I must advise the Committee that if there is a Division in the Chamber while it is sitting, the Committee will adjourn as soon as the Division Bells are rung and will resume after 10 minutes.
Clause 10 [Directions and guidance]:
67: Clause 10, page 5, line 18, at end insert—
“( ) Any secondary legislation relating to the Commission must from the date of Royal Assent be made subject to a formal reference to the Child Support Advisory Committee.”
The noble Lord said: I am happy to open a new day in a new week in Committee by moving Amendment No. 67 which is tabled in my name and that of my noble friend Lord Addington. I shall speak also to Amendments Nos. 73 to 75 and 85. This clutch of amendments makes any regulations relating to the new commission set up by the Bill subject to a formal reference to the child support advisory committee. The model is clear. Members of the Committee will be familiar with the work of the Social Security Advisory Committee, which has been an integral part of benefit law and policy making for many years. It provides a service by consulting on draft regulations that the department is bringing forward or which are in gestation within the department. It gives advice on those regulations, consults with stakeholders and produces conclusions that lead to a published report that is available to both Houses of Parliament when the regulations are debated. When I started to cut my teeth on social security legislation in an earlier incarnation in the House of Commons, it gave me considerable confidence that I had not completely missed the point when dealing with abstruse 90-minute debates on detailed technical regulations. For people who were coming to the subject for the first time, or who had some knowledge of a particular area but did not know the wider context of social security law, it was an invaluable aid that gave them—not just me—confidence that these were important matters of public policy.
Having spent 22 years in the House of Commons and two or three in your Lordships’ House—
It may well be too long. People get frightened by the technicalities of these important subjects. I point to the contributions that have been made during the passage of the Bill through both Houses. The number of people taking part in the debates is getting smaller, and the speakers who are not on the Public Bill Committee or party spokesmen could be numbered on the fingers of one hand. Therefore, there is value in having an independent interlocutor, without any axes to grind but with a great deal of expertise and knowledge in the field and access to a sophisticated network of stakeholders. That interlocutor can bring to bear corporate knowledge and experience built up over many years that shine light on and elucidate the finer points of some of the technical policy in the relegations. That will be the case when the commission is set up. It will set regulations. Indeed, the Minister has been hiding behind the commission with aplomb—probably rightly in many cases because it will be left to the commission to be successful in its own way of doing things. But I think that the commission will need to bring forward regulations and the department will need to sponsor the regulations. I for one would have an awful lot more confidence to look at the regulations as they come through, affirmative or negative as they may be, if they came with the seal of approval of an equivalent to the Social Security Advisory Committee—the child support advisory committee that would be set up in these amendments under consideration this afternoon.
The other thing that a child support advisory committee would be able to do is to make occasional special reports, as of course the SSAC can and often does, to great effect. Those reports would be on subjects that the committee believed, having regard to its experience of oversight of policy, should be investigated. The SSAC did a very good report not that long ago about call centres and the problems for clients who accessed the benefits system via that route.
There are lots of advantages to a committee that has a closer and more confident relationship with the department than the rest of the outside world—certainly opposition spokesmen—may have. It can anticipate problems and call attention to them and service an extensive network of stakeholders. So the proposition in front of the Committee is clear: we are asking for further help from people who would make it their business to study the development of the policy and the implementation and operation of the new work of CMEC as a commission, and help Parliament to digest its requests for secondary legislation.
The idea is not new. It was mooted first by the then Social Security Select Committee in 1999 to 2000, in another place. There was an instructive recommendation in the 10th report, which came to the conclusion:
“We recommend that the Government should consider either extending the terms of reference of the Social Security Advisory Committee, or creating a Child Support Advisory Committee on similar lines, to scrutinise secondary legislation on child support, as part of the process of building public confidence in the new child support system”.
The Government of the day set their face against that. The main reason, in so far as I could understand any reason at all, was that it would delay things, get in the way and take extra time—and there was a general nuisance value to any such committee. They decided that it would just make things harder and that the department had enough trouble without that. It may well slow down deliberation and may from time to time make life a little difficult for policy makers in the department, but my submission is that the value added by any such committee would far outweigh any drawbacks of that kind.
Another thing that I could adduce in evidence in support of the case is that we are just beginning to understand how the Child Support Agency legislation is being interpreted by the courts. There are some cases that have gone all the way through the legal process. One was the Smith case, which went all the way through the courts, because of the ambiguities that existed in the primary and secondary legislation about whether capital allowance should be considered as assessable income. I am absolutely certain. Knowing what I do about the work done by the SSAC, I am absolutely certain that it would have picked up such an ambiguity before the case went anywhere near the Court of Appeal. The case cost a lot of time, money and agony for those involved in it. It is my submission that a committee set up to do that work would have signalled that potential fault and that it could have been addressed long before the difficulties that it caused.
I turn briefly to the content of the amendments. It is a professional cut-and-paste job. I have just lifted the Social Security Advisory Committee provisions but those provisions have two things to which I should point. First, the Secretary of State can always override them, as he can under the SSAC rules, in an emergency or with the agreement of the committee if something goes wrong that needs to be fixed quickly. You can worry about the detail of the argument later. That is an important safety provision. That is enshrined in these amendments.
If the new commission has any sense, it will encourage a network of stakeholders. There are plenty out there who I am sure are willing to help. It should seize the initiative and try to encourage them to come in. They could all play a part in the newly constituted committee that I recommend in this group of amendments. All the necessary groups are there and, I say in passing, particularly non-resident parents. I have been studying this area of public policy for as long as anyone and I know that there are organisations such as Fathers 4 Justice and so on which work very hard, but they have a much harder job making representations on behalf of that important client group. Any such committee set up under these amendments would play a prominent role, as far as I am concerned, in the makeup of the committee that did the work.
In conclusion, for the additional level of assurance and the future operation and delivery of the new commission, this is a small price to pay in terms of extra administration and such extra bureaucracy that might be involved. I think it would give assurance to the client group which studies this policy area and it would give reassurance to parliamentarians that, when considering the regulations, they would be able to found them on some expert help that would guide them through the passing of the important secondary legislation that this primary legislation will provide for future consideration in Parliament. On that basis, I beg to move.
I do not know about other Members of the Committee, but ever since this Bill hit your Lordships' House for First Reading, I have been inundated with advice from all over the place. I think the Minister has held two, if not three, meetings on the Bill in my presence. Outside organisations are consistently giving me advice. Needless to say, I agree with some of the advice and not with the other, but that is beside the point—the advice is there.
The noble Lord, Lord Kirkwood, wants to set up a new committee, a child support advisory committee, to give yet more specialist advice on the orders that will flow from time to time from this Bill. He made reference to the SSAC—the Social Security Advisory Committee—which already exists. I also noted the 10th report of the Select Committee in another place. My reaction is that it is one thing to extend the remit of the SSAC but quite another to set up a new and specialised committee. In this case, it is so specialised that half the time it will not be needed. There will be erratic need for advice to be given, as and when orders are proposed.
Another small, niggling point is that there is a provision in the rules governing the SSAC that, in normal circumstances, any order that flows from a Bill within six months of Royal Assent does not have to be referred to it unless the Secretary of State feels that there is a particular and peculiar need. I do not see that provision in this set of amendments, but I could have missed it.
The other thing is that of course I recognise that there may be occasions when it is necessary to override the SSAC and for the Secretary of State to do things so fast that there is not time to refer things to the committee, whether that is the committee that the noble Lord, Lord Kirkwood, wants, or the SSAC. I recognise that he has incorporated that into the formulation for his new committee; but to have nine to 11 people sitting around waiting for something to happen—I am afraid not.
I have rather more sympathy with the push of the amendment. The SSAC does an extremely valuable job. The noble Lord is right that it normally comments on regulations after six months. The assumption is that within six months they come within the halo effect of parliamentary discussion. It is not dealing with an agency, so I would not think it appropriate to see the SSAC extending its remit to cover child support issues; they are a different sort of beast.
While it is highly desirable that the new Child Maintenance and Enforcement Commission and the new chair seek to extend their remit, particularly if the new board is going to be very tightly drawn, as I understand it probably will be, is there a reason why they cannot do it as is? In other words, does this need to be in the Bill? My hunch would be that this is the sort of thing on which the CMEC, being made up of good, sensible and competent people, will quickly determine whether it needs a wider circle of advice. My expectation is that it would want and need a wider circle of advice. Currently, the old Child Support Agency has the same wider circle of advice, involving groups such as Families Need Fathers. Is there any reason why it cannot be set up under the existing powers? I would be pretty unhappy about seeing such a prescriptive amendment being accepted. If my noble friend could give me the assurance that if the CMEC thinks that this is a wise move—as I would expect it to seek to do—it could do it, not just to deal with formal regulations, but to tap a wider body of opinion and views on child support as the context within which the new organisation operates and emerges.
The Government are unable to accept the amendment for the reasons that I will outline. Perhaps I can start with the comments made by the noble Lord, Lord Skelmersdale, and my noble friend Lady Hollis. The noble Lord talked about the ethos of the DWP in consultation and engagement, and he expressed his view about the wide range of stakeholders around this issue with which he has had the opportunity to engage. I absolutely agree with that. Specifically in relation to the point raised by my noble friend Lady Hollis, I would have thought it would be entirely in the interests of the commission to want to have a wider stakeholder group with which to engage, perhaps on an ad hoc rather than a formalised basis, as suggested here. The DWP as the sponsoring department would similarly have its consultation with stakeholders. That is a particular reason why we do not want to accept the amendment.
The noble Lord, Lord Kirkwood, raises a fundamental point about the importance of effective scrutiny of legislation and having the appropriate body, whatever that may be, to assist in that. We honestly do not believe that the additional tier of scrutiny that the Child Support Advisory Committee would represent is necessary in this case. The noble Lord, Lord Skelmersdale, talked about the scale of issues in relation to the SSAC. Looking at its last report, the SSAC scrutinised on average 36 sets of proposed regulations. We set down in the dossier that we shared with Members who expressed an interest in this legislation the proposals for the earlier regulations that are coming through that have not yet been drafted, some of which will depend on the commission’s input. Once we are in steady state, the advice is that the commission is likely to be looking to initiate something like two sets of miscellaneous regulations per year, and for two sets of such regulations we do not want the sort of infrastructure that is proposed here, with the number of people, staff and all the costs that go with that.
The vast majority of regulations in the Bill are certainly likely to be operational—concerned with matters such as how cases will transfer to the new scheme, the formal content of notices, and deadlines for information to be provided to the commission. The people with the expertise to scrutinise them effectively are those with detailed knowledge of the operations of the commission, including, for example, the capability of IT systems and the interaction of overall plans and strategies. It is right that the Commission, as an arm’s-length body solely focused on child maintenance issues, provides expert advice to Ministers on the policy behind the required regulations and the development of the regulations themselves.
That work will of course be subject to the overall direction and approval of the commission’s board, including the non-executive directors. The non-executive directors are in place to provide impartial, expert and professional advice that reflects a diverse range of fields. In this way, they will have a key role in shaping the regulations. The chair of the commission, with approval of the Secretary of State, will appoint those non-executive directors with the appropriate knowledge and expertise. These will be people who are particularly able to take these regulation issues forward.
As we debated last week, it is clear that the board has the opportunity to set up committees and sub-committees so that it can draw in particular expertise for particular areas if it needs to. Nor should we forget the scrutiny of regulations already in place; not only the process by which there is an obligation to consult when regulations are being drafted, but also the role of the Merits Committee of your Lordships’ House. For that variety of reasons, this is an unnecessary proposal. It will not add sufficient value, and could be quite costly and cumbersome. There are better ways to continue to engage with stakeholders to ensure that the CMEC is engaged in a real success.
I am not surprised by any of that, but I am disappointed. Two things strike me about what the Minister said. If he really believes—and I do not—that, in steady state, two regulations will be promoted by the commission a year, then there is an argument for adding it to the existing Social Security Advisory Committee. Its reason for not accepting the responsibility is that it would be too much work. Both these positions cannot be right. It may be that the committee is just ducking it because it is hard pressed, and it is. But if we are to have a steady state of two extra sets of regulations, it seems obvious to invite the committee to take this branch of semi-benefit law under its umbrella. It currently cannot because of how it is constituted and the provisions of its set-up. I will go away and contemplate, and perhaps talk to the Social Security Advisory Committee again. If its members could be persuaded that it would only be two sets of regulations a year, we might have a deal. I shall pursue that as a result of what the Minister has said.
The point that the Minister is missing, which the Committee must not miss, is that the value of what the Social Security Advisory Committee currently does is that it consults and publishes in the public domain. On websites, people can see what it says in detail. Any amount of stakeholder consultation that the commission does—which I encourage it to do, and we are all agreed that people are willing to help it—will be between it and the bilaterals, or the close communities that they serve. If this piece of public policy is going to take root and win public support, it should be much more broadly and widely promoted. The Social Security Advisory Committee, or some child support advisory committee, would be, in my view, an important part of that. On the basis that I will go away and think carefully about what the Minister has said, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 10 agreed to.
68: After Clause 10, insert the following new Clause—
“Review of the status of the Commission
(1) The Secretary of State must review the status of the Commission as a Crown body.
(2) The review under subsection (1) must be conducted as soon as reasonably practicable after the end of the initial period.
(3) The Secretary of State may review the status of the Commission as a Crown body at any other time after the end of the initial period, if the Secretary of State considers it appropriate to do so.
(4) The Secretary of State must prepare a report of any review under subsection (1) or (3).
(5) The Secretary of State must lay before Parliament a copy of the report.
(6) If, on a review under this section, it appears to the Secretary of State appropriate to do so, the Secretary of State may by order provide that the Commission is to cease to be a Crown body.
(7) An order under subsection (6) may—
(a) make any amendment to Schedule 1 that appears to the Secretary of State to be necessary or expedient in consequence of the Commission ceasing to be a Crown body;(b) provide for the Transfer of Undertakings (Protection of Employment) Regulations 2006 (S.I. 2006/246) to apply, subject to such modifications and exceptions as may be prescribed, as if, on the Commission ceasing to be a Crown body, there were a transfer of an undertaking or business which is a relevant transfer.(8) In this section—
“Crown body” means a body whose functions are to be exercised on behalf of the Crown;
“initial period” means the period of 3 years beginning with the day on which section 12 comes into force.”
On Question, amendment agreed to.
Clause 11 agreed to.
Clause 12 [Transfer of child support functions]:
69: Clause 12, page 5, line 35, leave out “section 46 (reduced benefit decisions)” and insert “section 6 (applications by those receiving benefit)”
The noble Lord said: I tabled Amendment No. 69 to prompt the Minister to offer me some clarification. I want to know why the Bill exempts the functions of the Secretary of State under Section 46 and not under Section 6 of the Child Support Act 1991. Section 46 is entitled “Failure to comply with obligations imposed by section 6” and those two sections are rather like love and marriage in the song, which go together like a horse and carriage.
Clause 12(2)(b) appears to reserve functions under Section 46 to the Secretary of State. Clearly, it is up to him to deem it right for people to be sanctioned by having their benefit withdrawn or reduced. I remember a discussion about this on the Welfare Reform Bill—no doubt the Minister does too—with which we had a happy time last year. This initial decision is taken under the powers of Section 6, not Section 46. Why is Section 6 not covered by Clause 12(2)(b). It may be that I have caused a slight fluttering in the doocot behind the Minister, but there must, I am sure, be a satisfactory explanation.
The Minister might be tempted to point me to Clause 15 to show that my amendment is not necessary because Sections 46 and 6 are to be repealed by the Bill. But this is not going to happen straight away. In fact, as I understand the position, it may not happen for some considerable time. The Minister may be able to expand on the timescale if he has any more detail. It certainly will not happen on Royal Assent, but there will be an interim in which the situation prescribed in Clause 12 stands on the statute book. I beg to move.
I thank the noble Lord, Lord Skelmersdale, for giving me the opportunity to explain why Clause 12 is drafted as it is. The amendment would alter the transfer of functions under Clause 12, so that the commission becomes responsible for Section 46 of the Child Support Act 1991, and that functions under Section 6 would remain with the Secretary of State. I shall seek to explain how this is the wrong way round.
Section 46 of the 1991 Act provides that, if a parent with care in receipt of a prescribed benefit chooses to opt out of the statutory scheme without good cause, the Secretary of State may apply a reduced benefit decision, reducing the amount of benefit that the parent with care receives. Given that this relates entirely to decisions on the amount of benefit a person is to receive, and not to child support, it is right that the function should remain solely with the Secretary of State.
Section 6, however, does relate to child support. It provides that a parent with care receiving prescribed benefits is automatically treated as having made an application for a maintenance calculation. As it falls to the Child Support Agency to handle such an application, this is a function which should be transferred to the commission. The transfer is achieved through Clause 12(1), and Schedule 3 makes the relevant modifications to the wording of the 1991 Act.
