Social Security Co-ordination (Revocation of Retained Direct EU Legislation and Related Amendments) (EU Exit) Regulations 2020

Baroness Stedman-Scott Excerpts

Tuesday 8th December 2020 Grand Committee

Moved by

[Baroness Stedman-Scott]

That the Grand Committee do consider the Social Security Co-ordination (Revocation of Retained Direct EU Legislation and Related Amendments) (EU Exit) Regulations 2020.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)]

My Lords, these regulations, which concern policy areas of my department and Her Majesty’s Treasury, and apply UK-wide, were laid before both Houses on 16 November. They are required to clear the way for the legislation which will implement our new system of social security co-ordination with the EU, EEA states and Switzerland.

The current EU social security co-ordination regulations—I will refer to these as the SSC regulations—operate to facilitate the EU’s free movement rules. They ensure that individuals pay social security contributions in only one member state at a time; they set out which member state is responsible for the payment of social security benefits; they require the export of some benefits to claimants resident in the EU; and they provide for the aggregation of social security contributions when claiming certain benefits and the state pension. These rules require equal treatment for citizens across the EU, overriding any domestic legislation. They have continued to apply to the UK throughout the transition period.

As the Committee will be aware, the Immigration and Social Security Co-ordination (EU Withdrawal) Act came into force on 11 November 2020, Section 6 of which provides a power to modify these SSC regulations, which have been retained in UK law. Before I go into the detail of the draft regulations, I will provide the Committee further details on the context in which they are being made. I hope noble Lords will forgive the lack of originality in what I am about to say, which is very similar to the update provided by the Minister in the other place yesterday.

As I have stressed to your Lordships on a number of occasions, citizens covered by the withdrawal agreement and related agreements with the EEA and Switzerland will be unaffected by these regulations as long as they remain covered by those agreements. Arrangements in this area for UK and Irish nationals moving between the UK and Ireland will also continue unchanged under a recent reciprocal agreement with Ireland.

The Government are negotiating future arrangements with the EU, similar in kind to the social security relationships the UK has with nations outside the EU. This means that there will be changes in social security co-ordination policy with the EU from the end of the transition period, regardless of the outcome of negotiations. The Government have been clear about this, including as the ISSC Bill passed through Parliament and in public communications.

As the Committee will be aware, negotiations with the EU are at a very advanced stage. It is the Government’s position that new rules, whether or not there is a future agreement, should take effect from the end of the transition period. These regulations are a core part of our legislative preparation and will stand whatever the outcome. We are also in discussions on future social security co-ordination rules with a number of EEA states and Switzerland.

I will now summarise the regulations we are debating today. Part 1 sets out that the regulations come into force at the end of the transition period, with the exception of some amendments being remade in Part 4. These amendments will come into force on the day after the day on which the regulations are made.

Part 2 revokes the EU SSC regulations retained under Section 3 of the European Union (Withdrawal) Act 2018 and the unilateral fixing statutory instruments made under Section 8 of that Act. The fixing SIs were brought forward to prepare for a scenario in which the UK did not leave the EU with a withdrawal agreement and would have enabled the UK to operate some of the retained SSC regulations unilaterally, so far as possible. This revocation is in line with the approach the Government set out in the draft illustrative regulations shared with the House during the passage of the ISSC Bill.

This means that the rules for those individuals who are not covered by the withdrawal agreement and move between the UK and the EU, EEA states and Switzerland after the end of the transition period will be determined by any new international agreements in place or, in the absence of an international agreement, the respective domestic law in each country. For UK benefits this means, for example, that the UK will no longer export child benefit to children living in the EU, with the exception of Ireland, delivering on the manifesto commitment. For national insurance contributions this means that, where no reciprocal agreement applies, the rules on payment of national insurance contributions for individuals moving between the UK and the EU, the EEA and Switzerland will be the same as the rules for the rest of the world.

These regulations make four limited savings from the general revocation of the retained SSC regulations in Part 3. First, they save the retained SSC regulations on the co-ordination of benefits in kind; namely, health- care, which is a policy competence of the Department of Health and Social Care. DHSC has made separate secondary legislation in respect of the reciprocal healthcare aspects of the retained SSC regulations.

Secondly, they save the existing debt recovery provisions which will enable the UK to collect overpaid HMRC benefits and social security contributions on behalf of a foreign social security authority where the individual or employer is present in the UK, as part of a reciprocal agreement on social security. Full details of the specifics of these provisions have also been set out in public correspondence.

