Child Support Agency

HC Deb 02 December 1993 vol 233 cc1265-74

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

10 pm

Mr. John Spellar (Warley, West)

This debate is about massive injustice being inflicted on families throughout Britain. Members of Parliament on both sides of the House are being deluged with complaints about the Child Support Agency. That is clear from business questions and questions to Ministers, and many of the cases are extremely disturbing, with havoc being created in the lives of thousands of ordinary families, more than 200 of whom were here today in the Grand Committee Room. It was unfortunate that the Department could not send along even one representative to address their grievances.

The national and local press have been active in campaigning on the issue and I pay tribute to the way in which they have highlighted the impact of the agency on families. I shall give examples of some of the worrying cases, but the important thing tonight is to concentrate on the principles involved.

The first thing to establish is that the agency is designed primarily to help not children, but the Exchequer. Parliamentary answers show that only about 10 per cent. of the money collected will go to the children. The other 90 per cent. will go to the Exchequer. Therefore, CSA does not stand for Child Support Agency but for Chancellor Support Agency.

We shall probably be told, rightly, by the Minister that with a £50 billion deficit the Government must be more careful than usual with public money. But in that case they must be honest with the public and describe the charge for what it is—a tax. It is a tax that is dramatically falling on certain groups of people in society and in the majority of cases it is, in effect, a divorce tax. Furthermore, the tax is retrospective, tearing up previous agreements and even court orders. It is interesting that, in the past, retrospective legislation has been looked on doubtfully by the House. But in this case we have retrospective legislation with a vengeance.

The tax will have immediate effect. When the Chancellor, who has just departed, introduced the increase in wine duty he left it until the beginning of next year before it came into effect, and similarly with other Budget measures. When the Government introduced the unified business rate, the ill-fated poll tax or the council tax, they built in transitional arrangements for individuals and local authorities. But there is no such transition for parents under this scheme. The full weight of it falls on them at once, often with dramatic increases in their obligations and often with a considerable debt arising from the delay between initial notification and the final assessment that comes through from the agency.

Nor does the agency seem to take account of payments made to the spouse during that period, so payment can be made twice over. Stopping payments in that period naturally causes enormous hardship and friction with the ex-spouse. Yet such debts can run into hundreds, even thousands of pounds in some cases, and impose a major burden on the individual and his second family. Even those who believe in the fundamental objectives of the Child Support Agency would, I am sure, accept the need for phasing in the increase because decent hard-working families, who have carefully worked out their budgets and been prudent in taking account of their obligations, find themselves faced with a dramatic change in their circumstance which threatens to plunge them into debt.

One of the arguments, or rather alibis, put forward by the Government and some of their apologists is that the Child Support Act 1991 supposedly received general support when it was introduced and that unforeseen problems arose only later. That mythology has formed the basis of a number of articles in the quality press.

The reality is rather different. It is true that there was general support for the principle of parents supporting their children. I am sure that that view is shared by all hon. Members here tonight. However, on Second Reading of the Bill the Opposition moved an amendment declining to give it a Second Reading. More important were the perceptive reasons given for that view. The amendment was moved by my hon. Friend the Member for Oldham, West (Mr. Meacher), who said that the Bill leaves lone parents on Income Support not one penny better off, makes lone parents worse off where they receive maintenance just above Income Support levels and thus lose access to passported benefits, allows maintenance payments to be disrupted if the absent parent defaults, does not take account of property settlements which could lead to an increase in orders for the home to be sold"—[Official Report, 4 June 1991; Vol. 192, c. 194.]

and so on. Many of those problems have come back to haunt us.

Those points were reinforced by my hon. Friend the Member for Eccles (Miss Lestor). In winding up the debate, she said: Many separated or divorced women have negotiated with their former partners, without rancour, an arrangement whereby they forgo any maintenance but are allowed to keep the family home for themselves and their children. We must bear that in mind when we consider figures on the number of people who do not receive maintenance. The Bill could undermine that principle.

My hon. Friend referred to the question of shared access, saying: The child may spend weekends and school holidays with its father … In such cases that is seen as the father's contributon to the child's maintenance, although no formal handing over of money is involved. Are we saying that that arrangement must change—that a formal maintenance order must be made, disrupting and undermining the understanding way in which the couple may have dealt with separation or divorce? My hon. Friend also said, perceptively: I fear that we are in danger of impoverishing the second family to provide for the first."—[Official Report, 4 June 1991; Vol. 192, c. 236.] That last point has been made to me time and again, in letters and at meetings, by second wives from across the country.