The noble Lord, Lord Skelmersdale, identified why functions under Sections 6 and 46 need be considered at all, when they are to be repealed under Clause 15. In fact, the repeal of Sections 6 and 46 may not be effected until shortly after the launch of the commission and there would be a short intervening period during which it is important that responsibility for these functions falls to the appropriate body. As it stands, therefore, Clause 12 simply ensures that responsibility for carrying out functions under Sections 6 and 46 falls to the appropriate authority before these sections are repealed.
On our estimate on timing, assuming Royal Assent is as we would all want, it is currently anticipated that we are looking at July for dealing with the Section 6 compulsion for the flow on to the case load, but October for the start. The earlier date would be for the on-flow, as there is no point in insisting that people come in if within a few weeks they have the choice to stay out of the system. I hope that that has dealt clearly with the noble Lord’s inquiry and that he will feel able to withdraw the amendment.
I shall certainly withdraw the amendment, but I found the answer, rather like the question, extremely complicated. I shall have to read it with some care because whatever the Minister says, there is a clear interaction between Section 46 and Section 6. The Minister suggested that Section 46 ought to go to the Secretary of State and that Section 6 ought to go the commission. I shall have to think about that. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 12 agreed to.
Schedules 2 and 3 agreed to.
Clause 13 [Transfer of employees]:
[Amendment No. 70 not moved.]
On Question, Whether Clause 13 shall stand part of the Bill?
In the earlier debate, I made clear my intention to oppose the Question that Clause 13 shall stand part of the Bill. This clause provides for TUPE transfer of CSA employees to the new commission. We have said all along that the people employed in the CSA are its biggest asset and would be critical in developing the modern service that needs to be put in place. I cannot emphasise enough how important it is that those people are moved across to provide the commission with a strong base on which it can build and to guarantee that there will be enough people to do the job from day one. However, as we discussed, following the amendment to give the commission Crown status, there is no longer a need for a TUPE transfer. Accordingly, I oppose the Question that Clause 13 shall stand part of the Bill.
Clause 13 negatived.
Clause 14 [Transfer of property, rights and liabilities]:
71: Clause 14, page 6, line 39, leave out subsection (2)
72: Clause 14, page 6, line 42, leave out “transfer scheme” and insert “scheme under subsection (1) (“a transfer scheme”)”
On Question, amendments agreed to.
Clause 14, as amended, agreed to.
76: Before Clause 15, insert the following new Clause—
“Information to be supplied by the Commission
Where the Commission has determined an application for maintenance under the Act and as a result a sum of child maintenance is payable, the Commission shall furnish the parent with care and the non-resident parent, at three-monthly intervals after the date of determination, with a statement setting out the following—
(a) the amount of the weekly liability, and accumulated liability over the three month period;(b) the amount paid by the non-resident parent over the three month period and dates when the payments were made;(c) the amount of any arrears which has accumulated over the three month period;(d) the total amount of any arrears owed to the parent with care.”
The noble Lord said: Amendment No. 76 takes us on to another important aspect of the work of the commission. It relates to the information requirements; that is to say, the obligations to be imposed on the commission and on parents to supply information. My noble friend Lord Addington and I have tabled five of the amendments in this group and the noble Lord, Lord Skelmersdale, has tabled two important amendments on the same kind of territory.
I shall start by making the case and asking a few probing questions about the quarterly financial statements that the amendment suggests be provided to parents. All of us who have experience of case work relating to the Child Support Agency understand perfectly well that one of the biggest bugbears and causes of contention between two parents is often an irreconcilable dispute about the figures on what has been paid in, what has been paid out and what is owing. It drives a wedge between parents; it is the biggest cause of aggravation, and leads to bad temper, anger, confusion and a great deal of very bad faith on both sides. At a stroke, if it could be magicked—although I am not suggesting for a moment that it is as easy as that—if there was some definitive accepted statement of the real situation, on an accurate, real-time ongoing basis, that would deal with a lot of the confusion and anger that arises in these circumstances and avoid a lot of disputes. The quintessentially simple idea is that once a quarter, both parents would get a statement through the letterbox, as I do from the Bank of Scotland, saying how much I owe. Then they would be capable of accepting the information in front of them and make their dispositions accordingly. If we could get into that situation, the resolution of these disputes would be easier.
The Minister was trying to help us last week by explaining that the new computer release, PR1, will sort some of the glitches in the current system and give enhanced facility and specification. One thing that I would like to know is whether PR1, if or when it is introduced in the course of the financial year, will provide that functionality and, if it can, how quickly it would be possible—if the Government decided to move in that direction—to produce that level of service. In particular, when the new statutory scheme starts in 2010, I would be very disappointed if we could not get, if not this precise proposal, something like it that serves the same purpose. If there were to be a regular flow of statements setting out the current position for both sets of parents, it would be strongly my advice that the user groups dealing with these groups of parents should be embraced in setting up the information and setting it out in a user-friendly way so that the best value could be obtained from any such initiative. So it is an important suggestion. It would help if it could be done; if it cannot be done, I should like to know why. If a technicality is getting in the way, I should like to know whether there are other ways around it.
Amendment No. 81 and Amendments Nos. 83 and 201 proposed by the noble Lord, Lord Skelmersdale, move into the territory of information being made available to the parent with care. Again, some of the same preliminary arguments obtain. Resentment and bitterness results when uncertainty about financial circumstances is evident. It can also prevent unnecessary appeals. From my experience of dealing with casework, the odds are stacked against the parent with care in trying to work out whether she has a case for variation or appeal. It is a high test to get a variation and an even higher one to get an appeal, but only then does she get access as of right to the level and quality of financial information that would enable her—and it is invariably a her—to decide whether she has a case or not. It is very cumbersome, stressful and expensive set of circumstances to contemplate.
At the moment, to put it crudely, the system seems simply to accept what the non-resident parent says. It is almost taken at face value. Experience since 1993 is that that is not a safe position to be in. Perhaps the casework that reaches those who are trying to help people consists of the aberrant cases, which involve the small percentage of people who are trying to swing the lead. But it seems wrong that the dice are loaded so self-evidently against the parent with care. That is the experience that has built up since the old and new schemes of the CSA were put into place. This legislation gives us a chance to try to redress that balance—and if we do not take it, that would be a great shame. The amendments deal with some of those important issues.
Amendment No. 77 specifically asks for a duty to be put on the commission to ask for that information. At the moment, the requirements are so soft that unless the NRP—usually the absent father—refuses, delays or deliberately and fraudulently makes a statement, nothing much more is done about it. The request to furnish information is made so that the Secretary of State can make his assessment of potential liability. It certainly is true that the NRP commits an offence if he makes a false declaration or fails to provide it; but he has got to be asked. In Amendment No. 77, I am saying that we should always ask all of them, ab initio, right at the start, so that if the answer comes back wrong, deliberately or otherwise, the situation can be dealt with at that time. We should be asking some very basic details about all his income sources, and it is key that he must be asked basic questions detailing all his sources of income. I agree with HMRC that that is going to be an easier place to start the income trail, but it is not by any means the end of the story on the totality of income or assets available. If we are interested in trying to generate the best outcomes for children, simply adding another step that asks every NRP to supply basic details of all his income sources gives you a very much stronger position to start from.
Looking at the figures for the year to March 2007, I notice 481 prosecutions for failing or misrepresenting circumstances. That is a tiny proportion of people who are doing this. Okay, prosecutions are hard to get, and the agency has been in a bunker trying to get through the legacy issues, but that is not adequate. The Bill gives us a chance to address it, and I will be very disappointed if we cannot get some improvement on the current situation.
Two amendments that are slightly off beam of the others are Amendments Nos. 202 and 206. Amendment No. 202 looks at risk assessment being required by the Office of Government Commerce or whoever—I am indifferent as to who does it, but the OGC is probably best qualified to do it—to make sure that there is rigorous, adequate protection and thought given to data sharing. We have noticed laptops going astray and CDs being committed to the post and lost. We need to lock this down in policy at a very early stage. I do not even know how long records are kept for or what the policy is for access to records, but in terms of loss of data, error, system failure and transmission of case data around the system, we need to have rigorous protection in hand. If I can get an assurance about that I will be happier. Amendment No. 206 is an invitation to make clear the fact that the courts with jurisdiction and hearing cases in these matters are not going to be stymied by people saying that they cannot have data either from HMRC or elsewhere. I beg to move.
As the noble Lord, Lord Kirkwood, said, this group of amendments considers the use and publication—to whom and where—of information. On Amendment No. 76, we on this side feel that furnishing all parties in these matters with the most accurate information concerning the payments would be beneficial. However, placing a duty on the commission to produce detailed quarterly statements seems to be overkill and is potentially too much of a burden.
The commission’s primary concerns of supporting maintenance arrangements and ensuring that parents comply with their obligations should be its priority. We had long discussions on Clauses 1 and 2 on Tuesday last week. We do not want to risk overburdening the commission with too many obligations that might distract from those priorities, laudable—I say that with due deference to the noble Lord, Lord Kirkwood—as these obligations might be. Of course, dissemination of this sort of information might prove useful at some stage. I wonder whether the Minister feels that one of the causes of the breakdown in payments of child maintenance is indeed a lack of information. If he feels that, it seems to me perfectly obvious that we need to do something or we need to amend the Bill in some way to try to solve that problem.
On my Amendment No. 83, I sought advice on the drafting from Resolution—the Solicitors Family Law Association. This amendment considers the issue of disclosure of information to the parent with care. As the noble Lord, Lord Kirkwood, said, under the current provisions and under the proposed system the parent with care is powerless to advise the committee whether she believes the maintenance calculation has been carried out correctly because she simply does not know. That is due to the fact that only very limited income detail is provided to the parent with care—the information used in the assessment process.
First, I would like to consider the issues that lie behind the need for this amendment. It goes almost without saying that child maintenance is paid to the parent with care to support the child. The detailed information used in the process, in particular the income of the non-resident parent, is not provided to the parent with care, so that person has to rely on the commission to obtain all necessary information from all relevant sources. When the calculation has been carried out, the parent with care is deprived of the opportunity to check that the information given is correct or complete and, therefore, cannot evaluate whether the commission has made an appropriate decision by reference to the information provided.
I anticipate the Minister telling me that the information of the parent with care on the financial circumstances of her former partner—or his former partner—is likely to be out of date after a period. Yes, I am sure it is, but none the less, here I am interested in the original calculation and the very recently separated parent with care will have a very good idea of the financial circumstances in the case of her former partner.
It is my opinion that the provision of information to the parent with care would assist in the purpose of bringing about effective maintenance arrangements for children. The current and proposed systems provide an opportunity for the non-resident parent to seek to misrepresent their circumstances to reduce maintenance liabilities. Obvious examples include where the non-resident parent has failed to disclose the true extent of income or of any second income that he may receive. Later we shall discuss what income means, but for the moment I shall leave it there. No safeguards are provided to the parent with care as that person is completely excluded from the information-gathering exercise. Detailed information is, however, provided to the parent with care if an appeal is lodged, as the noble Lord, Lord Kirkwood, says, which means that the parent with care has no alternative but to lodge such an application if the level of the maintenance calculation is in their mind in question. That unnecessarily increases the workload of the appeal tribunal. I would like the Minister to give me an explanation why such detail can be provided at the appeal stage, but not at the time of the initial calculation. It seems more than illogical to me.
As an analogy to the child support system, in the court process where financial matters fall to be considered, there has to be full and frank disclosure between the parties supported by documentary evidence. That continues to apply if, for example, the parties have to return to court years later for spousal maintenance to be reconsidered. The spouse seeking financial support from the ex-partner is entitled to be provided with full financial information about that person's income. Child maintenance is a similar form of financial support and I query why spousal maintenance should be treated any differently from child maintenance.
My Amendment No. 201 follows up the amendment that I have just discussed at, I am afraid, some length, in a bid to end any secrecy or misinformation surrounding child maintenance negotiations. Does the Minister not agree that it seems unjust that civil servants working within the commission are allowed access to information that a parent with care chasing maintenance for the benefit of their child or children is not?
I am grateful for these amendments being tabled because they give us an opportunity to talk about information-sharing arrangements between the commission and its clients. This group variously makes provisions to require the commission to gather and share the financial details of parents prior to and after the determination of an application to the commission, to safeguard the information held by the commission, and for the commission to produce details of payments. I agree with noble Lords that ensuring that information held by the commission is secure must be important and should be a key feature of the future scheme, and that in all cases appropriate information should be made available to parents. I expect the commission to treat these issues as a serious priority.
Amendment No. 76 would compel the commission to provide parents with a statement of maintenance payments at three-monthly intervals following the determination of an application. That would include details of the maintenance liability, payments made and any arrears that had accrued during the period. The proposed new clause would require the commission to provide detailed information at prescribed intervals. That would place a burden on the new organisation before it had started, by effectively obliging the commission to set up a costly administrative process.
The noble Lord, Lord Kirkwood, asked whether the provision of routine statements would be provided for within the functionality of the current system. The functionality to produce quarterly statements is not included in PR1, although the agency is currently designing the requirement for enhanced client statements, which is planned to be included in a release later this year. We should also recognise that, for the longer term, the commission may want to explore other ways of providing parents with information about maintenance payments. One such option would be to provide parents with access to information via the internet, for example, just as you can sometimes get via your bank. I agree that that is too prescriptive for the point made by the noble Lord, Lord Skelmersdale, but it is best practice to develop these arrangements so that information can be properly communicated to parents with care and non-resident parents.
If statements are being produced, I see no reason why they should not encompass the obligations of the non-resident parent as well as the parent with care. There is obviously a particular issue for the parent with care, because that parent is the one receiving the cash. It is very important that they can keep up-to-date with the sums due to them under the calculations and the extent to which those sums have been received. That is probably rightly the primary, but not the exclusive, focus.
Amendment No. 77 would appear to require the commission to gather the financial details of non-resident parents prior to the determination of an application for maintenance. Those who fail to provide such details would be subject to criminal sanctions. I remind the Committee—and the noble Lord, Lord Kirkwood, acknowledged this—that it is already a criminal offence, punishable by a fine of up to £1,000, for a non-resident parent not to provide information required to make a maintenance assessment, and that will continue to be the case.
However, we already know that a system based on financial information provided by non-resident parents leads to substantial delays in the assessment process, and may be subject to numerous changes at the request of either parent. That is why we propose to base the assessment on historical income data provided by HMRC and not on information provided by the non-resident parent. This amendment would call that process into question. Further, this amendment would result in a significant duplication of effort, since in many cases the commission would be investigating income information that had already been looked at and provided by HMRC. No purpose would be served by repeating those investigations or requiring non-resident parents to provide the same information twice.
Over the past few months as the policy on information and support has been developed, one issue that has most exercised me is what income should be taken into account and how that can best be accessed. We know from experience that what has created problems in the past is the desire to have fully complete information about the expenses and income of both parents and to have to rely on a variety of sources for that information to be compiled. That was what caused the CSA, in significant measure, to fail. We must avoid that: I cannot stress that too strongly to the Committee. It is a matter that I have thought long and hard about over recent months. There is something worrying about not being able to gather together all the information for an assessment to which noble Lords have referred. If that happens, we know that assessments will not be made on a timely basis and, in a large number of cases, we will not get more cash flowing to more children.
Amendment No. 81 would require the commission to gather information about both parents and share that information with both parties. I understand how that could be seen as beneficial to parents in understanding each other’s financial circumstances, but gathering such additional information would be unnecessary to the function of the commission. I am sure that the Committee will remember the difficulties that we faced, and continue to face, in administering the first child support system. That system requires the agency to gather the financial details of both parents, and takes into account the full financial circumstances of both parents including housing costs, unearned income and loans. Further, this amendment would violate the spirit, if not the letter, of the Data Protection Act 1998, as it would mean disclosing the financial circumstances of the non-resident parent to the parent with care, even in circumstances where that information is not relevant to the maintenance calculation in the current or future schemes. Under current arrangements, the parent with care can request a copy of all information relevant to their case from the Child Support Agency, and that arrangement will continue under the new commission.
The information that would routinely be provided and available to the parent with care would be the income of the non-resident parent on which the maintenance calculation is based. Factors affecting the maintenance liability could be any variation, the existence of a relevant other child or any personal information held regarding the parent with care themselves, but that does not necessarily amount to the full flow of information that might arise under these amendments.
The noble Lord, Lord Kirkwood, said that in circumstances where the relationship had just broken down, the parent with care would be likely to know quite a lot about the financial circumstances of the non-resident parent. However, that would depend on the relationship that has broken down. Clearly, if there has been a marriage or a long-standing relationship, that is more likely to be true. However, it would not be true in many of the cases with which we are dealing: the relationship might have been quite casual and brief.
Amendments Nos. 83 and 201 are very similar in effect so I will address them together. They would give the commission the power to share any information regarding the non-resident parent in relation to functions of child support with the parent or person with care. If we were to implement the changes suggested, we would give the commission the power to disclose such information as the address and telephone number of the non-resident parent, or the names and other personal details of other children of the non-resident parent, to the parent with care. Such inappropriate use of information held by the commission must be protected against in legislation so that it is clear that inappropriate disclosure of information is unacceptable and that the commission has every regard for the privacy and data security of its client.