Thirdly, they save the retained SSC regulations to the extent necessary to provide for continued operation of the agreement on social security between the Governments of the UK and Gibraltar. I can confirm that it is the intention of the UK and Gibraltar Governments to agree a new relationship not based on the EU SSC regulations. Once that has been implemented, this saving will no longer be required and will later be revoked.

Fourthly, they save provisions relating to aggregation and uprating of the state pension in the absence of agreements being in place with the EU, EEA states and Switzerland by the end of the transition period. This saving will provide for continued state pension aggregation and uprating in those countries up to the end of the financial year 2021-22. In the absence of a future agreement with the EU, the UK would seek to put in place reciprocal agreements on social security with individual EU countries instead; even where such negotiations are progressing well, the saving may be needed for a short period beyond March 2022 to finalise and implement bilateral agreements. For this reason, the saving is not time limited. However, it is a strictly interim measure targeted at those who move to the EU, the EEA and Switzerland after the transition period, while future arrangements are put on a reciprocal footing.

Part 4 makes related amendments in other EU exit legislation. This includes bringing forward the day on which amendments will be made to Section 179 of the Social Security Administration Act 1992 and the equivalent Northern Ireland Act. These amendments were previously made by the Social Security (Amendment) (EU Exit) Regulations 2019 and the equivalent Northern Ireland regulations, which are not revoked by this instrument. These amendments were otherwise due to come into effect at the end of the transition period.

While the UK has left the EU, we are not leaving the European Convention on Human Rights; in my view the provisions of the Social Security Co-ordination (Revocation of Retained Direct EU Legislation and Related Amendments) (EU Exit) Regulations 2020 are compatible with the convention.

In summary, these regulations make changes to prepare the statute book for the end of the transition period, particularly in relation to preventing the unilateral export of benefits, delivering on the manifesto commitment to prevent people claiming child benefit for children living outside the UK. They also ensure that the Government have the option to make a future social security co-ordination agreement with the EU through an Order in Council before the end of the transition period, should this be needed. I beg to move.

[The Deputy Speaker (Lord Duncan of Springbank) (Con)]

My Lords, for the information of those on remote calls, the first 90 seconds of the Minister’s speech were lost, but I think the gist of the speech was contained. If there are any particular issues that noble Lords wish to tease out during the questioning, I am sure the Minister will be happy to respond in her summing up. I call the first speaker, the noble Baroness, Lady Ludford. I understand she is having technical difficulties, so we will come back to her. We move on to the noble Lord, Lord Bhatia.

--- Later in debate ---

[Baroness Stedman-Scott (Con)]

I thank the noble Baronesses, Lady Sherlock, Lady Ludford and Lady Janke, and the noble Lord, Lord Bhatia, for their contributions.

The noble Baroness, Lady Sherlock asked about process and timing. I recognise that it is late in the transition period, but that is the nature of EU negotiations. Good progress has been made in this area, and we hope to get the deal over the line. The Government are prepared for all outcomes and have been communicating to citizens the importance of being prepared for rules in this area to change, in all scenarios.

While I acknowledge the points on the timing of the process, I have set out the baseline provisions that will apply on the state pension and national insurance contributions. There will be no unilateral measures in relation to other benefits where long-standing domestic rules do not already provide for this. These affirmative resolution regulations offer an opportunity for the House to scrutinise and approve the baseline that would apply in the absence of future agreement. The Government’s position is that it would not be appropriate to continue unilaterally to operate EU rules after we have left the EU and the transition period ends, in doing so creating different dates of change, additional cohorts and complexity for staff and citizens.

The noble Baroness, Lady Janke, talked about plans for bilateral agreements. As I set out, the Government would seek to put in place reciprocal agreements with member states swiftly if no agreement can be reached with the EU. As the Minister in the other place set out, securing reciprocal provisions on the state pension and national insurance contributions are priority areas for the DWP and HMRC but cannot be effectively operated on a unilateral basis. We would prefer a single deal with the EU, of course.

The noble Baroness, Lady Sherlock, asked how the future agreement would be implemented. The mechanism by which any future agreement will be implemented in the various circumstances we could yet find ourselves in remains under review. These regulations ensure—this is a point that the noble Baroness, Lady Ludford, raised—that the Government can use existing powers for this purpose between now and the end of the year, should this be required.