It was not just the Opposition who pointed out the flaws in the Bill. The Law Society—the body for England and Wales and that for Scotland—warned against a formula that it said was too rigid and would produce harsh and arbitrary results. It also argued for the need for a transitional phase and a more flexible system. It also said that the agency was inconsistent with the principles of the Children Act 1989, which was designed to ensure that all proceedings relating to one family could be heard in the same court. The point about that is that the court can look at the wide range of different individual circumstances that do not fit into the straitjacket of a national formula administered by a faceless bureaucracy. Unfortunately, the Government did not listen and the current chaos is the result of that.

I would argue that the agency is also misdirected in its priorities. The Second Reading debate included a number of references to targeting those fathers who had abandoned partners and children and were paying nothing. However, it appears that those are not the first priority of the agency—that is for new cases. They are not the second priority—that seems to be where the mother is on benefit and the father is already paying maintenance. In other words, he is in a job, is fulfilling his obligations and is easily traceable. Such fathers are the soft, easily identifiable targets where the agency can show some quick and easy results and possibly earn bonuses. Those fathers evading payment appear to be only the third priority and there is already anecdotal evidence that a number of them are finding ways to get round the system.

What about the actual operation of the rigid formula, especially the way that old, clean-break orders are being ignored? As I said, that is where retrospection really comes in with a vengeance. It has caused enormous problems because no account is being taken of the transfer of the matrimonial home and, in particular, the payment of the mortgage on it. In those instances, the parent is faced with an appalling dilemma. He could pay maintenance, default on the mortgage and risk making his children homeless. One person who came to see me could not even default on his mortgage because it was with his employer and he would have lost his job. Alternatively, the father could pay the mortgage but not the maintenance and risk imprisonment. Of course, if he were a police officer, he would not have even those options as he would lose his job for being in breach of his conditions of service. That is the stark prospect facing many serving officers, a number of whom were at the meeting today and have been at other meetings around the country.

The formula does not take account of debts, many of which could have arisen as a result of the divorce, or the cost of contact—particularly when the ex-partners live some distance from each other. If for financial reasons parents will see less of their children, how will that benefit the children or the country? How will that help to produce the better citizens of the next generation? The formula also does not allow for the cost of travelling to work. One couple was told that the husband did not need a car, but the wife rightly pointed out that her husband, who would have to pay the support, had to be at work by 4 o'clock in the morning because he was a long-distance lorry driver.

The agency takes account of only 50 per cent. of pension contributions. A number of categories of workers, such as those in the emergency services, make mandatory contributions, but only 50 per cent. of their value can be taken into account.

All of that shows that the agency does not live in the real world. Its monthly-paid bureaucrats have difficulty understanding that overtime is often an erratic element in a worker's pay packet. An individual may be assessed during a period when his employer is doing well and has a number of orders. When that period has ended, the worker goes back on ordinary pay but still has to contribute a substantial sum at the higher assessment.

There seems to be no understanding of the effect of assessments on second families, especially when they are caught out by the transitional provisions. A father will have to pay for the children by his first marriage, but the children that he looks after in his second marriage may not be the subject of any support. That wife, because her new husband is employed and not on benefit, is not considered a priority case for support from her first husband. Real presure and crisis is forced on such families. The phrase used in hundreds of letters to me is, "Our world has been turned upside down". That is a real cry of misery.

In the past, courts could examine individual cases and circumstances and make judgments accordingly. They did not always reach the right decisions and there were often variations across the country. The Government would have done better, however, to set broader national priorities and categories subject to the broader wisdom of the courts—rather than have that overridden and be replaced by the CSA's rigid national formula, which is a dramatic assertion of the doctrine that the man or women in Whitehall always knows best.

There is special resentment at the £78 charge made for the agency's unwanted intrusion into family affairs. It is probably a precedent for future Government fund raising, and is about as insensitive as the policy of the Chinese who, after shooting a person, charges his or her family the price of the bullet.

Families throughout the country are facing a bleak Christmas as a result of the agency's activities. Only 56,000 families have been assessed; a further 500,000 are in the pipeline. We are seeing only the tip of the iceberg, but we already know the anguish that the agency is causing among thousands of families throughout the country. The CSA threatens second families and places them under enormous financial pressure. It reopens old wounds between divorced couples, in respect not only of financial arrangements but of access and the disposal of the former matrimonial home. The agency's activities run counter to the law on clean-break divorce and penalise those in work who are trying to build a new family life. It is unfair, and the problems are growing by the day.