In practice, there are very few instances when the commission would need to provide personal and financial information relating to the non-resident parent to the parent with care in order to exercise its functions, and currently the parent with care automatically receives all details that we believe are necessary.
These arrangements will continue under the commission. We are sure that this provides sufficient access to information for the parent with care, while protecting the privacy of the non-resident parent.
Amendment No. 202 concerns the security of information and would require the information held by the commission to be subject to a risk assessment. Protecting personal information is a top priority for every government department and will be expected to be a priority for the commission also. The department is currently reviewing its IT and data-sharing arrangements to ensure that the processing and sharing of information is carried out fairly, lawfully and strictly in accordance with the Data Protection Act.
The department plans to ensure that the commission follows through any recommendations from the review and will, if necessary, ensure this by using its powers to issue guidance and direction to the commission. Therefore, I do not believe that it is necessary for the Office of Government Commerce to perform a risk assessment on the data as held by the commission.
Amendment No. 206, the final amendment from this group, would give the courts access to much of the information held by the commission. Paragraph 1 of Schedule 6 to the Bill puts into place powers for the commission to transfer information between agents acting on behalf of the commission. It also enables the commission’s agents to give information acquired while acting on behalf of the commission back to the commission. Further, the agency is currently able, and the commission will be able in the future, to disclose information to the courts and tribunals where such disclosure is made for the purposes of any proceedings relating to the Child Support Act 1991 or where a court has exercised any power to make, vary or revive a maintenance order or maintenance agreement. This enables the agency and the commission to disclose information when applying for or defending an action which has been brought in respect of a particular issue on a case. We believe that it would be inappropriate for the commission to disclose information to the courts in matters beyond its primary concerns, which could include property disputes, custody hearings, or criminal trials. I hope that with those assurances and arguments, I have convinced the noble Lord to withdraw the amendment.
Later, we shall debate the position and knowledge of the parent with care, and the ability to make applications under the variation scheme. That will be a good opportunity to develop further some of the discussion around this important issue.
That last sentence was helpful, because there is a danger that we will conflate these two issues. I wanted to make it clear that no one is expecting the commission routinely to disclose revenue information regarding NRPs to the parent with care in every case. I will study carefully what the Minister said, but I think that he is founding far too much on the ability of HMRC to be able to identify anything other than a single income stream, whether earned or otherwise. If that is the basis of everything that flows—I understand the need to get it done quickly and to get the assessment made and in place—there is a real risk that the parent with care, who is invariably the mother, will be left short-changed. We will come on to that later.
Yes, we will come on to that later, but the noble Lord is right in saying that when we look at HMRC data, we are looking at data of employment income and the process of returning that employers’ to HMRC, and HMRC to the DWP and self-employed income. We will come on to discuss the broader issues around investment income, but certainly the starting point is that that information will not be used in the calculation of maintenance. It is not routinely included in the current system, but we will come on to that later.
We want to be clear that we believe that the information flow from HMRC will deliver what we need to make the assessment, given the constraints of that assessment process.
I understand that and the point is well taken. But how is the parent with care able to make a judgment about her next step, even if she has the right and title to move to a next step; either going for a variation or an appeal right away? There is a real risk that she will be short-changed.
I have picked up on something else, but I do not want to stray into the next debate. Using data protection too early in all this worries me because the Commissioners for Revenue and Customs Act 2005 has some right and proper protections for people’s records. Section 18 states that data can be provided where it is in the public interest to disclose under Section 20 of that Act. I hope that we are not going to start hiding behind confidentiality to deny parents with care the ability to make proper judgment about whether they have title to mount a variation.
78: Clause 15, page 7, line 23, at beginning insert—
“(1) Subject to subsection (2),”
The noble Lord said: We now come to what I consider to be an important part of today’s proceedings. These amendments are in concert with Conservative colleagues. I was told this morning—I think that the noble Lord, Lord Skelmersdale, received the same message—that bone fide pressure groups and specialist organisations such as Barnardo’s, the Child Poverty Action Group, Citizens Advice, National Children’s Bureau, the National Council for One Parent Families, Gingerbread and Resolution are all deeply interested in this group of amendments. It is my pleasure to move Amendment No. 78, which is about full maintenance disregards in the new set-up.
Before I say anything else about the merits of the amendment, I hope that the Minister will take the opportunity for an update as to when and exactly how Sections 6 and 46 may be abolished. I know that the intention is that it will be by the end of 2008, but that is now looming. If we are to have a staged abolition of Section 6—and I am not sure about that—it is important to notify at least those organisations I have mentioned. They deal, importantly, with clients, trying to advise them and help them through the process of change. If Section 6 is rolled out just for new benefit applicants, what will happen to existing benefit claimants who want to opt out? That may still be being worked on, but we must be careful about how we do it. If it is done the wrong way, and if those clients say that they no longer want child support via the CSA, they could face a reduced benefit direction. I am sure that the Minister is alive to that, but it is the kind of pit that we could easily fall into if we do not plan this properly.
If the timetable is not worked out to the nearest week or day, that would not surprise me. However, if anything can be said about the transition towards the end of 2008 to move out of Sections 6 and 46, it would be of assistance to the Committee’s proceedings today.
Amendment No. 78 makes the abolition of Section 6 conditional on the introduction of a full maintenance disregard for income support or jobseeker’s allowance means-tested. Obviously, it is a probing amendment. Parliament did rather well in getting the maintenance disregards that it did. The announcements that came in the Pre-Budget Statement were very welcome. I think that 41,000 on benefit under the old scheme will receive the £10 disregard from the end of 2008. It has been increased to £20 thereafter, and £40 from 2010-11 will make a difference. It will drill into some of the more intractable parts of the campaign to eradicate child poverty. There are estimates in the Henshaw report of how many children that could take out of poverty.
The case for a full maintenance disregard gets stronger as we go on. We had some important debates earlier in the Committee’s proceedings about how important child poverty is to the public debate, going forward to 2010 and the Government’s eventual abolition target of 2020. Here we have the prospect of a real, tangible, early way of maximising the number of children lifted out of poverty through the child maintenance system that is costed and targeted. Henshaw’s modelling suggested 80,000 or 90,000 children; that is 30,000 or 40,000 on top of the 50,000 in the pre-Budget announcement. That prize is really worth driving for. Even if there is no other reason for adopting a full maintenance disregard, that would be sufficient in itself to make the case.
Briefly, I want to mention three or four other things that are pretty obvious but worth restating. It would be a significant incentive to the non-resident parent to pay child maintenance. However, there is a danger that if we get to £40 in 2010-11, it could become the going rate for payment to parents with care and benefit. That, as Professor Parkinson pointed out when he was over a couple of weeks ago, could have the perverse effect of leaving wealthier non-resident parents to benefit if they are making payments to parents with care on benefit, and sticking to the £40 rate when they could be paying more. An incentive effect can be realised from this policy if we seize the opportunity in the Bill.
It is cost-effective. Some of the department’s modelling suggests that an extra £90 million, on top of the £140 million already committed, is a significant sum of money. I am not daft; I know this. Comparing the cost per child of lifting people out of poverty against the cost per child of doing the same thing using the tax credits system, my evidence is that child maintenance could lift a child out of poverty for £3,000; it would cost £4,300 with the tax credit system of which the Prime Minister is so enamoured. Full disregard is a cost-effective way as against child tax credits, which seem to be the Government’s favoured mechanism for making future improvements in child poverty. If the Government are thinking of doing that, this is the cost-effective way of getting the same end result.
Administrative savings are not insignificant. The current notification and re-notification process within Jobcentre Plus and the Child Support Agency have obviously come across great difficulties in co-ordinating the payments and keeping them up to date as parents with care fall out of work, into benefit and back again. I cannot quantify that, but I know that there will be serious and significant administrative savings in a number of different respects, costs which Jobcentre Plus and the Child Support Agency are stuck with under the current system, complicated as it is.
It is not right to use as a defence against a full maintenance disregard that it is a potential work disincentive. A learned article by Professor Alan Marsh, only a quarter of which I understand, may have been put in the Minister’s red box. If it has not, I hope that it will be this weekend; it does not make for happy reading, I can tell you. It is a learned piece of work that certainly persuaded me, as a layman, that work incentives remain strong even when maintenance is fully disregarded. That cannot be fully ignored. That is especially true in looking at the new requirements for parents with care with children aged 7 and over, where they will be expected to look for work as a condition of receiving benefit come 2010.
There is a whole host of good reasons for making this case. I would not be surprised if the department was quietly making it to the Treasury itself. This would be a big hit, a real gain, and would launch this new commission with a flourish. It would give everyone a whole lot more enthusiasm in getting it to win over public hearts and minds, and would make a real difference. The Government need every lever available to them to realise the target of halving child poverty by 2010. I do not think that there is any realistic chance of that. I do not believe they can abolish child poverty by 2020, unless they use levers like full maintenance disregards. The case is very compelling. On that basis, I beg to move.
The amendments in this group, so ably moved by the noble Lord, Lord Kirkwood, again suggest some caution in regard to the abolition of Sections 6 and 46 of the Child Support Act 1991. They make that requirement to co-operate stated in the 1991 Act conditional on the introduction of a full maintenance disregard for child maintenance payments with income support and jobseeker’s allowance. If I had any in this room, my noble friends would be rather surprised that I added my name to these amendments, because they are not yet my party’s policy. I put my name to them to point out an anomaly, as I see it and to which I have referred in earlier debates, in the benefits system.
Child maintenance payments are wholly disregarded for tax credit purposes. These amendments would allow the same complete disregard for poorer parents with care; that is, those on the benefits I have just stated. Does the Minister have any idea how much this would cost? The proposed maximum disregard of £20 from 2008, rising to £40 in 2010, would make it unlikely, where the parent with care is on benefit, that the non-resident parent would choose to pay any more than this amount even if he could afford it. Here, I agree with the noble Lord, Lord Kirkwood. Private maintenance arrangements would not result in any more than the disregard. There will therefore inevitably be wide money differences between the statutory and the non-statutory schemes. I recognise that a full maintenance disregard would provide the largest incentive to parents with care to seek maintenance and non-resident parents to pay what they can afford, and would increase the numbers of children taken out of poverty. That is, if it is affordable, and it may or may not be a big “if”. I shall await the Minister’s answer on that with eagerness.
I would also think that the Government would find these amendments appealing, given that the application of this disregard would mean significant administrative benefits to CMEC and to Jobcentre Plus. I support the thrust to get a debate going on this, although I did not support the detail.
The amendments taken together seek to link the repeal of Sections 6 and 46 of the Child Support Act 1991 with a full disregard for maintenance payments in the main income-related benefits. As Members of the Committee will be aware, our aim is to encourage parents to make their own arrangements for maintenance while maintaining a statutory maintenance service for those who cannot or do not wish to. This is why we propose to repeal Sections 6 and 46. This removal of compulsion is the first step in moving to the new system of child maintenance.
The noble Lord, Lord Kirkwood, asked me specifically about timing on the removal of this. These are working assumptions, which I referred to in a previous debate. They are not locked in precisely. It may depend in part on how quickly we make progress on this Bill and get Royal Assent. The noble Lord can assist us in that. The proposal is that in July 2008 the reduced benefit directions will be removed for everyone and the Section 6 compulsion will be removed for the flow of people onto the maintenance arrangements. For the reason I outlined earlier, there is no point in forcing people who do not want to be in the system to be in it and, as soon as they are in it, giving them the choice of staying in it or not. In a sense, it will be a two-stage process, with October being the date when we currently hope that the Section 6 compulsion will be removed across the piece. At that point, the higher disregards, the £20 disregard, and the current scheme cases extended to voluntary scheme cases will be introduced, and in 2010 there will be the higher disregard of £40.
We will continue to encourage parents to arrange child maintenance alongside the repeal of Sections 6 and 46. The commission will provide an information and support service supporting parents, particularly those on low incomes, enabling them to make maintenance arrangements which suit them best. I stress that when the removal of Section 6 happens it will be vital that the information and support service is up and running in a robust fashion. In the child maintenance White Paper, we made the commitment that from 2010-11 parents with care on benefit would be able to keep significantly more of the maintenance paid before their benefit is affected.
The announcement made in the 2007 Pre-Budget Report exceeded that commitment; the disregard will be increased to £20 a week by the end of 2008 and extended to parents on the pre-2003 child maintenance scheme who are currently not eligible for it. There will also be a full disregard in housing benefit and council tax benefit from this point. We will then double the disregard to £40 a week from April 2010. This marks a clear contrast with arrangements prior to 2003, where each £1 of maintenance paid reduced benefit entitlement by the same amount. The changes will benefit some 350,000 children and will lift around 50,000 children out of poverty.
We want to start encouraging parents to make maintenance arrangements as soon as possible, so we should not make the timing conditional on increasing the benefit disregard, whether to £20, £40 or to a full disregard. It is important that we do not put that stricture in place, and I do not think that was the intention of the noble Lord. There is enough in the new system from the outset—the extended and increased disregard and the new information and support service—to encourage positive parental choice. We will be building on that by doubling the disregard in 2010.
A number of points were raised about cost. The noble Lord, Lord Skelmersdale, asked what it would cost. There was an old figure of £230 million, but that has subsequently been adjusted and updated to £180 million. That is a tentative figure, but it gives the scale of the possible cost involved. The noble Lord, Lord Kirkwood, said that it is important to use all the levers that we can in tackling child poverty. That is right, and a lot of levers are being used, particularly with the focus on work, getting lone parents into work and supporting them in that, and the use of the tax credits system. Child maintenance has an important role to play, and the disregards that we are proposing to enter into the system will make a significant contribution. We should not hold up the introduction of these important changes until a full disregard may be available.
I think we should recognise that it may in some cases be seen as a limiting factor. It is a much higher ceiling than we have at the moment with the £10 disregard, so it is a substantial move. There is some risk that that will be seen as a target figure in some cases, but not necessarily in all cases.
I shall share some current data with noble Lords: 87 per cent of the current case load—the total case load, just not the current scheme case load—has a maintenance liability of less than £40 a week. At the moment, without that £40 limit, the arrangements are overwhelmingly below £40. Seventy-five per cent of the case load has a maintenance liability of less than £20.
The noble Lord, Lord Skelmersdale, asked the Minister the apposite question about the cost. It is true that the cost came down: it was over £200 million and fell to £180 million. I am not sure whether that is gross or net. It is important to know what the best modelling advice is because the figure for the totality of the cost and the savings is much more sellable to the Treasury than we would imagine. I would like to ensure that we can get the best handle on what figure is at stake, and that would be in the department’s interest as well. It is undoubtedly a big sum, but there would be a lot of benefit if it could be found.
I am tempted to say that I shall withdraw the amendment only if the Minister promises to read Professor Alan Marsh’s paper The Disregard of Child Maintenance Payments. It is only 11 pages and will fit snugly in his ministerial box. I shall try to persuade him later. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 79 and 80 not moved.]
Clause 15 agreed to.
[Amendment No. 81 not moved.]
82: After Clause 15, insert the following new Clause—
(1) The Secretary of State shall, within twelve months of the coming into force of this Act, publish a report—
(a) reviewing the provisions of the Child Support Act 1991 (c. 48) relating to shared care, with a view to their repeal; and(b) examining alternative provisions for increasing and extending variation provisions for non-resident parents.(2) The report shall be published and laid before both Houses of Parliament.”
The noble Lord said: The three amendments in this group tabled by my noble friend and me try to tackle the thorny issue of shared care and attempt to take a realistic view of it. Amendment No. 82 calls for a review of the shared care rules within 12 months of the Act coming into force. Amendment No. 89 is more of a probing amendment than many amendments and is about the process of the shared care decisions. Amendment No. 90 is effectively an attempt to define realistic shared care.
I know that there is a great danger that when a Minister sees a call for a review his eyes start to glaze over, but the aim of Amendment No. 82 is to try to value the shared care; that is, the support of the parent who does not have day-to-day care. What is that parent’s role and what should be given to encourage him or her to take a greater role in support? The unfortunate background to this is that people may use shared care simply as a way of making fewer payments; it is, generally speaking, fathers saying that because he takes the child for x amount of time, x number of days or x number of afternoons there should be a reduction. This is not a call for that. It is a call for a review about what should be required to encourage and support people in the sharing process. We have heard so many arguments stating that two parents are better than one. If those parents decide that they cannot or will not live together in the same household unit, having the two parents making input separately is surely better than having only one doing so. All the arguments in another part of the department about respite care surely reinforce that. There needs to be a real review about government intervention—for instance, providing support to enable the person who is not the main carer to have interaction.
Amendment No. 89 again is a probing amendment to seek clarification and answers to some unanswered questions. Will the interim shared-care provision apply to all parents who approach CMEC or just those who are recently separated? For instance, will there be any grounds for an appeal where the non-resident parent does not have the children overnight during the six-month period and, therefore, the parent with care will lose out on some much-needed financial support for the children? How do those things work? That is what we are trying to get at.
