regulations to specify that support for mortgage interest can continue to be paid in the form of a benefit, for example where the making of loans is temporarily excluded. Subsection (5) enables the regulations to provide for legislation that has been repealed or revoked under the Act to be treated as having effect and for assistance with mortgage interest payments to continue to be paid as a benefit until such time as specified in a notice issued by the Secretary of State. Subsection (7) enables the regulations under this section to make different provision for different areas, cases or purposes.

178. Subsections (8) and (9) provide that these regulations must be made by statutory instrument subject to the negative procedure.

Section 22: Expenses of paying sums in respect of vehicle hire etc

179. This section enables the Secretary of State to make regulations to recover the administrative costs of making certain payments from the organisation to which the payments are made. Specifically, it relates to payments made to any organisation that leases or sells motor vehicles to disabled persons. It only applies to payments made on behalf of those in receipt of the higher rate mobility component of disability living allowance or the enhanced rate mobility component of personal independence payment.

180. This section works by modifying the Social Security Administration Act 1992 and takes effect through secondary legislation. The costs can be defrayed either by requiring the organisation to pay a fee or by deducting and retaining part of the benefit payment or by such other method as may be prescribed in regulations.

Section 23: Reduction in social housing rents

181. This section requires that in relation to each relevant year registered providers of social housing must reduce the rents payable by their individual tenants by at least 1%. Subsection (1) provides that reduction is calculated by reference to the amount of rent that was payable by the tenant in respect of the preceding 12 months.

182. Subsection (2) clarifies that if a tenancy comes to an end after part of a relevant year or, if the rent reduction requirement no longer applies to the tenancy, then there will be a proportionate reduction in the maximum amount of rent payable.

183. Subsection (3) makes special provision for determining the amount of rent payable in respect of the 12 months preceding the first relevant year. Its effect is that, for the purposes of calculating rent payable during the rent reduction period, social rents will be reduced from the rate that applied on 8 July 2015 (the date of the summer budget when the rent reduction measures were announced), or an alternative "permitted review day" with the consent of the Secretary of State for Communities and Local Government. Consent to use of an alternative "permitted review day" might, for example, be sought by a provider who, on 8 July 2015, had not yet implemented its 2015 rent increase. The Secretary of State’s consent can be given individually or be in the form of a general consent (subsection (4)).

184. Subsection (5) makes clear that for the purposes of calculating the rent payable in the first relevant year a tenancy existing on 8 July 2015 is to be treated as having been in place for at least 12 months before the first relevant year.

185. Subsection (6) sets out what is a ‘relevant year’. There are four relevant years commencing from 1st April 2016. Generally, this is a year beginning on 1st April, however, where a private registered provider's rent year for the majority of its tenancies commences on another date then the rent reductions may be applied from that date instead.

186. Subsection (7) qualifies subsection (6). It provides that a private registered provider’s practice as regards its tenancies should be determined by reference to its practice as regards to tenancies of its social housing in the year ending 31 March 2016.

187. Subsection (8) clarifies that a private registered provider with the practice referred to in subsection (6) is not obliged to use that alternative relevant year provision, but may instead use a year commencing 1st April as its relevant year.

Section 24: Exceptions

188. The section makes provision for exceptions to the rent reduction requirement set out in Section 23. Subsection (1) provides that the rent reduction requirements do not apply to low cost home ownership or shared ownership.

189. Subsection (2) provides that the rent reduction requirement does not apply when the property is subject to a mortgage and the mortgagee is in possession of the property, a receiver is appointed to enforce the mortgage, or a person is appointed to exercise powers that include the power to sell or dispose of the property to enforce the mortgage (this includes the appointment of an administrator under paragraph 14 of Schedule B1 to the Insolvency Act 1986).

190. Subsection (3) provides that if the property is sold or disposed of by the mortgagee for the purpose of enforcing the mortgage, or a receiver or other person described in subsections (2)(b) and (c) then the rent reduction requirements cease to apply to that property from that time.

191. Subsection (4) defines mortgage and mortgagee for the purposes of subsections (2) and (3).

192. Subsections (5) to (10) give the Secretary of State power to make regulations to disapply the rent reduction requirement in other cases.