The Government acknowledged public concern about the agency by establishing their own review. The Minister must accept that the CSA needs a fundamental rethink. The Government should suspend the agency's operations until it can be given fairer and better guidelines or the work returned to properly resourced courts which can deal with the problems in one go. That way we could bring hope before Christmas to thousands of despairing families not only in my constituency but throughout the country.

10.14 pm

The Parliamentary Under-Secretary of State for Social Security (Mr. Alistair Burt)

I congratulate the hon. Member for Warley, West (Mr. Speller) on securing the debate and providing the House with an opportunity to debate this important issue. I know that it is an area in which he has great interest and I look forward to further dialogue with him on the subject on Monday.

The hon. Gentleman made a number of valuable comments with which I shall deal shortly. I am aware of the lobby this afternoon. It is not always possible for Ministers to attend, but the hon. Gentleman was kind enough in his letter to me to suggest that we sent someone along. I should like to pay tribute to my hon. Friend the Member for Broxbourne (Mrs. Roe) who went along to that meeting and put a case. It was slightly churlish of him not to mention her contribution to the proceedings.

Mr. Spellar

Will the Minister give way?

Mr. Burt

I am sorry, but no. Before I deal with the detailed matter, I should like to say a few words about some of the fundamental issues that are at stake. It might be helpful if I were to remind the House of the purpose of the child support scheme and its provisions.

The purpose of the Child Support Agency and the Child Support Act 1991 is to obtain maintenance for children and to improve on a discretionary court-based system, which had failed to stem a decline in the payment of maintenance. The scheme is designed to ensure that, wherever possible, parents pay for the maintenance of their own children, rather than making other people, including other parents, do so through their taxes. This principle was widely welcomed, as was the move away from the courts, by hon. Members from all parties and by the relevant lobby groups when the Child Support Act was introduced in 1991, and is unchanged.

The principle is not a new one. Parental responsibility for children has long been enshrined in the law of this country. However, before 1991 fewer than one third of lone parents received maintenance from the child's other parent. By 1997 our aim is to have raised that proportion to half. Maintenance payments are a valuable income which lone parents can take with them when they return to work—which many wish to do. It will ensure that many will no longer have to rely on income support as their main source of income.

The Child Support Agency has figured prominently in the media in recent weeks. However, much of the coverage has been misleading and one-sided. The majority of comments have centred around the amounts of maintenance that absent parents are being asked to pay. Little attention has been paid to the substantial benefits for children to be derived from regular payments of maintenance.

We said in the White Paper, "Children Come First", that the new scheme was expected to increase the amounts of maintenance paid by absent parents. We repeated this in debates on the Child Support Bill and the regulations and continued to make the point on numerous other occasions. We recognised that there would be concerns expressed by absent parents, which we are now seeing as the measures begin to bite. We must, however, remember that there are two sides to every coin: yes, absent parents are being asked to pay more, but parents with care are now receiving realistic amounts of maintenance for the first time.

It is understandable that absent parents, some of whom have previously paid little or nothing towards the maintenance of their children, and others who may have paid less than the formula now requires, would not welcome being made to pay more—I understand that—but many of those absent parents, wittingly or unwittingly, made settlements which involved any maintenance that they paid being supplemented by the taxpayer. It is clearly reasonable that those absent parents who can afford to do so should make a more realistic contribution towards the cost of maintaining their children, without such taxpayers' interest.

Contrary to some media reports, the amount of maintenance to be paid is determined not on an arbitrary basis by the Child Support Agency or by faceless bureaucrats, but by a formula which was extensively discussed both inside and outside Parliament and put into legislation. It ensures that both parents, where they can afford to do so, contribute to the maintenance of their child. It produces predictable and realistic levels of maintenance for children, taking account of the fact that they do not look after themselves, and at the same time ensuring the children share in their parents' increasing income. This important principle has not been brought out in media stories.

Another crucial factor rarely mentioned is that the vast majority of absent parents will be left with 70 to 85 per cent. of net income after paying maintenance, and those with low incomes will usually be left with an even higher percentage. In fact, it has to be said that some of the media coverage has been unbalanced, with journalists being selective, to say the least, with their presentation of the facts, very rarely taking the trouble to research fully the true circumstances of the parents with care and their children.