Amendment No. 90 probably is the most substantial amendment. The amendment would allow for a deduction in child maintenance and liability in respect of shared care only if the child in question stays overnight with a non-resident parent for at least three nights a week on average or at least 156 days in a 12-month period. Effectively, in a seven-day week, three nights a week probably is about as close as you can get for shared care. It is half the time and is a long-term commitment. How can we bring that in? When you take on the fact that this is split as close to down the middle as you can get in a seven-day week, what is the situation? Can we have more clarification? If a person takes on that degree of the upbringing of the child, there might be some concern about whether they are also providing things like half the clothing and school-runs, et cetera. There might need to be a declaration that a person is doing half the care or something very close to it. Should that be taken into account? I beg to move.
I thank the noble Lord, Lord Addington, for moving this amendment and for the manner in which he did it. This group variously makes provisions to increase the threshold at which shared care is taken into account in the maintenance calculation; removes the new rules proposed by the Government to aid in the administration of shared care; and requires the Secretary of State to publish a report, within 12 months of this Bill coming into force, reviewing the current shared-care rules.
I am aware of the noble Lord’s concerns regarding the shared-care rules as they operate under the current schemes, and on the issue of the new shared-care provisions that this Bill will allow for. Therefore, I welcome this opportunity for debate, and recognise that the shared-care regime as it stands does not perfectly satisfy either parents with care or non-resident parents. However, I believe that the rules strike a reasonable balance between parents.
Amendment No. 82 requires the Secretary of State to publish a report reviewing shared-care rules with a view to their abolition. Shared care is an issue with no unanimous view about the right way forward. The consultation on the child maintenance White Paper revealed little common ground among stakeholders as to what the rules should be. As such, existing rules will be carried forward largely unchanged, and there are no plans to depart from the basic rule that any reduction should be based on the number of nights a non-resident parent has their child with them.
Obviously, as we have developed these and previous child maintenance proposals, we have fundamentally looked to uncouple issues of contact between parents and their children, recognising all the research and important information on engagement of non-resident parents with their children, as well as engagement with parents with care, with issues of child maintenance, notwithstanding the need to recognise that costs are involved if non-resident parents look after their children from time to time on one basis or another. We try to de-link those two issues of contact and maintenance.
The rules that determine which parent should pay in a case of shared care are currently in regulations and will continue to be in the future scheme. If we decide to make any changes to the rules on shared care at the same time as we are introducing the first regulations for the new calculation rules, they will be made through the affirmative resolution procedure and therefore undergo scrutiny by Parliament. Such a report as suggested would therefore seem unnecessary. So there will be an opportunity to debate them.
We have introduced a number of minor changes to the shared-care regime to help parents reach an ongoing agreement, which Amendment No. 89 seeks to remove—I understand that it is a probing amendment. These changes allow regulations to be made which would allow the commission to proceed with a maintenance calculation for a certain period on the basis of an assumption about the level of shared care if parents have not yet agreed what the level should be.
In a range of discussions we had with stakeholders, it was represented to us that one problem in getting maintenance arrangements under way quickly was arguments about shared care. We looked administratively to see how we could cut through that problem. The proposal is that for the first six months of the case an interim decision will be made to give the parents the chance to reach a decision in their own time. At the end of the six-month period, if agreement has been reached, then that can be used as the basis for the adjustment of the maintenance calculation. If no agreement has been reached by that stage, then the reality of the existing shared-care arrangement can be used to determine the effect on liability. The aim is to help a pattern of shared care to be established that will provide a more accurate basis for the maintenance calculation. Removing those powers, as suggested by the amendment, would result in that not being possible.
It would need to be covered in regulations. The Bill provides for regulations to be made to facilitate that.
Amendment No. 90 would mean that a reduction in maintenance liabilities for shared care would not occur unless care was shared for at least 150 nights per year. The noble Lord may wish to distinguish equal care from shared care. There are arguments about whether any maintenance should be paid in equal-care arrangements. That is not where the Government are on that; we are currently planning to carry forward the current arrangements. We are committed to recognising ongoing shared-care arrangements where they exist and to encouraging them where they do not. If these amendments were accepted, the commission would be unable to recognise the vast majority of shared-care arrangements.
Where shared care does occur, in most cases it is for fewer than two nights a week. Only about 2 per cent of the agency’s caseload has overnight care of children for 156 nights or more per year. The reduction in maintenance recognises that shared care invariably involves non-resident parents in extra expense and that that can be substantial. The rules offer a simple and transparent incentive for non-resident parents to share care, both financially and in terms of legal recognition of the ongoing relationship. If the threshold for shared care to be taken into account is increased to 156 nights per year, more non-resident parents would be unable to meet the costs of their children staying overnight and shared-care arrangements would suffer as a result. I hope that on the basis of that explanation the noble Lord will feel able to withdraw his amendment. If he feels I have not covered all the points he raised, and if he lets me know, I shall try again.
I thank the Minister for his response. On Amendment No. 82, his answer was, “Don’t worry. We’ll get back to it, probably in this Room, going through regulations at considerable length”. On reflection, I think that Amendment No. 90 might be too high a threshold. One of the reasons why it was designed as it is was to show that there should be an expectation that some contact—the odd overnight stay—should be regarded as perfectly normal. Is it part of the Government’s thinking that it should be quite normal to have some contact—for instance, the odd stay-over? Would that be regarded as normal, as nothing exceptional?
Of course, we would encourage that sort of contact when it was appropriate—and there may be cases when it is not. At the moment the threshold at which adjustment to maintenance obligations kicks in with shared care is when it reaches 52 nights a year. Below that, if there are overnight stays, there would be no adjustment. So we already have a threshold. When overnight contact is between 52 or 103 nights, or further up the scale, and when it is appropriate, the Government would want to encourage it. It is for the parents and children involved to settle these matters. We do not want to have arrangements that would discourage that.
The problem with this issue, and the one that we face through a number of engagements with stakeholders, is that some say there should be no adjustment for shared care, while others say that there should be far greater adjustment. That is why we felt that there was no compelling reason to move away from the current scale, other than to seek administratively to ensure that the arrangements do not get in the way of allowing assessments to be made, not only in respect of the opening period and how you can identify what the starting point should be for shared-care adjustments but also to lock the arrangements in as part of the fixed-term awards. Another bugbear of the current system is that there are endless requests for changes of circumstances, including arguments over whether it is one night more or less. Administratively that can be very complex, so trying to get that sorted up front and to lock into fixed-term arrangements, as we seek to do on incomes as well, will certainly help to make maintenance arrangements effective and move cash more quickly for the benefit of children.
I thank the Minister for that clarification—I had forgotten to ask the question initially. I hear what he says. It is probably a question of going away and having a think to see whether there is any mileage or new points to be brought out of this. The question is where we draw the line and how much encouragement should be given to regular but casual and normal contact. That is probably the underlying message, to try to get people involved. As that requires ongoing thought, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 83 not moved.]
Clause 16 [Changes to the calculation of maintenance]:
84: Clause 16, page 7, line 35, at end insert—
“( ) No application may be made at any time under this section with respect to a qualifying child or any qualifying children if there is in force a maintenance order in respect of that child or those children and the person who is, at that time, the non-resident parent.”
The noble Lord said: I begin with an apology to the Committee on this amendment, as not only is it in the wrong place but it is also in the wrong words, which does not help either advisers or participants in the Committee to understand what on earth I am on about. So I shall try again. A suggested place would be after Clause 16; in Section 4 of the Child Support Act 1991, subsection (10) should be deleted and substituted as follows:
“No application may be made at any time under this section with respect to a qualifying child or any qualifying children if there is in force a maintenance order in respect of that child or those children and the person who is, at that time, the non-resident parent”.
Would the Minister like me to repeat those details?
Section 4 of the Child Support Act 1991, subsection (10) should be deleted and substituted as follows:
“No application may be made at any time under this section with respect to a qualifying child or any qualifying children if there is in force a maintenance order in respect of that child or those children and the person who is, at that time, the non-resident parent”.
The amendment is grouped with Amendments Nos. 194 and 195, both of which stand as printed in the Marshalled List, in the right place and in the right words! I tabled these three amendments to prompt a discussion on the 12-month rule, which features in Section 4(10) of the Child Support Act 1991. Amendment No. 84 is a proposed substitution of Section 4(10), while Amendments Nos. 194 and 195 are simply additional probes.
I shall provide a bit of background on the 12-month rule so that we are all singing from the same hymn sheet—or page of legislation. The rule applies where parents have a consent order or, in Scotland, minutes of agreement, made on or after 3 March 2003, dealing with the payment of child maintenance. The rule prevents parents from applying to the CSA for a maintenance calculation for the first 12 months that the order is in place. After that period, either parent may apply to the CSA, effectively terminating the original order.
The Solicitors Family Law Association—Resolution—provided me with a real case to explain the point. Resolution was acting for the parent with care in a divorce case, attempting to negotiate a financial agreement. The division of capital was actually agreed, but they failed to reach a settlement. The case had to go to a final two-day hearing, solely because of the issue of maintenance. While the non-resident parent offered a figure for child maintenance, they wanted it to be called a “school fees order” to ensure that after 12 months the parent with care could not refer the matter to the CSA with a result that the payment was reduced. The non-resident parent refused on that basis.
I have tried to anticipate the Minister’s retort. Perhaps he is about to say that if the 12-month rule was abolished, parents would be locked into agreements that were no longer working. However, that is not the case. An order for child maintenance invariably has an indexation clause providing for yearly increases. Applications back to court are therefore extremely unusual because, unless there has been a substantial change of circumstances—for example, one party has had a significant windfall—there is simply no need to return to court. The 12-month rule does not promote this “set and forget” concept, as it promotes future applications between the parties even if there has been no change.
The question then arises whether the 12-month rule becomes so crucial for all parents, because of the problems in the past, when parents transferred capital assets between them instead of future child maintenance. Again, that is a question that needs to be asked, as I have done, and answered—which has not yet happened. Surely the issue here is whether parents should have a choice as to how they deal with their own finances if they can reach agreement. Parents understand what they require and what is best for their children, and the 12-month rule undermines their ability to reach a voluntary agreement, as no parent will reach an agreement—especially when an element of capital is involved—if it can simply be undermined 12 months later. On what basis can the Government interfere in what parents believe between them to be fair?
The Government have said that they will consider this matter if a case could be made that it would result in,
“better service for customers and lower costs for the Government”.
To me, such a comment only demonstrates that the refusal to abolish the 12-month rule has little to do with a concern about proper arrangements being made by parents for their children. I beg to move.
Could I explain my hesitations about the noble Lord’s amendment? As a probing amendment it is to be welcomed, because it will be interesting to see how the provisions have worked. But may I take him back a stage and explain about the 12-month rule? When we were looking at the CSA provisions for the 2000 Act, representations were made about the difficulty of having a sensible relationship between the CSA and the court system, and the degree of possible churning. Lawyers were sometimes altering the financial support between the parent with care and the children to minimise those obligations and, as the noble Lord rightly said, playing around with issues about capital and income.
After meeting with senior judges, including someone who is now a Law Lord, it was felt that, if we could produce a formula, lawyers on both sides would come to an agreement about the appropriate level of child support within the court. The phrase that we used was “in the shadow of the CSA”. In other words, they would know that there was a presumption in favour of what was then, in terms of net, 15 per cent for the first child and so forth. Obviously, with consent that could be varied, and would be for issues such as school fees—always one of the biggies—or adjustments in the arrangements of who stayed with whom.
We were asked to include the 12-month ruling because it would provide steadiness. For 12 months after the court settlement, things could bed down and there would be no immediate return to the court under ever-changing arguments. After that 12 months, provided that you gave the other party two months’ notice, you could return to the court to vary the arrangements. The two months’ notice was to make sure that solicitors and lawyers on both sides could see whether they could resolve the disputed issue—whether appropriate payments for school fees or whatever—between themselves without formally going back to the court to ask for a new ordnance on the level of child support.
That scheme was carefully contrived with the support of lawyers because people pass between the benefit and the non-benefit systems. Clearly, the parent with care might want to benefit from the CSA and then may want to come off CSA and move to voluntary payments. We wanted consistency with consent for the lawyers to use. I was assured by lawyers and solicitors at the time that they thought that it was a sensible way forward.
The noble Lord may have evidence which I have not so far seen in the public domain that this has produced some hard cases. In that case, it is obviously right to look at it again. However, the purpose was to try to get voluntary agreements within the framework of the CSA, with a time limit of 12 months to get some stability and two months to give notice to give those parents with care who might cycle between the voluntary and involuntary systems some degree of consistency. It could be argued that, if we are now going to adopt a voluntary system across the board, consistency may be less important. I would argue that it is actually more important, but that is the background.
I welcome this as a probing amendment, but I hope that it does not trigger a change in policy unless there is evidence for one. For every hard case we may see, the provision has allowed some stability and a structured response to the needs of children whose position would otherwise be much more precarious.
Amendment No. 84 would prevent parents who have a maintenance order made by consent, or minutes of agreement registered in the Books of Council and Session or the sheriff court books, from making an application to the commission for a maintenance calculation. At present, they may apply once the order or minute has been in force for 12 months. Although the preamble to the amendment has changed a little, we understand the intent.
I start by thanking my noble friend Lady Hollis for reminding us in her powerful intervention about the history of this provision and why it was introduced in the first place. It is our understanding from responses to our consultation that solicitors support the use of the child maintenance formula for agreeing the level of child maintenance when that is done through the court. This negotiating “in the shadow of the CSA” has proved to be powerful. They said that it is a useful guide and that even without the 12-month rule they would advise their clients to agree maintenance at a similar level to the formula. In terms of removing Section 6 compulsion, we are extending choice that is available to parents.
The existing 12-month rule applies where parents have a maintenance order or registered minute of agreement made on or after 3 March 2003. It has two main purposes. When agreement between parents breaks down, it provides a swift and readily available route into the commission so that children are not left for considerable periods with either no maintenance or inadequate arrangements. It also encourages agreements that contain levels of child maintenance broadly consistent with the amount calculated under the statutory scheme and discourages agreements that divide up property and assets between adults and leave children without regular, ongoing payments of child maintenance.
We do not wish to restrict any effective and agreed maintenance arrangements, in whatever form, to 12 months, 48 months or any other period of time. In fact, the repeal of Section 6 will break the link with the benefit system so that any existing maintenance arrangements will not be overturned simply because the parent with care claims benefit. Only the action of one or both parents can do that. We want to encourage dialogue and agreement between parents which leads to effective maintenance arrangements providing ongoing support for children. As long as parents are happy that their arrangements are providing adequate maintenance for their children they can continue.
Our hope is that parents will not need to turn to the commission for a calculation under the statutory scheme. The agreements will continue and benefit the children for as long as both parents want them to. However, if things do go wrong, or a parent decides that another type of arrangement would be more suitable for their children, they need a readily available route into the commission. Children must not be left for considerable periods with either no maintenance or inadequate arrangements—neither should we lock parents into agreements that are no longer working.
Amendments Nos. 194 and 195 apply only to registered minutes of agreement. They extend the 12-month rule to 48 months and would prevent those with a registered minute of agreement made on or after 3 March 2003, which has been in place for less than 48 months, from making an application to the commission for a maintenance calculation. Registered minutes of agreement have many advantages, but if circumstances change and the original agreement needs adjustment, difficulties may arise. If parents cannot agree, there are limited circumstances in which they may apply to the court to vary the financial arrangements and, in the case of parents who were never married or in a civil partnership, the opportunity for variation is often severely restricted. We believe that a 12-month period strikes the balance between giving registered minutes of agreement a chance to bed in and work and providing a means to resolve difficulties quickly and keep payments flowing.
Those are all very good reasons for the 12-month rule to stay as it is and why a period of 12 months is preferable to an extended period of 48 months. The 12-month rule gives time for agreements to bed in and work but allows swift intervention by the commission to keep maintenance flowing to children. Therefore, it puts parents with court orders and registered minutes of agreement on the same footing as any other separated parents. On the basis of that explanation, I hope that the noble Lord will not press the amendment.
I am certainly not going to press the amendment, but I wonder if the Minister has considered an event which must be quite common. There are two parents with care, who, having taken their children to school, are sitting in a local cafe having a cup of coffee or tea and a bun together. One parent with care has been married and has a settlement through the courts where a capital sum has been taken into account and the maintenance on an ongoing basis is only slightly reduced from the statutory CMEC rate as a result—although I understand that it could be quite a lot reduced in some circumstances.
The other parent with care has gone through the CMEC system and is getting £x a week, which is considerably more than the weekly income of child maintenance of the first parent with care. Immediately, jealousy will raise its ugly head. As a result of that, the first parent with care will turn to CMEC. There is absolutely no doubt about that at all, even though I understand exactly what the noble Baroness, Lady Hollis, said about the reasons for introducing the 12-month rule.