Section 25: Exemption of a registered provider of social housing

193. This section makes provision for exempting registered providers from the requirements of section 23 in certain circumstances. Subsection (1) provides that the Regulator of Social Housing in England may, by direction, exempt a private registered provider from the rent reduction requirement where conditions, including a requirement for the consent of the Secretary of State, are satisfied.

194. Subsections (4) and (5) set out conditions which must be satisfied before an exemption may be granted. The Regulator may only grant an exemption if the Regulator considers that complying with Section 23 would jeopardise the financial viability of the provider or, if the circumstances of the private registered provider satisfy requirements prescribed in regulations made by the Secretary of State under subsection (5).

195. Subsection (6) enables the Regulator to publish a document about measures that it considers could be taken by a private registered provider to comply with section 23 and to avoid jeopardising its financial viability.

196. Subsection (7) gives the Secretary of State powers to, by direction, grant an exemption to a local authority if conditions set out in subsection (10), relating to serious financial difficulties, or subsection (11), relating to requirements prescribed in regulations, are satisfied. Subsection (12) enables the Secretary of State to publish a document about measures that he considers could be taken by a local authority to comply with section 23 and to avoid serious financial difficulties.

197. Subsections (2), (3), (8) and (9) specify the terms on which an exemption may be granted. The Regulator or Secretary of State (as applicable) may grant to a provider a full or limited exemption. The section provides the flexibility to tailor the exemption to the circumstances of a provider such as granting an exemption in respect of only some of the provider's social housing or for a limited period, applying a lesser reduction or limiting rent increases as specified in the direction.

Section 26: Further provision about social housing rents

198. The section introduces Schedule 2 which makes provision for the rent initially payable by tenants of social housing whose tenancies begin after the beginning of 8 July 2015.

Section 27: Provision about excepted cases

199. Subsection (1) provides the Secretary of State with a power to make regulations regarding the maximum amount of rent payable by a tenant in a category excepted by regulations under section 24 or paragraph 5 of Schedule 2. Subsection (2) enables the Secretary of State to make regulations setting out the maximum amount of rent payable by a tenant who ceases to be excepted from the rent reduction provisions part of the way through a relevant year. The regulations would deal with the rest of that year and, if there is one, the following relevant year.

200. Subsections (3) and (4) provide that the regulations may, in particular, provide for how the maximum rent may be determined and provide for section 23 or Part 1 of Schedule 2 to have effect with modifications. Subsection (5) provides examples of modifications which may be made.

201. Subsection (6) sets out that regulations may not modify the 1% annual reduction where it is specified in the Act, and subsection (8) that where an exception to Part 2 of Schedule 2 applies, alternative provision may not impose a maximum rent below the social rent rate.

202. Subsections (9) to (12) enable the Secretary of State to make provision for an exemption regime applicable to excepted cases (i.e. provision equivalent to section 25).

Section 28: Implied Terms

203. The effect of this section is to imply a term into tenancy agreements that rents may be reduced, without notice, to comply with a requirement of the social rent provisions. Such an implied term would override any express provision of an agreement regarding rent review dates and thus help registered providers comply more easily with the social housing rents provisions.

Section 29: Change of registered provider

204. This section, which applies where social housing subject to a tenancy transfers from one registered provider to another, clarifies how the rent reduction policy applies if there is a change in the registered provider.

205. Subsection (2) ensures that four years of rent reductions apply to a tenant whether or not the initial provider and transferee have corresponding relevant years and that when rent reductions are calculated rent paid to the transferor must be taken into account.

206. Subsections (3) and (4) provide that if the former registered provider had an exemption in place, by virtue of a direction under section 25, paragraph 6 of Schedule 2, or regulations under section 27, then this continues in relation to the new provider until the end of the relevant year or, if earlier, when that tenancy comes to an end.

Section 30: Enforcement

207. The section makes consequential amendments to Part 2 of the Housing and Regeneration Act 2008, to ensure that, if appropriate, the Regulator may take enforcement action in relation to breaches of the requirements of section 23, part 1 of Schedule 2 or regulations made under section 27.