We expect a number of social security benefits to no longer be exportable to the EU in future; this is in line with long-standing UK policy on certain benefits. Certain benefits, such as disability and unemployment benefits, are not exportable when an individual permanently leaves the UK even when there is a social security agreement in place, and in line with communications which the Government published on GOV.UK before the summer.

The noble Lord, Lord Bhatia, and the noble Baronesses, Lady Sherlock and Lady Janke, raised the subject of impacts. As the Minister said in the other place yesterday, the Government remain committed to publishing an updated impact assessment once the outcome of negotiations is known. I can confirm that those impact assessments will be brought forward. Those covered by the withdrawal agreement are not impacted by this instrument. The measure does not impose any costs on business and ensures that once the SSC rules cease to apply between the UK and the EU, businesses can apply the standard rest of the world rules for national insurance where there is no reciprocal agreement.

The noble Baroness, Lady Sherlock, raised the question of students. The Government have provided guidance to all UK universities via Universities UK to make them aware of the need to communicate to EU students who have moved to start their courses in person in the UK by the end of the transition period that they will need to apply under the points-based immigration system. They will not be covered by the withdrawal agreement’s provisions on social security co-ordination and will be subject to any new reciprocal agreement with the EU or any individual member states.

The noble Baroness, Lady Sherlock, also asked about Gibraltar. I can confirm that the Government will seek a bilateral agreement with Gibraltar similar in kind to that agreed with Ireland.

The noble Baronesses, Lady Sherlock and Lady Janke, raised the issue of healthcare. While that is a matter for the Department of Health and Social Care and not in scope of these regulations, the Government will assess their options for reciprocal healthcare if we do not achieve an EU-wide agreement. The Department of Health and Social Care is aware of the concerns of people with pre-existing health conditions and is carefully looking to the impact of any loss of necessary healthcare provisions.

On matters of governance, the UK’s proposed legal text, published in May, contains provisions on dispute resolution, data sharing and administrative co-operation between social security authorities. As is standard practice in international social security arrangements, we have been clear when it comes to future arrangements that there should be no CJEU oversight. We remain in close collaborative discussion with member states in this area through the administrative commission, which the UK continues to attend and will continue to attend in an observer capacity.

These regulations are an essential part of the legislative programme and have been laid in preparation for the end of the transition period, as we reset our relationship with the EU. Not proceeding with this legislation would result in the UK unilaterally operating EU rules after the end of the transition period, regardless of the negotiations. For the reasons I have set out, that would not be desirable.

The noble Baroness, Lady Sherlock, asked what would happen if there was no deal. If a British pensioner moves to the EU, the EEA or Switzerland in January 2021, their state pension will be uprated in April 2021. She also raised the issue of double contributions. On social security contributions, the standard rest of the world rules limit the possibility of UK-based employees working overseas and their employers being required to pay social security contributions in two countries at the same time to 52 weeks, while ensuring that they avoid creating gaps in their national insurance record in the UK for short periods of work overseas.

The noble Baroness, Lady Janke, raised the use of delegated powers. During the passage of the parent Act, I set out the exceptional circumstances under which we are operating, and shared draft illustrative regulations for scrutiny at that stage.

The noble Baroness, Lady Ludford, talked about the primary purpose of the amendments for the 1992 Act being to provide powers to conclude an agreement with the EU. She asked whether we would need the revoked provisions again. No, we are saving the only provisions that we may need to rely on.

The noble Baroness asked what a deal would contain. We have set out our approach to negotiations and have been negotiating in line with that. In particular, we are seeking arrangements on state pension and national insurance contributions.

On the issue of consultation, the UK has left the EU and the Government have acted in response to the manifesto commitment to end free movement. The SSC regulations facilitate free movement between member states of the EU on a reciprocal basis. The Government have repeatedly set out an approach to seeking a deal with the EU in this area to reflect the agreements that we have with countries outside the EU. There have been a number of publications to this effect, including our approach to negotiations published on 27 February. The UK has a long-standing policy in relation to the exportability of benefits, and negotiations with the EU have been consistent with that policy.

I thank again all noble Lords for their contributions to the debate on this SI. We will look at Hansard and make sure that we have answered all questions. If we have not, we will write to noble Lords—and, in that instance, I beg to move.

Motion agreed.