Of course, they will receive different amounts if their former partners have different incomes. The presumption is that they will both have the same percentage, unless there was agreement through the lawyers for the first parent with care to have a different percentage because some other trading went on.
Yes, of course. My point is that, if there is agreement between the lawyers about a capital split, that is of no interest to CMEC, is it? CMEC is interested only in weekly income—I am putting it badly. It is interested only in a sum that flows regularly to the parent with care, whereas the courts look at things rather differently for very obvious reasons. I shall have to consider this very carefully and take further advice on this amendment because I am not satisfied with the Minister’s answer, although it has been backed up by the undoubted experience of the noble Baroness, Lady Hollis.
In the example outlined by the noble Lord, would he accept that, inevitably, in relation to a settlement through the court, advice would have been available to the parent with care, the non-resident parent and the court and that that advice would have been given in the shadow of the statutory system and the amount of maintenance available under that system? Generally, one would expect that to be factored into the overall arrangement. It seems to me that that does not preclude capital being part of the settlement. We are talking about child maintenance and not espousal maintenance arising from a divorce or separation.
In a sense, I do not see the problem. If there is an awareness of the statutory system being available and an awareness of what that system would produce—indeed the awareness of what the statutory system would produce should be much easier to calculate on the new basis because there will be a ready-reckoner via the information and support service—the information that will be taken into account in that calculation will be clearly and swiftly obtainable, particularly if we recognise sharing information between the commission and the court. I do not see why the noble Lord has a problem with that. It may well be that parents will end up in different situations, but the key is doing that in the shadow of what the statutory system would produce, which seems to me to be the right way to proceed.
I thank the Minister for having another go at explaining his point. We shall have a resolution to this matter only if we have figures for something that, as I understand it, the CSA does not collect: namely, the number of divorces that result from these problems and how often the 12-month rule is activated. If we can have those, we might come to a resolution to the problem which I have tried to outline.
The noble Lord raises a very good point. The evidence base for some of this is a bit thin on both sides of the argument. In terms of the facts and figures that I have and in terms of parents making maintenance arrangements via various methods, about 100,000 currently use the court system and around 20,000 consent orders are made each year. We do not have data, and the CSA does not collect data, on the extent to which applications that come to it come from people who previously had consent orders.
That is very unfortunate. That is the real question that needs answering. As the Minister says, it is unanswerable. I shall read very carefully what the Minister has said, but I most certainly reserve the right to come back to this matter on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 16 agreed to.
[Amendment No. 85 not moved.]
Schedule 4 [Changes to the calculation of maintenance]:
86: Schedule 4, page 64, line 23, at end insert—
“Accuracy of calculationIn Part 1 (calculation of weekly amount of child support maintenance) the accuracy of the assessment of income shall be accurate within a tolerance of plus or minus 2%.”
The noble Lord said: I am lost in admiration for how the noble Lord, Lord Skelmersdale, can make up amendments before introducing them. That is a wonderful precedent, which I might adopt in the future. It took a lot of style, but he got away with it beautifully.
We now turn to the calculation of maintenance. These are probing amendments. They are all in my name and that of my noble friend. They seek to do no more than to look at questions that arise from the calculation of maintenance. I want to spend some time on Amendment No. 91, but briefly I shall refer to Amendments Nos. 86 and 87.
The provenance of Amendment No. 86 is the tolerance limits that are required for public prosecution and court proceedings. The chief executive of the Child Support Agency has a really difficult task if the courts ask him to be penny perfect in every assessment before he takes on a prosecution or enforcement. I am not trying to introduce any slovenly, casual attempts at getting assessments right, but getting things right to the nearest penny, and having cases sent back because they are a few pence or pounds short, one way or the other, has been an enormous cause of delay in the past and I do not think that is fair.
This amendment is far from competent or technically correct, but it is an attempt to say to colleagues that maybe we should take a deliberate decision to achieve the benefits of expediency and getting things done in a sensible way. Is there not a tolerance limit that we would be prepared to accept? This amendment is designed, as much as anything, to help the organisation to get things more or less right. I am reminded of the old highland “ATHINE” principle—“Ach to hell, it’s near enough”. As far as I, as a lowlander, can make out, that is the way in which much highland life is lived.
I am not trying to put inaccuracy into the system, but there comes a point when parents with care and non-resident parents would be prepared to accept an amount to within 1 per cent or 2 per cent, or anything up to 5 per cent. It would make sense to consider at least the potential for giving the prosecution and enforcement arm of this new organisation some wiggle room when it comes to clearing cases in magistrates’ courts. The sheriff in the Jedburgh sheriff court hated taking cases for local authorities and other public bodies, as I had to do from time to time. One always had a very hard time because when the sheriff had any discretion available to him, naturally enough, he would always take the side of the defender and not the pursuer, so I got the rough end a number of times. My career was short lived, but not just for that reason—I was elected.
Perhaps some consideration should be given to leaving a little more room for manoeuvre for the enforcement mechanisms. Perhaps I can attach to Amendment No. 86 a further question, which arises from page 35 of the annual report of the CSA. The 2006-07 report talks about the standards committee’s work in the previous year and about the committee being relaunched. We are still talking about the accuracy standards of assessments. The annual report says:
“This committee was re-launched mid-year under a new Non-Executive Chair and met twice in the latter half of the year”.
It goes on to talk about acknowledging and endorsing,
“the new approach to accuracy checking and quality assurance, which is expected to result in measurable performance [improvement] during 2007/08”.
That is very welcome. However, the reports of the old standards committee used to be put on the website and published in summary in the annual report. I have noticed that that seems to have slipped. Perhaps I could have some reassurance about that.
Amendment No. 87 is a probing amendment. There is an argument which says that if we are moving away from the quintessential simplicity of 10, 15 or 20 per cent in the net system that is used currently to 12, 16, 19 per cent gross and we have the change if the income is between £800 and £3,000 a year—of course, there are reductions in the hands of non-resident parents for relevant children—perhaps we cannot be as confident as the proposals in front of us that these will be equivalent amounts. It is a difficult judgment. You are trying to mirror the net system that we have now in the new system and do it accurately. That looks a little rough and ready to me. I do not know how we should do it. I make no complaint about that.
All that Amendment No. 87 seeks to do is to say, in case we get that wrong and in case it needs to be fixed quickly, we should look at putting the percentages into secondary and not primary legislation, so that they can be amended at the pleasure of both Houses of Parliament. There are other reasons as well besides just getting the equivalent net/gross figures. We could find that some of them are too high and that there were interferences with tax credit regimes and so on. There is a case for putting the basic rate percentages into secondary legislation so that they can be more flexible.
I need to get a series of questions clear in my head. I am not complaining about anything or advocating anything, but I am trying to ensure that I understand the future role that Her Majesty's Revenue and Customs will have in calculating child maintenance. They are important questions so I hope that the Committee will bear with me. It is true to say that there is much to be gained in using HMRC data in terms of spitting out the calculation and looking at ways of dealing with non-co-operation by non-resident parents. That is all understood.
I want to get it clear in my head that we are talking about a system in the new regime which will arrive at a total gross income. The phrase “total gross income” is important. If the new commission is to take the first income figure that is available and that comes through the pipeline—the data gateway from HMRC—and is to use it to get on quickly and do an efficient calculation, that is one thing. It is not what I understand should happen, but it may be what is in mind to happen. The first question is: to what extent are we able and willing to alter and upgrade the systems that HMRC and CMEC will have to get the information that CMEC needs to make a proper assessment of total gross income? We need to know more about the systems. We also need to know what information CMEC understands is held by HMRC and what systems it is held on. There are different sets of systems. I do not know much about HMRC, but I know that there are different work streams to deal with PAYE, self-assessment, repayment of taxes, national insurance contributions and others. There are a lot of sophisticated systems which, for HMRC’s purposes, are in silos. We are asking them, in this important set of cross-examinations we will conduct on CMEC’s behalf, to cost-cut bits of information that will need to be taken from each of these silos. It is important that we understand exactly what processes will be able to do that. There will inevitably be people with combinations of earnings in different silos at different times. A total picture of a non-resident parent’s income from all of these sources must be extracted as a matter of routine if the new system is to work successfully.
Some of the basic questions revolve around the concept of a consolidated return. I understand that it is possible, on cause shown, for the HMRC to do this, but it is a special procedure which it does not do unless it is required and has a purpose. I think we are asking it to do a whole set of consolidated returns. Maybe we are not, but I would like to know whether we are or not, or are using some other techniques to drill in to the information there. We must ensure that we get it all out. For example, I am not an expert on employment-related benefits, but I know that the Treasury has workflows, streams and systems that collect information from employers on employment-related benefits. We must get access to that silo as well. The key question is whether CMEC staff in the new regime will be able freely to access all of that kind of data to find out whether the non-resident parent possesses any of these kinds of income. It is important that we understand that.
On processes and systems, what systems will we use to transfer data? The regulatory impact assessment statement with the Bill said:
“There would be some initial set-up costs met by the Department for Work and Pensions”.
There is also a commensurate, equal and opposite, reference to the Revenue’s provisions, where it says that relatively minor start-up and ongoing monitoring costs for HMRC will also be put in hand. Can we find out more about the costs of the set-up? Are they minor? Are they ongoing? How much will they cost? What significant investment is being made so that the CMEC staff can have proper access via electronic gateways to all of the data held by HMRC? Could we get the latest progress on all this? We got some information from Mr Plaskitt in the Public Bill Committee, when he talked about discussions evolving and being well advanced. It looks as if everything is in hand and we are on top of it all. I would like some reassurance that that is true.
Finally, I shall ask a question about when a determination has been made that a non-resident parent has significantly underreported his income. During the Public Bill Committee, Mr Plaskitt gave the impression that that will be picked up in the next year’s fixed-term maintenance agreement. I understand that that is the current position, but I do not think that it is right. If you tried to persuade the Inland Revenue that you would start sorting out your tax arrears next year when you do the sums again, it might tap you on the shoulder and say that the tax arrears are due and you are liable. There should be an in-year reassessment of the non-resident parent if he has been found to have significantly underreported his income. A reconciliation should be made there and then.
Then there is the question of arrears. Will there be such a thing as arrears when underreporting is subsequently discovered? Will it be possible to take an historic view of the years of underreporting that have just been discovered? That could amount to a big sum of money. Are we simply going to say that that will be sorted out when the reassessment comes up next year and then everything will be all right again? I do not think that the parent with care would take kindly to that treatment, if that is what is in hand.
I am sorry to labour the Committee on this, but it is essential that we all clearly understand the processes of exchange by the time the Bill gets Royal Assent. My experience is that HMRC and the DWP are very unhappy—that is not the right word. The DWP has had a subsidiary role to the Treasury in anything that I have been involved in in the past 10 or so years in Parliament. The Treasury usually charges for access to its time-and-line system. Its position in the Whitehall hierarchy is pretty high and mighty—we all know that from a political point of view—but there may be difficulty in the department getting access and proper positive reactions in future communications with the Treasury. If this fails, and we cannot get the income assessments that we hope we will achieve under the new system, a big part of this change in policy will be unavailable, which would be a great shame.
I am asking all these questions and I do not know the answers to them—it is always dangerous to ask questions when you do not know the answers. They are important questions, so I hope the Minister will forgive me for asking them in such a long-winded way. I beg to move.
I am grateful to the noble Lord, Lord Kirkwood, because, particularly on the last amendment, some of his questions on the underreporting of tax income had not occurred to me. I will be interested to hear how the Minister suggests the system will respond. In the past, it would have been regarded as part of the arrears to be paid, but I am unclear about what will happen now.
I shall make a couple of brief comments on the other two amendments. Amendment No. 86 introduces a 2 per cent tolerance. The noble Lord has a point of substance. As I recall, it was the case that to the nearest penny it might be 78 per cent accurate, which was a remarkable figure, but to the nearest pound, it is was up to 95 per cent accurate. The problem was that if you went for the nearest penny you spent so much time doing the assessment that you did not spend enough time doing the enforcement. That was the concern: not to get sloppy accounting, but to get effort put where it mattered. It may be that my noble friend will be able to tell us that by going from net to gross income on one hand, and to tax data on the other, and from viewing the preceding year’s data, there will be almost no difference in staff input in assessing to the nearest penny and the nearest pound. I think that is quite possibly the case, in which case this problem should now go away. However, it has been a problem in the past and it is therefore worth exploring the issue.
I have some sympathy with the second amendment about putting the requirement into regulations; not for the reasons which the noble Lord adduced, that we may want to change the percentages—as far as I can see the move from net to gross percentage is perfectly sane—but because one is never sure whether a case will go through the courts and possibly eventually to Europe. That may involve some unspecified form of income—it could be dividends or whatever—that has not come into the formula and may come back. We in Parliament are required to take this into account. In practical terms only, it may be much simpler to take account of any subsequent legal judgment, which will certainly follow any new system as the less content try to challenge it, through regulations than through primary legislation. Again, however, I am sure that my noble friend can reassure us to that effect.
I will deal with some of the individual questions, but will first deal with my prepared text. The amendments together relate to the statutory maintenance calculation in the future scheme, and raise a number of important questions on the accuracy of information, how maintenance will be calculated and how information about income might be obtained.
The changes we made in 2003 to maintenance calculations are working reasonably well, and we do not intend in the Bill to make any substantial changes to the principles behind them. The changes proposed in the Bill will further simplify the calculation process, resulting in more transparent calculations which can be made more quickly. Many of the changes—for example, the new basic rate percentages and the definition of weekly income to be gross rather than net—are the result of our decision to make calculations by using income information provided by HMRC. I shall come on to some of the more detailed points around that in a moment.
Amendment No. 86 would provide in regulations a performance target for the commission in relation to the accuracy of income information used to make a statutory maintenance calculation. Such information would have to be accurate to within 2 per cent. Since the implementation of the operational improvement plan in 2006, the Child Support Agency has increasingly focused on improving accuracy. For example, in the year ending this March, the agency expects to check fully about 6,000 decisions for accuracy, a four-fold increase on last year. The agency’s latest published QSS shows an accuracy rate for the year to date of 87 per cent for maintenance calculations; the figure for the whole of 2005-06, before the OIP started to have an impact, was 81 per cent. So although there is more to do, the agency is already making improvements and will continue to do so.
However, it is not appropriate for this kind of target to be placed in the Bill. The commission’s performance targets will be agreed between the commission and the department, and will be published in the commission’s business plan. The point that the noble Lord really pressed was that, unless you have an accuracy figure, as my noble friend Lady Hollis said, you can waste a lot of time trying to fine tune the calculation when, in practice, you do not need to.
Amendment No. 87 would provide in regulations for an alternative method for calculating the basic rate of maintenance. We want the calculations to be based on the non-resident parent’s gross income, subject to certain limits: the number of qualifying children, the shared care attributed to those children and the number of relevant children in the non-resident parent’s new family. While this amendment retains the same principles, it is possible that noble Lords want a pre-set amount of liability based on non-resident parents’ gross income but not adjusted for income above £800 per week. In fact, I do not think that that was the noble Lord’s point. However, just for the record, the £800 broadly corresponds to the amount of weekly income at which the 40 per cent income tax rate starts to apply. There is therefore a greater difference between gross and net income at these levels. The lower percentages are designed greatly to reduce the impact on liabilities of this difference. It would not be right for either parent if, in existing cases, there was to be a substantial change in liability built in to the design of the scheme on moving to the new statutory maintenance liability. We want there to be as much stability as possible at that point.
The noble Lord, Lord Kirkwood, challenged us a bit, asking how we know that the new percentages are right. Effectively, it has been based on a process of arithmetic. Work has been done to look at what the liabilities would be under a range of incomes for someone entering the system now on a net basis and what the equivalents would be that were set out in the RIA and other documents. The idea was to try to get it as close as possible so that it was aligned as closely as possible. The noble Lord and my noble friend Lady Hollis said that we might need to adjust those, and we need them to be in regulations. It is already the case that percentages for the maintenance calculation can be adjusted by regulations, in paragraph 10 of Schedule 1 to the 1991 Act. There is the scope to do that. That is particularly important because we have also suggested that we would probably wish to review that £800 limit once during each Parliament as the threshold for higher rate tax potentially changes. There is already that scope.
Amendment No. 91 would preclude the possibility that regulations could allow income from a past period to be considered. We want maintenance calculations to be based on the historical income data as provided by HMRC. The commission will also be assisted by having calculation rules, which means that the HMRC information can be used with minimal adjustment. In cases where the latter differs from HMRC data by 25 per cent or more, a parent will be able to ask for a calculation to be made using that current income figure. Reliance on HMRC historical gross income data at the time of assessment and annual reviews will make maintenance calculations quicker and transparent for parents.
The noble Lord asked what data we are talking about here. Effectively, we are talking about employment income data and self-employment data. There is already a process by which employers have to report to HMRC gross employment incomes net of occupational pension deductions. That information should be provided within a month of the end of the year.
That is very helpful and it is a first step; we are getting there. Supposing someone has two part-time jobs and the Treasury will take the bigger one in terms of the earned income flow. Are we sure that the statement that has just been made will cover both jobs if there are two PAYE streams for the non-resident parent?
