General policy statement

The purpose of this bill is to make modifications to the benefit review and appeal provisions under the Social Security Act 1964 to ensure the review and appeal provisions operate fairly and independently of the Government Ministry responsible for the administration of that Act.

The benefit review regime that currently operates with regard to decisions, other than medical decisions, provides for a Benefits Review Committee that consists of one member appointed by the Minister of Social Development and two members who are staff members of the Ministry of Social Development. The perception among beneficiaries of that Benefits Review Committee structure is one of bias in favour of the Ministry of Social Development.

That perception has been reinforced by the recent Supreme Court judgment Arbuthnot v Chief Executive of the Department of Work and Income. Prior to the Arbuthnot judgment it had been widely understood that Benefits Review Committees performed a quasi-judicial function. However, the Supreme Court in Arbuthnot has found that the Benefits Review Committees’ functions are purely administrative.

Beneficiaries therefore often wait well in excess of six months before the correctness of an adverse primary decision of the Ministry of Social Development can be independently considered by the Social Security Appeal Authority. Given that beneficiaries are often wholly reliant upon the Ministry to meet their day-to-day living expenses, such a delay in providing an independent judicial reconsideration of an adverse decision is unacceptable.

The quality of decisions made by Benefits Review Committees has historically been widely criticised by beneficiary advocacy groups and, on occasion, by the Social Security Appeal Authority. Benefits Review Committee decisions are frequently issued without adequate reasons for them being stated. Benefits Review Committee decisions also frequently rely on the Ministry of Social Development’s policy, rather than comply with the statutory requirements of the Social Security Act 1964.

Medical Appeal Boards currently hear appeals by benefit applicants for child disability allowance, invalid’s benefit, sickness benefit and veteran’s pension against decisions made on medical grounds. Medical Appeal Boards have been subject to much criticism for their failure to operate a fair procedure that complies with the principles of natural justice. This is compounded by there being no right of appeal under the Social Security Act 1964 against a Medical Appeal Board decision.

The complexity of the Social Security Act 1964 results in beneficiaries frequently engaging advocates or solicitors to represent them at reviews and appeals. However, there is currently no provision in the Social Security Act 1964 for costs to be awarded in favour of successful review applicants. While there is provision for cost to be awarded in favour of successful appellants to the Social Security Appeal Authority, this power has traditionally been exercised sparingly by the Authority. Three undesirable consequences flow from these inadequacies in the current legislation:

• highly skilled advocates therefore often work for little or no remuneration

• beneficiaries who can least afford legal representation become indebted to solicitors

• beneficiaries inadequately represent themselves at review and appeal hearings.

The Social Security Act 1964 does not currently provide a specified manner for Ministry of Social Development staff to convey decisions to benefit applicants or beneficiaries. This results in decisions often being conveyed inadequately, and without notifying applicants of the right to review decisions with which they disagree.

Main changes to existing law

The main changes the bill makes to the existing law are as follows:

• The existing Benefits Review Committee structure is replaced by independent benefit reviewers who will be required to conduct reviews independently of the Ministry of Social Development, exercising due diligence and in accordance with the principles of natural justice. The reviewers will conduct the reviews in a manner similar to that currently provided for accident compensation claimants under the Injury Prevention, Rehabilitation and Compensation Act 2001.

• The Medical Appeal Boards that currently hear appeals by benefit applicants for child disability allowance, invalid’s benefit, sickness benefit and veteran’s pension against decisions made on medical grounds will be abolished. This function will be transferred to benefit reviewers, who will have the investigative powers to obtain expert medical evidence should they consider this necessary in particular reviews involving entitlement on medical grounds to these benefits. A right of appeal to the Social Security Appeal Authority will apply to decisions of reviewers on such entitlements.

• Reviewers will be required to award costs in reviews that are determined in the applicant’s favour. There will be a discretion for reviewers to award costs in reviews that are not determined in the applicant’s favour if the reviewer considers the review application was reasonably brought. The quantum of the review costs will be prescribed by regulations promulgated under the Social Security Act 1964. The new regulation making power will also extend to prescribing a scale of costs on appeal and to the general conduct of reviews and appeals.

• There will be a statutory requirement on decision makers in the Ministry of Social Development to notify their decisions to beneficiaries and benefit applicants in writing and to advise them in writing of their review rights.