Section 31: Transitional provision

208. This section prevents extended impact on registered providers that have tenancy agreements in place that provide for rent reviews on fixed dates. It therefore enables, by virtue of subsection (2), but does not require, providers to bring forward rent reviews more quickly after the end of the rent restrictions, and subsections (3) to (6) enable a provider with rent reviews that are approximately annual to bring forward all subsequent rent reviews. Subsection (8) sets out that the registered provider and the tenant may vary or exclude by agreement a term implied by this section.

Section 32: Rent standards

209. The section makes the powers of the Regulator of Social Housing to issue rent standards, under Sections 194(2A) and 198(3) of the Housing and Regeneration Act 2008, subject to the provisions in the Act about rent levels.

Section 33: Interpretation

210. The section makes provision about terms used in the social housing rents provisions. In particular, subsections (3) and (4) make provision clarifying when a tenancy begins and how a tenancy is to be treated as continuing, or as coming to an end, and subsection (6) provides for a regulation-making power which may specify cases where a reference to an amount of rent includes, or does not include, service charge.

Schedule 1: Meaning of "the relevant sums" and "the relevant amounts"

211. Schedule 1, paragraph 1, sets out the relevant sums for the purposes of Section 11 (freeze of certain social security benefits for four tax years). These are:

     1. the personal allowances for a person or couple used in the calculation of income support;
     2. the personal allowances for a person or couple used in the calculation of housing benefit;
     3. the work-related activity component of housing benefit;
     4. the age-related amount for contribution-based jobseeker's allowance which is relevant for calculating the claimant's personal rate;
     5. the personal allowances for a person or couple used in the calculation of income-related jobseeker's allowance;
     6. the contributory allowance of employment and support allowance;
     7. the work-related activity component of contributory employment and support allowance;
     8. the prescribed amounts for income-related employment and support allowance;
     9. the work-related activity component of income-related employment and support allowance;
     10. the standard allowance for a single or a joint claimant of universal credit;
     11. the additional amount of universal credit for a disabled child or qualifying young person (but only the smaller or smallest of sums specified); and
     12. the limited capability for work element of universal credit.

212. Schedule 1, paragraph 2, sets out the relevant amounts for the purposes of section 12 (freeze of certain tax credit amounts for four tax years). These are:

     1. the individual element of child tax credit payable in respect of a non-disabled child or qualifying young person; and
     2. the basic, 30 hour, second adult and lone parent elements of working tax credit.

Schedule 2: Further provision about social housing rents

213. Schedule 2 makes provision for the rent initially payable by tenants of social housing where a new tenant begins a tenancy after the beginning of 8 July 2015. Part 1 of Schedule 2 sets out different principles which are applicable to new and existing social rent housing and Affordable Rent housing.

214. Paragraph 1 of Part 1 sets out the rules applicable in the case of existing social rent housing (that is not affordable rent housing). The initial rent payable by that tenant must be no more than the higher of the ‘social rent’ rate, or the ‘assumed rent’ rate, on a pro-rata basis.

215. Paragraph 2 of Part 1 sets out the rules applicable in the case of new social housing (that is not affordable rent housing). The rent payable by that tenant is the social rent rate, on a pro-rata basis.

216. Paragraph 3 of Part 1 sets out the rules applicable in the case of affordable rent housing. The rent payable by that tenant must be initially set at no more than 80% of the market rate for that social housing or the social rent rate if it is higher, with the 1% reductions then applied in each of the following years. The market rent is to be based on the valuation methods recognised by the Royal Institute of Chartered Surveyors.

217. Paragraph 4 enables the Secretary of State to make provision for identifying accommodation that may be let as social housing at an affordable rent, for example, where there are agreements or arrangements with the Homes and Communities Agency, the Greater London Authority, and the Secretary of State.

218. Part 2 of Schedule 2 sets out exceptions (paragraph 5) and exemptions (paragraph 6). Provision for exceptions and exemptions mirror the conditions in sections 24 and 25 of the Act.

219. Part 3 of Schedule 2 sets out the general provisions. Paragraph 7 provides that regulations under the Schedule must be by statutory instrument subject to the negative procedure. Paragraph 8 gives the Secretary of State power to issue guidance relating to the determination of assumed rent. Paragraph 9 sets out the meaning of 'the relevant day'.