We absolutely need to be sure that they are aggregated. I do not think that they would necessarily be aggregated at the employer report to HMRC, because they would not necessarily be the same employer or group, but they would need to be aggregated during that process. The noble Lord is right. To be clear, we are not talking about any aggregation of investment income or other types of income. Again, we will probably discuss that later on. We are referring to employment income and self-employment income here.
The agency introduced a new approach to accuracy checking that significantly increased the number of cases checked—I think I dealt with that—and it introduced new teams to support staff in dealing with issues arising from the checking regime and ensuring ongoing remedial work to improve the accuracy of assessments. The agency has recently introduced a new accuracy measure, not as a result of switching from net to gross but as part of the quality assurance framework. The agency has introduced a cash value accuracy measure, which looks at the total of incorrect calculations against the total of correct amounts. We changed the way in which we measure and report on accuracy to focus on providing feedback to managers and teams and improving future performance.
The noble Lord also asked where we are on the process of transferring data from HMRC. That work and those discussions are ongoing. The information that I have before me is probably not sufficiently clear to be able to give a more specific update, so rather than do it piecemeal I shall write to the noble Lord to give him the latest information that we have on that.
I think that has dealt with all the noble Lord’s questions about income and the transfer of data. The noble Lord talked about year-end reconciliations. The principle that we are adopting here is to not routinely have a year-end reconciliation. Clearly, if there are circumstances where the non-resident parent has inaccurately reported income, which might arise if there was a variation that was being looked at, or where other assets had to be taken into account in the calculation and there was deliberate under-reporting of income, that would be adjusted, and there would be penalties exigible for deliberate under-reporting.
But at whose hand? We are talking about circumstances in which the HMRC/DWP/CMEC nexus would identify that there was something untoward with the accuracy and the level of reporting by the non-resident parent. At what stage does a parent with care get to know about that so that she can take action? So far so good; I just hope that the Minister will make me completely happy by saying that in those circumstances someone in the system would trigger an action that would try to resolve that anomaly.
To be as clear as I can on this, it depends on the specific circumstances. If data coming from HMRC have been returned by the employer, they would be used in the assessment. If there is a variation request coming from the parent with care—we will come on later to the circumstances in which those might be facilitated—that would trigger an inquiry by the commission from a range of people, not precluding the NRP, as to more accurate data about income. That would be a circumstance in which there was an inquiry by the commission to the NRP, which should prompt a response.
There might be other circumstances where, although we expect the HMRC returns to capture most of the data that we want—for example, if someone was self-employed and had been late with a self-assessment return, that information would not necessarily be available on as timely a basis as it might be for others—the commission would have the power to make inquiries of a range of people to seek to assess what income was appropriate. Those are the sort of circumstances in which requests might be made of the NRP and others and under which the NRP would be under an obligation to respond. If that response was inaccurate, deliberately or otherwise, and the commission’s inquiries identified that, that would be adjusted. The basic starting point here would routinely be HMRC data.
I perfectly well understand that, and perhaps we are getting into too much difficulty. The Minister’s offer of a letter about data gateways and so on would be really helpful. It gets very detailed, and you need to think about it carefully. The new assessment procedures for the standards committee will, I hope, get published. I am not a conspiracy theorist; I do not think that this is an attempt to bury any important new standard method of calculating accuracy or squirrel it away out of the public domain. I assume that it will have the same exposure to the public gaze as the previous system, and if it has been refined and improved, I am in favour of that. I hope that we can get an assurance that it will be made public.
Indeed, but I am talking about methods. There used to be a stripped down report in the annual report about how the standards committee had done its work and what the results were, with the methodology as well as the figures. I understand the corporate figures well enough. If that could go on the website so that it is available to those who study these things, that would be welcome. Obviously we are all agreed that the generality of the new system is clear. It deals with the exceptions. With non-resident parents we have exceptional circumstances in how they are dealt with and where the onus lies in taking the remedial action that may or may not be necessary. I do not always think that the parent with care will have the information to be able to do that.
It has been a useful debate. If we get a letter that is shared with colleagues, that will take the argument forward. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 87 not moved.]
88: Schedule 4, page 65, line 21, at end insert—
“(1A) Provide for a calculation of income to include any interest, dividend or other income derived from capital.”
The noble Lord said: It has been a somewhat rare occurrence during the almost three days in Committee that the minds of the noble Lord, Lord Kirkwood, and myself have actually chimed together. However, in this group of amendments that is the case. His Amendment No. 92 is almost identical to my Amendment No. 88. We both point out that there is a problem in the proposals, as they insist that any calculation must have factored into it interest dividend or any other income derived from capital. As we all know, income is treated differently under what are known as the old scheme cases in the Child Support Act 1991 and the new scheme cases, which happened on or after 3 March 2003.
Under the original Act, dividend income was taken into account by means of the Child Support (Maintenance Assessments and Special Cases) Regulations, SI 1992/1815, in paragraph 13 of Schedule 1. In particular, in the part on other income, it included:
“Any interest, dividend or other income derived from capital”.
As such, dividend income was caught. There was a failure when the new scheme was introduced under the Child Support, Pensions and Social Security Act 2000 to include a wider income clause. I do not remember being involved in discussion on that Bill, but I may have been. My noble friend Lord Higgins was in charge in those days, and I may have been asleep—it is always possible.
The scheme defines net income specifically as earnings from employment, income from self-employment tax credit and other income. Other income is simply restricted to any periodic payment of pension or other benefit under an occupational or personal pension scheme or a retirement annuity contract, and so on. But there is no reference to,
“interest, dividend or other income derived from capital”,
as provided for in the original scheme. Thus, such income is not automatically taken into account.
This loophole has some unpleasant implications for child maintenance. Parents can use it to avoid paying what is due from them. Dividend income can be a considerable source of income for a self-employed, non-resident parent and it has often been used to avoid child maintenance responsibilities. To incorporate dividend income under the 2003 and proposed scheme would require an application from the parent with care for a variation based on diversion of income, under the Child Support (Variations) Regulations, SI 2001/156. As we all know, a number of technical hurdles have to be leapt, which means that an application for variation cannot by any means be guaranteed—or rather, the success of the application cannot be guaranteed. Additionally, the onus to apply is on the parent with care, who may be unaware of any dividend income received by the non-resident parent. Indeed, the Minister appears adamant that the parent with care should not be so aware, from remarks that he made earlier this afternoon. Furthermore, the parent with care is likely to be unaware that such income is not automatically taken into account. If that parent with care becomes aware of the position only at a later date and at that time makes an application for a variation, it is from the date of application for the variation only that such dividend income can be taken into account. I hope that I have got that right. As I understand it, the award variation cannot be backdated to before the application was sent in.
Variation applications are typically referred to an appeals tribunal, which takes time and resources that would be reduced if the definition of income was expanded in accordance with the original Act. Therefore, I look forward to hearing how the Minister can reasonably assure me that the exclusion of such variables can still mean that calculations for the amount of child maintenance owed is true or fair. I doubt that he will achieve that objective.
Having spoken for longer than I intended, especially with the presence here of the Chief Whip, I shall not comment on the Liberal Democrat amendments. They are quite capable of doing that for themselves. I beg to move.
I hope that I can rise to that challenge. This is an important group of amendments. I agree with the noble Lord that we are at one in spirit on this.
The amendments in my name and that of my noble friend are all probing, but they all deal with how we calculate some of these assessments and how we deal with evasion and inaccurate assessments. Amendment No. 92 was run in the Public Bill Committee in the House of Commons. It allows the commission in the case of self-employed non-resident parents who own a limited company or a share in one or are company directors to immediately presume a basic level of income. Based on my experience in a previous incarnation of doing casework, it was almost the biggest problem facing parents with care that they were unable when the non-resident parents were self-employed to get any real appreciation of the realistic income available to non-resident parents. Therefore, the amendments try to deal with that in a more expeditious and grown-up way.
The old scheme certainly gave an enormous amount of wriggle room to non-resident parents, especially if they were self-employed or had income of other sorts, such as rental income. The level of ingenuity possible for those people under the first scheme, set up and introduced in 1993, was limitless. It never ceased to amaze me, the ingenuity that could be brought to bear by self-employed people who could lose or conceal their real income and wealth and the assets available to them. They went to any lengths—quite extraordinary lengths—because of the heat generation between the two sets of parents, who were often very angry and distressed. People were just playing games with one another in a way that made it impossible for the professionals in the agency to deal with the situation rationally. In the new situation, we must look at self-employed non-resident parents in a different light altogether.
Amendment No. 190 proposes a general catch-all anti-evasion clause. If I had only one pick from the amendments in this group I would go for that one. In the early days, there used to be a catch-all provision to deal with evasion, which got lost in the 1995 and 2000 legislation changes. I do not care how the provision is cast; the wording may be wrong and it may be technically incompetent, but it must be possible to have such a provision. It is right that we consider some kind of residual, catch-all, back-up, anti-evasion provision that people can take advantage of where, in their heart of hearts, they believe that they are being given the run-around by a self-employed non-resident parent who has all the power and potential of concealing income in every which way.
In my experience, there were websites that shared information about how best to do so; it was a joke. Those members of the non-resident parent client group were not representative, but a lot of them were being driven to distraction by the way in which the system bore down on them. There was no excuse for the way in which they were behaving. Some of them were deliberately flouting the authority of the agency and doing so on websites in a way that was not only inimical to the parent with care but to the long-term interests of the child involved.
Some consideration of putting something in the Bill that strengthens the new CMEC commission establishment to deal more robustly with anti-evasion is sensible. Amendment No. 93, which goes as far as deeming an income, might seem extreme, and the amendment may be technically incompetent, but that is a way that can be found to set in legislation an ability to take the initiative, get the assessment done and then face down a non-resident parent and say that if the deemed income is not right they have the ability to get it right by putting the facts of the case fully, squarely and openly in front of the commission and the parent with care.
Amendment No. 95 concerns avoidance, which we have dealt with. Taken together with Amendment No. 190, it creates a general power to deal with evasion. There is a well established rule in Scots law, and there was an earlier presumption against the alienation of assets in the social security and benefit Acts that dealt in the old supplementary benefit schemes with people gratuitously alienating assets and that being taken into account, and the system having some remedy against that where it is clearly being done in bad faith to try to elide responsibilities and duties.
This is an important group of amendments. I concur with what the noble Lord, Lord Skelmersdale, said. If this is not technically the right way of doing this, the Minister would be well advised to think carefully about whether there is some other way of achieving the ends that are set out in this group.
I agree that this is a very important group of amendments. Taken together, they relate to the statutory maintenance calculation in the future scheme and they raise a number of important questions about how it will be calculated, what income will be taken into account, how information about that income might be obtained and what to do about more exceptional cases. The changes that we made in 2003 to maintenance calculations are working reasonably well. As I said a moment ago, we do not intend for this Bill to make any substantial changes to the principles behind those calculations. The overall liability structure, based either on the weekly income of the non-resident parent, or on their benefit, or other specific circumstances, is broadly supported. This will continue to be complemented by a variations scheme that can apply in specified exceptional circumstances. The changes proposed in the Bill are the result of identifying opportunities to further simplify the calculation process, resulting in more transparent calculations that can be made more quickly.
Many of the changes—for example, the new basic rate percentages and the definition of weekly income to be gross rather than net—are the result of our decision to make calculations by using income information provided by HMRC. It is our intention that the detailed definition of what will count as income will be given, as now, in regulations. These will be introduced for parliamentary scrutiny and debate after the Bill has been given Royal Assent.
Amendment No. 88 would require, in addition to earned income, calculations to take account of income from capital, such as dividends and interest. Amendment No. 92 would make the same requirement, with the exception that its scope is restricted to information provided by HMRC. Amendment No. 93 would give the commission the power to presume a level of income where the non-resident parent is self-employed or a company director. Amendment No. 95 would give the power to take account of income where the non-resident parent had unreasonably deprived themselves of a resource. Finally, Amendment No. 190 simply attempts to address deprivation of resources, but limits its effect to cases where the estimated difference in income is 25 per cent or more.
This group of amendments broadly reflects a single significant concern of noble Lords which has exercised our mind greatly in recent months: that some non-resident parents are better able to control their resources by diverting them out of earned income into a form beyond the scope of the maintenance calculation in order to reduce the amount of child maintenance they are required to pay. This is unfair, both to children and to non-resident parents who act reasonably. I agree that any attempt by non-resident parents to manipulate their personal financial circumstances for the purpose of reducing their child maintenance payments must be firmly opposed. It is important that we take all reasonable steps to discourage such actions and to ensure parents with care receive the maintenance that truly reflects the non-resident parent’s financial circumstances.
However, the simpler approach to calculations, with its focus on income related to earnings, is the right one. It is imperative that we do not repeat past mistakes by returning to the complexity of the first child support scheme. In that scheme—as outlined by the noble Lord, Lord Skelmersdale—most forms of income are taken into account, including interest and dividends payments. Finding out about these adds to delay and, in many cases, makes little or no difference to liabilities.
We also understand that not all taxpayers with investment income are required to complete a self assessment return and, as such, HMRC data coverage of these types of investment will, generally speaking, be less comprehensive than for earnings. Indeed, I think the approach is that you would routinely file a self assessment return if you were a director or self-employed with earnings above a certain level, or with investment income above a certain level. You might be required to report to HMRC if you had investment income which should be taxed at a higher rate, but there are no universal obligations to report, partly because a lot of investment income is taxed at source. There is therefore no need, if one is only a basic-rate taxpayer, to report that. Of course, some income is not reportable at all because it is a tax privilege, such as ISA income and tax-free capital gains up to a certain level.
The preferred initial approach, which we intend to carry forward, is for the variations scheme to cater for cases of significant unearned income—I stress “initial”. That scheme will also continue to deal with cases where a non-resident parent can control the amount of income they receive from their job, or unreasonably divert income. I should say that, although our initial approach is for the focus in mainstream maintenance calculations to be on earned income, we will work with the commission to look at the feasibility of including certain types of income such as investment and shares income. We will do this when the operational realities of using HMRC data become clearer.
We are also retaining the power to estimate income where available information is unreliable, insufficient or atypical. We shall be working with the commission to decide how to make best use of that power. This should help to address the issue raised in Amendment No. 93, where noble Lords wish to have scope to presume income levels for non-resident parents who are directors or self-employed.
Our experience of the first child support scheme is that investigating cases of possible deprivation of resources is often not straightforward. The amendment on this matter would require the commission to investigate every change in income which could otherwise result in a reduction in maintenance liability. That would place a significant burden on the commission and does not fit with our intention to operate a simple, effective and value-for-money scheme. It is also unlikely to be cost-effective in terms of outcomes, as only a small minority of non-resident parents seek to manipulate their income in this way.
The amendment would entail the commission deciding whether any observed reduction in income was intentional or reasonable. In complex cases in which this power might be necessary, it would be difficult for commission staff to make that kind of decision.
Many of the issues raised by the amendments will be open for discussion when the regulations made subsequent to the Bill are introduced. Those regulations will include detailed provisions of what will count as income and will set out how the powers in this Bill and the Child Support Act 1991 will be used by the commission. The concerns raised by noble Lords will be given careful consideration when we come to draw up those regulations.
The noble Lord, Lord Skelmersdale, referred to the variations and said that there was often not a high chance of success—that it was a high hurdle to overcome. That is right, which is why we are determined to try to lower the bar so that variations are generally more accessible. Obviously, the more that we can make that happen, the greater reliance we can place on that route rather than on some of the more detailed amendments suggested here. We will come to that matter shortly, but that is our clear intent.
It would be helpful to put these matters in context. The family resources survey in 2005-06 found that over half the single males aged between 20 and 50—which we used as the best proxy for NRP, although we know it is not perfect—do not have any investment income at all and most of those who do have only small amounts. Only 5 per cent have more than £10 of investment income per week and only 1 per cent have more than £50 a week. That is not to say that we should not seek to access that information where it applies, but it is a small percentage of the current case load and the likely case load of the commission going forward.
The noble Lord, Lord Kirkwood, spoke about problems relating to the self-employed. Again, I believe that it is right to have our starting point for the self-employed in the returns that they make to HMRC, because we and HMRC have common cause in wanting to make sure that those returns are robust in accordance with the law and are properly constructed. However, there are provisions in the Bill, and I have touched on some of them. In the event that such information is not available, other routes will be taken to assess income. Part of the issue with the self-employed is not only making the assessment, but also having effective enforcement powers. That is another route by which we can improve the situation for self-employed people. If you look at the data at the moment, compliance for the self-employed is significantly below compliance for employed people and we need to tackle that seriously.
I hope that that will enable the noble Lord to withdraw his amendment. The key argument that we are seeking to advance is that, if we go back to the complexity that we had and demand as an integral and automatic part of the calculation income details that we cannot readily get from HMRC—that we certainly cannot get on a fair basis across all the case load—and we have to resort routinely to getting that from non-resident parents and others, we will return to the problem of having real administrative difficulties, particularly with those people who are not intent on paying the child maintenance that they should. That is why we have gone down the path that we have. The key to it is to make sure that those variations are more accessible, and we will have the chance to discuss that shortly.