Clause by clause analysis

Clause 1 is the Title clause.

Clause 2 is the commencement clause. It provides that the bill comes into force 3 months after the date it receives the Royal assent.

Clause 3 provides that the bill amends the Social Security Act 1964 (the principal Act).

Clause 4 sets out the purpose of the bill.

Clause 5 amends section 10A of the Social Security Act 1964 to repeal the subsections that govern the administration of the Benefits Review Committee structure and to provide that section 10A applies to the benefit review structure established by the new sections 10B to 10J.

Clause 6 inserts nine new sections 10B to 10J in the Social Security Act 1964.

• Section 10B sets out the procedure under which a beneficiary or applicant for a benefit makes an application for a review of decision.

• Section 10C requires that all applications for review be acknowledged in writing by the Ministry of Social Development.

• Section 10D requires that the chief executive of the Ministry of Social Development engage on contracts for services as many reviewers as are necessary for the conducting of reviews. It requires that no officer or employee acting under the chief executive’s delegated authority can be a reviewer and that no reviewer can be engaged on a contract that has terms that could influence the reviewer, in conducting the review, in the chief executive’s favour. Section 10D also provides a mechanism for allocating review applications for hearing by reviewers that ensures the independence of the reviewer.

• Section 10E requires that a reviewer must act independently when conducting a review and must disclose any previous involvement in the decision under review.

• Section 10F establishes the general principles for the conduct of reviews. It requires that the reviewer comply with the provisions of the Social Security Act 1964 and any regulations made under it, comply with the principles of natural justice, exercise due diligence in decision-making, and adopt an investigative approach with a view to conducting the review in an informal, timely, and practical manner.

• Section 10G requires that a reviewer must hold a hearing unless either the review application is withdrawn by the applicant or the parties to the decision under review agree not to have a hearing. It also stipulates how the hearing must be convened and conducted.

• Section 10H ensures timeliness in issuing review decisions and requires that they be written, contain reasons for the review decision and notify the applicant of his or her right to appeal the review decision.

• Section 10I requires that the reviewer must put aside both the chief executive’s decision and the policy and procedure followed by the chief executive in making the decision, and decide the matter only on the basis of its substantive merits under the Social Security Act 1964. It further provides that the reviewer must confirm, vary or revoke the chief executive’s decision, and that if the reviewer revokes the chief executive’s decision, that he or she must either substitute his or her own decision or require that the decision be made again in accordance with directions from the reviewer.

• Section 10J provides that all costs incurred by a reviewer in conducting a review shall be met by the chief executive. It also provides that costs shall be awarded in favour of a successful review applicant, and may be awarded in favour of an unsuccessful review applicant if the reviewer considers the review application was reasonably brought.

Clause 7 amends section 12K of the Social Security Act 1964 by inserting a new subsection (8A) to provide that the jurisdiction of the Social Security Appeal Authority in hearing any appeal is restricted to matters raised in the notice of appeal and such other matters as may be consented to by the appellant.

Clauses 8 and 9 abolish the Medical Appeal Boards and transfer their functions to reviewers. It also provides for a right of appeal to the Social Security Appeal Authority for unsuccessful review applicants who have been declined child disability allowance, invalid’s benefit, sickness benefit and veteran’s pension on medical grounds.

Clause 10 amends section 81 of the Social Security Act 1964 by inserting a new subsection (4) to provide that the chief executive may not exercise his or her powers under section 81 to alter the decision of a reviewer, other than when new information that was not before the reviewer becomes available to the chief executive.

Clause 11 amends section 86J of the Social Security Act 1964 to require the chief executive to give notice to an applicant or beneficiary of any decision to which he or she has a right of review or a right of appeal. It further provides that such notices be written, contain the reasons for the decision; and give the applicant or beneficiary information about his or her rights to apply for review, including details of the time available to do so and an explanation of when applications can be made outside that time.

Clause 12 inserts a new section, section 132K, into the Social Security Act 1964 to empower the Governor-General, by Order in Council, to make regulations prescribing a scale of costs of reviews and appeals under the Social Security Act 1964 and prescribing rules for the conduct of such reviews and appeals.

Clause 13 makes consequential amendments to the Social Security Act 1964.