I am grateful for that response because it will repay careful study, but it is not safe to equate a self-employed person’s tax return with a fair and true representation of his or her current net wealth. There are perfectly understood restrictions on what needs to be reported. I am not saying that anyone is doing anything illegal, but with clever accountants, self-employed people make it their business—and it would be stupid if they did not—to do everything within the law to constrain their visible income for taxation purposes. Therefore, I doubt that it is sufficient to take that figure—whatever it may be—as an accurate reflection of something with which we can make a calculation.
I may be missing something, but it is all very well to say that the generality of the working age population does not have income, investment or anything else, but that 7 per cent of the case load is what nearly drove the agency into self-destruction. That may be an exaggeration, but an enormous amount of energy and professional time was devoted to trying to pin down what was actually going on with a small proportion of the case load involving self-employment. I counsel caution.
I was not going to intervene on this because it is a difficult issue, but why does the noble Lord think that? If the self-employed person has, with the help of accountants, declared an income that HMRC has accepted and within the law has clearly abated his returnable income by depreciation for this, that and other legitimate reasons, why does the noble Lord think that CSA staff, without the facilities, resources or information that the tax inspectors have, would be able to do a better job? Given that there is not full payment of maintenance—given the £40 figure—the loss of the additional money is not likely to be borne by the person with care, but by the taxpayer. This is a double question. First, I do not think that you could realistically get at that information. At least—Glory be!—with the tax system we have a better chance. Secondly, it may not matter as much as the noble Lord thinks because it may fall into the headspace between the 40 quid a week disregard in benefit cases and the amount that might have to be paid.
I entirely take that second point. That will unfold, and we will watch it carefully. I also take the point about whether CMEC could do better than the Inland Revenue. But it is cauld kale—an expression my Granny used to use—to the parent with care who is still left festering with the notion, rightly or wrongly, that the full income is not reflected in the assessment. That is all I am saying.
I am most grateful to my noble friend for making exactly the same point as I was going make. If you are not going to use the tax basis, what basis will you use? We also need to be careful about damning all the self-employed as wanting to do all that they can to rip off the taxman and parents with care. Yes, there are different bases of calculation for the self-employed and the employed in some respects, but if we substitute that, we would need a whole raft of detailed rules. Then, as my noble friend says, how on earth could we police that effectively?
Curiously, in some respects, spouses or former spouses may be in a slightly better position in relation to some self-employed people to understand the arithmetic of the calculation, because often—I need to be careful about straying on to the employment of spouses in this context—they are possessed of an understanding that is broader than might otherwise be the case. If we move away from HMRC as a starting point, we will be in great difficulty. Somehow suggesting that our calculation is different from that which the Revenue would accept cannot be right.
I am obviously losing, so I shall stop. I still need to be reassured that the HMRC figure covers all the silos of which I spoke. I am still not sure that the figure arrived at looks at all the bits and pieces of potential sources of income. We are talking about the potential for a variation or appeal application rather than the initial assessment. Maybe I am confusing myself and the Committee and we are getting nowhere fast, but it is very important that we do not simply say that the figure for self-employed people available to the HMRC, which I believe is delivered for a different purpose, is automatically a reflection of the assessment figure to ensure that the child gets all the maintenance to which it is entitled.
To be clear, we are not suggesting that the self-employed income as reported for tax purposes is itself an indicator and would encompass all issues around personal wealth and unearned or investment income. It would not, just as employment income would not. There are issues around lifestyle and diversion of income and we believe the variation route is the right approach to address them, but simply picking self-employment income is not of itself going to pick up those issues, just as employment income would not. We need other mechanisms to do that.
When I started on this amendment I suspected that I would be unwise to take on a former accountant, and the exchanges between the noble Lord, Lord Kirkwood, and the Minister have proved that point. We want to be assured that everything taxable reported to HMRC is used as a basis for calculation by CMEC. It is as easy as that. I think that I got the answer at some point in the Minister’s initial response.
If you got the answer that it would be, I did not explain the matter sufficiently clearly. HMRC might be possessed of investment income details for some people, although it would not have those details for all people because not everyone has to report them.
The answer is that no, it would not be. I referred to investment income. That is one case in which you could not just go to HMRC to have that broader calculation; in some cases it would have details of investment income and in others it would not. To base a system of child maintenance on whether that information was returnable to HMRC would not be right. We are saying that for employment and self-employment income—broadly, earned income under old-style terminology—yes, it would be possible to do that. But to take account of other income or lifestyle using the variations route, we would start with the current arrangements and look at capital of £65,000 and impute an income to that—which is what happens under the current scheme—rather than access individual details of individual investment income, capital gains or rental income. In due course it may be possible to take account routinely and automatically of these broader issues, but that is not where we are starting. In that regard, that mirrors the current system. We are not saying on day one that the treatment of investment income is going to be any different from that which applies currently, with the exception that the route into possibly taking account of that through variations might be more accessible.
The noble Lord, Lord Kirkwood, very nearly used the expression “quitting while you’re behind”, so perhaps I had better do so. I agree with the noble Lord and the Minister on the subject of intentionally devaluing your income. Over Christmas, there was a case in the magistrates’ court in Taunton where a young man who was a non-resident parent intentionally made himself unemployed in order to avoid his responsibilities. His defence was that he had sought to become self-employed, but in the mean time, there would have been no money flowing through the system. I do not know the result, but I am sure that the Minister or I can check. It does not particularly matter; the point is that I regard that as a despicable thing to do. I think the Minister does too; we probably all do.
Returning to the matter of income, is CMEC going to inquire of HMRC about the income on which it can base its calculation?
I am surprised. I shall look at the Minister’s statement very carefully. Will the financial information from HMRC on which the CMEC calculation will be based be on a PAYE basis purely from the employer’s or whoever’s end-of-year return, or will it be possible to get something mid-year from HMRC so that at least an interim calculation can be made with some accuracy?
The intent is that it would be based on the year-end return that employers make to HMRC that then filters through to DWP. The timeframe would generally be that employers have a month to report to HMRC, so that is the end of April, and I think something like 61 per cent of the data reported by employers on a timely basis would come through to DWP by the end of May. Assessment will be based upon the latest information that the commission has for an individual on a preceding-year basis. If data for 2006-07 comes through to the commission in May 2007 and a case comes in to the commission on 1 June, the assessment will be based on data from 2006-07. If that person came into the commission in April or May 2008, the assessment would still be based on that 2006-07 data until the next year’s data kicks in. I hope that explains.
As I was saying, I will study extremely carefully the interplay between the noble Lord, Lord Kirkwood, the Minister and myself, and decide where, if anywhere, we go from here. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 89 to 93 not moved.]
94: Schedule 4, page 66, line 44, at end insert—
“( ) require the Commission to instruct an independent assessment of any self-employed non-resident parent’s income when an agreed income figure continues to be in dispute after 28 days of a maintenance claim being made which assessment will be binding on all parties for the rest of the financial year.”
The noble Lord said: This is another look at requiring the commission to instruct an independent assessment. Amendment No. 101 looks at the commission’s duty to investigate. Amendment No. 94 requires the commission to instruct an independent assessment of any self-employed non-resident parent when there is a dispute after 28 days. From what he said earlier, I guess that the Minister’s case will be that this will become a lot less contentious and more straightforward. We all hope and pray that that is right. However, when I was a solicitor in south-east Scotland, professional disputes of many kinds where you could not get two parties to agree were resolved by being taken to arbitration. There were different systems for doing that in different parts of professional and agricultural life. A person of skill came in who knew what they were doing, who had a bit of experience and a track record in the area, and in whose judgment people could have confidence, and simply cut the Gordian knot by making a recommendation. That finding was accepted by both sides and the world went on its weary way with the dispute resolved. This may again be perceived by the department as an extra complication, but in circumstances where there still may be confusion and disagreement between the assessments made, it is worth looking at in a probing amendment. It would be good to hear what the department feels is there by way of merit that might be used in deploying it.
Amendment No. 191, also in my name and that of my noble friend, looks at placing a statutory duty on CMEC to investigate a non-resident parent where there are grounds for suspecting that the information held regarding his income does not give the full picture. We have discussed that before. Indeed, Amendment No. 191 was run in the Public Bill Committee in the other place with a slightly different wording. The departmental response was that there would be a danger that the commission might be swamped with references for investigation, and that the future reliance on HMRC data would solve many problems. This amendment has been refined to make it clear that CMEC would be expected to investigate only where there really were grounds for suspicion, so that there is no prospect of any fishing expeditions without them. I hope that that new wording might be more acceptable to the Minister.
Looking at why we need Amendment No. 191, there is no doubt that the agency and CMEC going forward will have a considerable array of methods and powers to investigate financial circumstances. As I understand it, the staff guidance at the moment says that decision-makers are not required at any time to undertake independent investigations. In practice, that leaves parents with care to prove the NRP’s financial circumstances by themselves. As I argued earlier, I do not think that is fair. The balance is against the parent with care. I believe that the new system we are setting up should try to create a more level playing field, otherwise it will still be too easy for non-resident parents to evade their responsibilities. I beg to move.
As I understand it, these amendments give the commission powers to reconsider or investigate, depending on whether they are acting for or against the non-resident parent, the payments that the non-resident parent is obliged to pay in relation to their income. I call these enforced payments, although I am sure that is not a technical term. When calculating them there will inevitably be parties who feel an injustice has been done. It is virtually impossible to negotiate a perfect solution; but, as in life, I am afraid so it is in child maintenance payments. A decision has to be made at one point and reviewing and re-reviewing such decisions wastes precious resources to no great objective. It also sends out a message to non-resident parents that decisions made by the commission can be taken lightly and overturned. That would be a disaster because we would be back in the old ball game of the CSA for totally different reasons.
Of course, the commission must develop a human face—we all agree with that—and make accessible to parents a whole support network, but it must be seen to have conviction on its decisions. Of course, the decisions can be appealed and later we will have discussion on what level of appeal is appropriate in particular cases. Although they can be appealed, the commission must have conviction over what it does. That is absolutely essential.
These amendments mirror concerns raised in amendments debated in the other place that the new calculations rules may not reasonably take account of a non-resident parent’s ability to pay and, in part, they carry on the debate we have just had. It is important that the new rules are seen to apply fairly. However, I do not think that these amendments offer the best way to proceed.
Amendment No. 94 provides for an independent assessment of self-employed income in a case where the figure used in the calculation is in dispute. We recognise that a minority of self-employed parents will want to obstruct the commission by giving income information which is incorrect or incomplete. We have already taken steps to deter them. The use of HMRC income data will mean that in fewer cases will information be required from non-resident parents, reducing the opportunity for them to directly mislead the commission. We are retaining the provision which means that knowingly giving false information will be a criminal offence, in the way that it is currently with HMRC and the Child Support Agency.
Where a decision is disputed, there will, as the noble Lord, Lord Skelmersdale, said, continue to be a right of appeal to an independent appeal tribunal. A tribunal can serve with a financially qualified member and is empowered to direct any party to the appeal to supply any information it considers relevant.
Amendment No. 189 proposes a change to the variations scheme rather than to the mainstream calculation. It would allow the commission to initiate the variations process itself instead of having to wait for a formal application from a parent. Although we recognise the concerns, there is a serious practical difficulty here. For the types of income likely to be considered in relation to a variation, the information received from HMRC is unlikely, on its own, to be sufficiently comprehensive. To initiate a variation in these circumstances would not result in a fair and equal system. However, we have listened to concerns raised about this matter and, as I intimated earlier, have tabled Amendment No. 101 which seeks to improve the variations scheme for parents with care.
Amendment No. 191 would require the commission to investigate a non-resident parent’s income whenever a new maintenance calculation is made or a variations application considered. The commission will be able to undertake further investigations into a non-resident parent’s income where appropriate. In supporting this process it will be able to obtain information from a number of sources, such as local authorities and accountants. If in the course of an investigation, it comes by information which may be of interest to HMRC, the commission will be able to pass that information on through the gateways.
We consider that this approach is preferable to investigating income in every case. The majority of non-resident parents are straightforward in their dealings with public bodies. The task of effectively double-checking income information would add greatly to the commission’s workload and, in the case of independent assessment, would add to delay. In most cases, this additional effort would not change maintenance calculations. We are also retaining the power to estimate income where available information is unreliable, insufficient or atypical. We shall be working with the commission to decide how to make best use of that power.
Finally, I remind Members of the Committee that detailed provisions for the treatment of income are in regulations and that Parliament will have full opportunity to debate these. Accordingly, I ask the noble Lord to withdraw the amendment.
I perfectly understand what the Minister has said. I shall think about that a bit more clearly. I certainly accept that government Amendment No. 101 and the groups we are coming to are a significant step in the right direction. We will discuss them when we reach them and I think that we will want to reflect on them. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 95 not moved.]
Schedule 4 agreed to.
Clause 17 [Power to regulate supersession]:
96: Clause 17, page 8, line 1, at end insert—
“( ) make provision that where there is a change in circumstances of the non-resident parent, the Commission shall make a fresh assessment if the gross income position of the non-resident parent increases or decreases by 10% from the gross income figure fixed by the calculation currently in force;”
The noble Lord said: Clause 17 states that a calculation can be reconsidered only if the parent’s income changes by 25 per cent or more. My amendments are not like the amendments we discussed in the previous group—that is, pernickety insistences on reviews and re-reviews. I very strongly feel that the bracket of 25 per cent before any change is made is too large. In essence, I said as much at Second Reading. From the non-resident parent’s point of view, if his income has decreased by, say, 20 per cent, to lose one-fifth of his income, without the ability to have the maintenance calculation reviewed, could place him in the position of being unable to make his child support payments and/or provide for himself and any second family who might exist. This proposed 25 per cent rule will also disadvantage the parent with care, who is often the most vulnerable party in child maintenance negotiations. If there is a substantial increase in income for the NRP by perhaps even 20 per cent, it would seem illogical that the parent with care cannot share in this increase and have the assessment revised to produce the maximum amount of money flowing to the child.
I have tabled Amendment No. 98 on the advice of the Solicitors Family Law Association, Resolution. This provision would mean that no longer is it down to the non-resident parent to provide income information, which could be obtained by the commission direct from HMRC. Indeed, it should be done under the system proposed in the Bill. This amendment is tabled with the intention of producing quicker and potentially more accurate calculations than the Bill would produce. Does the Minister not also believe that it is imperative that the calculation, where possible, reflects the up-to-date income position of the NRP? This is a slight over-hang, and I might have asked the question during our tête-à-tête towards the end of the last group of amendments that I moved. I am convinced that this amendment would also assist in alleviating child poverty: in cases where the updated information shows an increase in the non-resident parent’s income, this will maximise any maintenance calculation.
Amendment No. 97 was drafted by Gingerbread, and is very sensible. It is a probing amendment to prompt a discussion on how CMEC intends to avoid the situation where non-resident parents can get a reduction in their child maintenance, but only face a levelling-up in a year’s time when their liability is reset to the following year. Where, in a tax year, a non-resident parent’s child maintenance is assessed on current income or where he is required to pay only the flat rate of maintenance, the amendment would require CMEC to retrospectively check, using HMRC data, that during the tax year in question, the NRP’s actual income, as calculated for child support purposes, did not exceed the figure used to calculate his child maintenance by more than 25 per cent. If he did so, the non-resident parent should be made to pay the underpayment of liability. In another place, Ministers rejected an amendment which would have required non-resident parents to notify CMEC if their income rose by more than 25 per cent.
A non-resident parent will be able to switch to a lower current-year assessment if he can show that his income has dropped by 25 per cent or if he claims benefit. There seems to be no CMEC mechanism for revising this reduction, even if it becomes apparent in retrospect that the reduction in income or period on benefit lasted for only a short while, perhaps while he was unemployed for three months. That lower assessment will continue to apply for the rest of the year and will be re-evaluated only in the following year when he could—I am ascribing motives to him, which I hope he would not have—do the same again. This is far from desirable and there is a plain danger of abuse. I beg to move.
I concur with the noble Lord, Lord Skelmersdale, and the way in which he has moved his amendment. We need to be careful as regards the figure of 25 per cent, which is a very steep cliff edge. In my Amendment No. 100, I suggest reducing the figure to 20 per cent. Under Amendment No. 99, there is scope for thinking about imposing a duty on the commission when constituted to come up with a low income protection scheme of some kind that is not too bureaucratic or onerous. That would give some comfort to those who have been following these proceedings and think that this is just a little bit of a bridge too far all in one go.
Amendment No. 97 seeks to allow retrospective review of supersessions so that we can prevent misuse of some of the supersession rules. The arguments were not run earlier in the Public Bill Committee in the House of Commons, but this amendment is designed to allow discussion of how CMEC intends to avoid a situation where non-resident parents can get a reduction in their child maintenance but only face a levelling-up in a year’s time when their liability is reset for the following year.
In the Commons, Ministers rejected an amendment which would have required NRPs to notify CMEC if their income rose by more than 25 per cent. Again, we are trying to level up the playing field and put the parent with care in a stronger position. A lower assessment for an NRP would continue to apply for the rest of the year. It would be re-evaluated the following year when he could do the same again. There is a danger of potential abuse. The parent with care cannot apply for a variation because she has got no access to the financial information to which we have referred and have had discussions about earlier. In that circumstance, she is flying blind. Amendment No. 97 looks at ways to prevent misuse of that kind.
Members of the Committee will be aware of our proposals for the statutory maintenance service to introduce a system of fixed term awards with annual reviews of maintenance calculations. In between annual reviews, maintenance will be adjusted only for a change in the non-resident parent’s income if that change exceeds a tolerance level, which will be specified in regulations. As has been mentioned, we have proposed a level of 25 per cent. We believe that provides certainty for parents on the amount of liability, allows for significant changes in income to be reflected and will reduce significantly the volume of reassessment work carried out by the commission.
The commission will advise Ministers on the level at which the tolerance should be set, taking into account the potential impact on child poverty and what is possible operationally. It will be set out in regulations which, being subject to affirmative resolution, will be available for scrutiny by both Houses. The advantage of placing the tolerance in regulations is that it will be possible for the commission to review it in the light of experience and, if necessary, seek ministerial approval to change it.
Amendment No. 96 seeks to set the tolerance level in primary legislation at 10 per cent. Currently, the agency receives around 160,000 applications for a change of circumstances every month. Since 2003, a staggering 5 million changes of circumstances have been cleared by the agency for new scheme cases alone, which results in the agency spending far too many of its resources constantly adjusting maintenance liabilities. Many non-resident parents report repeated—even weekly—changes to their income and shared care arrangements.
For the commission to be successful, we need to avoid burdening it with the same level of re-work and reassessment that the agency has faced. Restricting the scope for in-year adjustments will help us to achieve this. Cases will be reviewed annually, and the income figures from HMRC will be updated so that they will always represent the latest available tax year. Analysis shows that between 2004-05 and 2005-06, 39 per cent of non-resident parents had an increase or decrease in income of 25 per cent or more.
If the tolerance were set at 10 per cent, that would hugely increase the volume of cases needing adjustment. For the period mentioned, 61 per cent of cases had an increase or decrease in excess of 10 per cent. Setting the tolerance level at 10 per cent therefore would not result in the reduction of reassessments needed for the commission to effectively manage its caseload, nor would it provide the desired level of income stability for parents.
We recognise that a tolerance for changes in income means that until the next annual review of the case, a non-resident parent who has had a significant drop in income will pay a higher proportion of their net income in maintenance. For example, a non-resident parent with one child who was earning £20,000, whose income drops by 24 per cent to £15,200, would have to pay around 20 per cent of their net income during this period. In a worst case scenario, a drop in income of 24 per cent would mean that a non-resident parent earning £800 per week with three or more children to support, might pay around 34 per cent of their net income until their next annual reassessment. However, since only 11 per cent of all non-resident parents have three or more children, and only 2 per cent of all non-resident parents are likely to experience a drop in income of between 20 per cent and 25 per cent, this scenario will be somewhat rare.
Amendment No. 97 applies to cases where a maintenance calculation has been adjusted for a reduction in the non-resident parent’s income. The amendment would provide that where the commission subsequently receives information from HMRC that shows that for the period covered by the lower maintenance calculation the income was actually 25 per cent or more higher than the income figure on which the lower maintenance calculation was based, the calculation should be reconsidered once more.
When a non-resident parent can show that their current income has fallen by 25 per cent or more compared with the figure on which their maintenance liability has been based, it will be possible for their liability to be adjusted to be based on current income. This type of adjustment is known as a “supersession”. Before the agency will carry out a supersession, it will require robust evidence that income has reduced for a period that is long enough to give a comprehensive and accurate picture of the non-resident parent’s income. This minimises the scope for manipulation and ensures that figures are not affected by short-term falls in income or by seasonal fluctuations.
I assure noble Lords that the current rules that allow for a revision of maintenance liability that has been found to be based on inadequate or incorrect information will continue to apply under the new arrangements. This means that if a parent with care believes that the non-resident parent’s income has not dropped by 25 per cent, the decision can be disputed and, if they do so within one month and are successful, the lower calculation will be changed from its start. If she successfully disputes it after the one-month dispute period, the lower calculation could be replaced from the date she disputed it.
If the commission subsequently receives information that shows that maintenance should not have been reduced because the non-resident parent had misrepresented or failed to disclose a material fact, the lower maintenance calculation could be revised and the original higher assessment could be put back in place from the outset. There are already existing provisions in place to allow for a decision to be reconsidered in the circumstances envisaged by the noble Lord. It is worth pointing out, however, that data from HMRC will only ever reflect the most recent complete tax year. The current income figures provided by the non-resident parent would inevitably be for a different period.
Carrying out routine reconciliation of HMRC data, even if it were possible, would be a resource-intensive and potentially complicated exercise that would reduce many of the administrative benefits of basing maintenance on HMRC information, resulting in frequent minor overpayments or underpayments which would require adjustments to ongoing maintenance that would be complex for parents to understand and budget for and for staff to explain to them.
Under Amendment No. 98, regulations would provide that an immediate adjustment takes place where the maintenance calculation had been based on income data supplied by HMRC and the commission subsequently receives updated income information. A non-resident parent could submit new income details at any time and their maintenance calculation would be reviewed. This could have an overwhelming effect on the commission by creating unmanageable peaks in workload following the end of the tax year. To manage the system of annual reviews, the workload needs to be spread evenly throughout the year.
Amendment No. 99 would place a requirement on the commission to make proposals to protect low-income non-resident parents from too high a threshold. Noble Lords might consider that there should be a separate, lower tolerance for non-resident parents on low incomes, but that could add significant operational complexity and create other difficulties. For example, would the lower tolerance only apply to those already on incomes below a certain threshold, before their income falls? Or would it also apply when the drop in income itself brings the income level below the threshold?
Finally, Amendment No. 100 seeks to limit the tolerance level to 20 per cent. As I mentioned earlier, the agency spends far too much time adjusting maintenance assessments, and we need to reduce the amount of similar work that the commission will be required to carry out. The analysis that I referred to earlier looking at income changes between 2004-05 and 2005-06, shows that around 44 per cent of non-resident parents had an income change in excess of 20 per cent. This is only 5 per cent different to the figure of 25 per cent but, given the likely scale of the commission’s caseload, even a 5 per cent difference could have a significant impact on the volume of cases needing reassessment. As I said earlier, in due course the tolerance level will be set out in regulations, and there will be an opportunity to debate it then.
The noble Lord, Lord Skelmersdale, cited an example where someone might be tempted to go from work on to benefit and back into work to try to defeat or get around the rules of assessment. If someone goes from unemployment to work, there is an immediate reassessment of the amount that is due. The range of circumstances is fairly limited where there is an immediate reassessment.
The question was also specifically posed why we are not requiring non-resident parents to report increases in income of 25 per cent or more, when they could be earning far more than the figures used in the maintenance calculations. For reasons of simplicity, we want to remain with the historic HMRC figure and avoid changes in liability wherever possible. If the non-resident parent has a large increase in income in any tax year, that will catch up with him when the maintenance is based on his income for that particular year. If a parent with care reports that the non-resident parent had an increase in income of more than 25 per cent and she has some evidence to support the claim, it would be investigated.
In conclusion, I suggest that a key difference of the new system proposed is that it will be possible for annual updating of assessments, which has not been possible under the current arrangements. Some assessments have been languishing unchanged for many years. This is a better system. Certainly at the margins it may be perceived as broad-brush, but that is the price that we pay for efficiency and being able to make those annual adjustments.
I was just about to dream up a précis of what the Minister has been saying for the past seven or eight minutes, but he did it himself so I do not really have to think about it too much. The system is by no means perfect, but it is as perfect as we can get it at the moment. Is that a fair summary?
That is not an unreasonable summary. If we did not have to have regard to realities, the constraints of systems and people’s behaviour, one could have a much more intellectually perfect system of what was included and excluded. Experience shows us that that is not the right way to go. At the heart of all this, we must have effective arrangements to ensure that the money goes to support children.
I am glad that the Minister said that. Of course, in a perfect world there would be no people, so there would be no need for climate change Bills or anything like that, and certainly no need for this Bill. However, we do not live in a perfect world.
The latest available tax year information is all well and good, but by definition—as the Minister said under a previous amendment—it is always going to be at least slightly and possibly very out of date by the time that it is needed to be applied for the CMEC calculation. That is imperfect, but I admit that I cannot see any better way of doing it. It is rough justice, if you like. In some of my meetings with my honourable friends down the corridor, I have discussed this at some length and persuaded them that there is no better way. They have much better sources of advice on these matters than I do up here, but even with that they have not come up with a better suggestion.
I should have been able to pick it up through my reading, but I was alarmed to hear that there were 160,000 applications for variations a month. I find that an absolutely staggering figure when the total number of cases is, from memory, about 1.5 million a month. So it is a very large percentage indeed.
I was glad to hear that when someone moves from unemployment to work there is an immediate reassessment. What I did not hear was what happens the other way round—when someone moves from work to unemployment. How speedy is the assessment then?
I think it operates symmetrically so that if somebody goes from work to benefits there is an immediate reassessment, and if he goes from benefits to work there is an immediate reassessment. We are not locked in to the preceding 12-month calculation. How speedily that can be done depends upon the circumstances. I am not sure that I can give a clear answer to that, but one would want it to be done expeditiously.
Of course. At this late hour, I am not going to take the Minister to task for saying, “I think such and such happens”, but perhaps we can find out whether it does happen. I am pleased to hear that as far as he knows the speed and the action are reciprocal, whether from unemployment to work or work to unemployment—I see nods behind him, so I shall excuse him for the words “I think”.
I shall look at this again, but in the mean time it is quite clear that we are not going to get any further tonight, so I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 97 to 100 not moved.]
Clause 17 agreed to.
101: After Clause 17, insert the following new Clause—
“Determination of applications for a variation
(1) Section 28D of the Child Support Act 1991 (c. 48) is amended as follows.
(2) After subsection (2) insert—
“(2A) Subsection (2B) applies if—
(a) the application for a variation is made by the person with care or (in the case of an application for a maintenance calculation under section 7) the person with care or the child concerned, and(b) it appears to the Commission that consideration of further information or evidence may affect its decision under subsection (1)(a) whether or not to agree to a variation.(2B) Before making the decision under subsection (1)(a) the Commission must—
(a) consider any such further information or evidence that is available to it, and(b) where necessary, take such steps as the Commission considers appropriate to obtain any such further information or evidence.”(3) In subsection (3), after “duties” insert “, apart from the duty under subsection (2B)”.”
The noble Lord said: I was looking to see whether noble Lords had an appetite to close proceedings, but I am very happy to move Amendment No. 101 and to speak to Amendments Nos. 203 and 205.
Amendment No. 101 places a duty on the commission to make investigations into any application for a variation from the parent with care where it is clear that further evidence would help the commission to decide whether a variation should be given. In Committee in the other place, a number of amendments were tabled concerning cases where non-resident parents manipulate their income and avoid a maintenance liability which properly reflects it.
Although the Government rejected those amendments, we considered the representations that were made. We are aware that there is some dissatisfaction with how the variations process works and with how difficult it can be for a parent with care to provide the information needed to make a successful application. There are a number of obstacles either party may face when applying for a variation under the current scheme; for example, a lack of awareness caused by how the Child Support Agency currently functions. The parent with care and the non-resident parent are not initially informed of the variations scheme during the calculation process. If either feels strongly enough that the maintenance liability is unfair due to costs or income not taken into account, only then would the Child Support Agency inform the parties of the variations scheme. With that approach, if the parents have little or no contact with each other, the parent with care may never become aware that the non-resident parent’s liability does not accurately reflect his financial circumstances.
Once an application has been made, there is still a sift process. At that point, the agency evaluates the grounds of the variation and assesses the level of information provided by the applicant. If they do not meet the minimum requirements, the application is sifted out and no further action is taken. The other party will never be informed of the application. While non-resident parents have such an incentive to provide information on their variation applications and reduce the liability, they do not have such incentive on applications made by the parent with care. That is why we want the duty-to-investigate provision to apply for the variation applications made by parents with care.
Therefore we propose this amendment to the 1991 Act which will ensure that parents with care are able to secure variations where appropriate that will help to secure maintenance liabilities that more accurately reflect the non-resident parent’s financial circumstances. The commission will investigate applications by using information already held—for example, by HMRC—or it will seek information from other sources, such as accountants, employers or credit reference agencies.
This change is part of a package of ways in which we can strengthen the variations scheme and overcome the obstacles faced when applying for a variation. We are also considering other changes that do not require primary legislation; for example, legally requiring non-resident parents to provide information about variation applications such that the non-resident parent would be subject to criminal sanctions if he or she did not comply. We are also looking into the feasibility of the commission developing a risk-profiling system to identify those non-resident parents who may have assets or income that could be the subject of a variation and to prompt the parent with care to apply for one. We also expect the commission to work to raise the profile of the variations scheme, especially at key points such as the initial calculation and the annual review.
Amendments Nos. 203 and 205 are minor and technical. They allow the commission access to information held by HMRC for the purpose of functions relating to national insurance contributions. I beg to move.
I am sorry to raise a couple of questions at this late stage. This is obviously a welcome concession as far as it goes. There is no doubt about that, and the Minister deserves credit for introducing it. However, the noble Lord, Lord Skelmersdale, was talking about applications for variations. I would like some more consistently collected information on applications for variations. Although there are people who make applications, there are more important questions about the follow-through: the number of applications for variations that are accepted by CSA decision-makers, the numbers then taken to appeal and the outcome of those appeals. Although I accept that there may be a flurry of activity where there is nothing to lose, in the red rage that parents with care often get into, they will—if they know about it—make an application just on the basis that it is the only thing available to them, with no real prospect of success. We should be careful and monitor how the variation provisions pan out in practice when this legislation is in steady state.
I have already welcomed the amendment, and I may have misunderstood this but it will still put the burden on the parent with care to bring a variation application before the commission can intervene to give them access to the provisions in the new clause. We had discussions about this earlier. The amendment will not help such a parent with care unless she is alerted to the fact that an application for a variation might be appropriate. Indeed, although the noble Lord, Lord Skelmersdale, was evincing surprise that there was a big number—it is a big number in absolute terms—in proportion to everything else it is modest. We should be quite clear in this new system about what entitlements and abilities there will be for parents with care to make variation applications.
Unless I have misunderstood this, and I hope I have—if I have, someone will put me right—this does nothing to help the parent with care to know whether she has a chance of taking advantage of the new powers in Amendment No. 101. Welcome though they are, they will not do the job for that reason.
It is really too late to do more than comment on what the Minister said on Thursday last:
“I want to inform Members of the Committee that we are currently investigating, and I am in discussion with HMRC on the details of the HMRC data transfer”.—[Official Report, 31/1/08; col. GC 395.]
I hope that we hear about this later.
These three amendments, particularly Amendment No. 203 which refers to national insurance contributions, allow me to ask why this is going to be helpful to CMEC in the first place. I can well understand why the tax returns and all the rest of it are useful, but not why national insurance is. Are we talking about amounts or records?
Let me pick up first on the points of the noble Lord, Lord Kirkwood. He asked what data we have on successful applications, appeals and outcomes. We do not currently have detailed data on that, although some research is under way to look at this issue in detail. The key point is perhaps to recognise that we propose to shift it from how it currently works—or does not work—to try to make it more accessible. If we just shifted some of the issues I touched upon—about how we currently communicate with parents with care about its availability and so on—and nothing else, it would help. We are planning to do more than that.
The noble Lord is right. Standing by itself, the amendment would not provide a parent with care with any more information about whether or not they should be seeking a variation. We are looking at profiling to see whether the commission can use it to inform parents with care of the likely circumstances in which a variation may be appropriate. We certainly want to move on to a better system.
On the information we will be providing to the commission to which it does not currently have access, the amendment will provide the commission with access to all information held by HMRC for the purposes of functions relating to contributions. While the majority of information held for contribution purposes is also held for income tax purposes and, as such, will be accessible to the commission, specific pieces of information, and information above a certain age, will not. The agency currently makes use of historic contributions information when it needs to create a historical profile of a non-resident parent’s employment history in order to perform a maintenance calculation, or revalue an interim maintenance assessment. The commission will also require access to contributions information for these purposes. So there is certainly a particular opportunity there to go back into the past in trying to deal with these long-outstanding debts. That national insurance information will help the commission in building an employment profile for somebody. I hope that deals with the points raised.
On Question, amendment agreed to.
The Committee stands adjourned until Thursday 7 February at 2 pm.
The Committee adjourned at 7.37 pm.