In the vast majority of cases in the papers, such research would reveal a parent with care and a child on benefit. One particular documentary, ITV's "World in Action", presented a series of cases, subsequently researched by The Sunday Times, which was heavily critical of the programme. The Sunday Times reporter who spoke to the ex-wives said that "World in Action" had made little effort to examine the full circumstances of the absent parents interviewed. The producer admitted to the newspaper that he had not contacted former partners.

In sensitive matters such as these—I appreciate the sensitivities on both sides—a greater willingness to present both sides of a difficult case would be better for everyone than merely putting a partial case. It would please me immensely if other sections of the media were to follow the lead of The Sunday Times so that the public could see some of the true benefits to children that are being derived from the scheme.

I recognise that people have genuine concerns about how the detail of the scheme has affected them, and I do not minimise the effect that this must have, but I have undertaken, as have my right hon. Friends the Secretary of State and the Prime Minister, to examine those concerns and we are continuing to do so. I remain convinced, however, that the basic principles of the new scheme are sound and stand up to scrutiny and are supported by the vast majority of people in the country. If it is apparent that the scheme can be improved further, I will obviously ensure that that is done.

The hon. Gentleman made some specific points and I shall do my best to cover as many as possible. He said a lot, however, and I may not be able to cover it all.

The hon. Gentleman mentioned the take-on strategy. Given the number of families involved and the need to ensure that each case is handled fairly and accurately, it was not possible to implement the new arrangements for all families overnight—but it was never our intention to do so. The agency aims to take on its full work load by the end of March 1997, but until then we have to prioritise the cases that it handles.

This year, the agency is giving the highest priority to all new cases, which have nowhere else to go. Newly divorced or separated parents who have care but do not have a court order or written maintenance agreement and who are not on benefits are no longer able to seek maintenance through the courts.

The second priority is parents with care who make a new claim to income support, family credit or disability working allowance. After these cases, the agency will cover, over the next three years of operation, cases where the parent with care was already getting income support in April. Less than a quarter of such cases are receiving maintenance. The agency has always made it clear that, within this group, priority would be given to the parents with care receiving maintenance, and this strategy was set out in the leaflet, "Parents Who Live Apart", which was published in January 1993 and sent to all hon. Members.

The agency will also consider sympathetically, in the light of individual circumstances, any existing benefit client who seeks to be taken on early, including those where the absent parent has been avoiding paying maintenance.

The hon. Member for Warley, West mentioned targeting, which has caused much concern. It is simply not true that the agency is concentrating solely on absent parents who are already paying maintenance. We have always made it clear that all types of cases would be dealt with. The agency expects to deal with just over 1 million cases during the year, almost 640,000 of which will involve absent parents who do not currently pay any maintenance.

In the seven months up to 31 October, the agency took on 616,000 cases and estimates that more than 50 per cent.—some 330,000—were not receiving maintenance. This proportion will increase as the year progresses. I advise the hon. Gentleman that in nearly a third of assessments the absent parent has been assessed as either not liable to pay maintenance or to pay a nominal amount. That is hardly commensurate with targeting payers.

The agency has had considerable early success, which has not received the publicity that it should have, in finding missing absent parents—those parents who, unlike many others, have shirked their responsibilities and, in many cases, disappeared without trace. In the cases completed so far, it has managed to trace more than 9,000 absent parents where the parent with care did not know their whereabouts—a success rate of more than 90 per cent., which was unmatched by the previous court system.

The hon. Gentleman raised the issue of clean-break settlements. Much attention has been paid to what are widely known as clean breaks. There can be no clean break between parents and children, and there never has been under the court system. It has always been possible for the parent with care to return to the court to reopen the need for child maintenance if circumstances changed.

Where a parent with care has gained sizeable equity in a property, the true effect in most cases being dealt with has been that she has acquired a material asset while the taxpayer has supported her children's basic living costs. It must be remembered that for many parents with care this transfer of property is not one of a free-standing asset but one with an associated level of debt through the mortgage. In those cases where the parent with care is reliant on income support, the interest on this debt falls to be paid by the taxpayer.

Advocates of that approach overlook a real problem. In the vast majority of such cases, there is insufficient information to determine what proportion of any settlement was attributable to spousal maintenance, which is not dealt with by the agency, and what is attributable to child maintenance, which is dealt with by the agency.

It should be emphasised that the child support formula provides for the practical consequences of a clean break settlement because it allows for the absent parent's housing costs. For example, in not taking any equity from the family home the absent parent may well incur greater expenses in re-establishing himself in a new home. The formula allows for those costs, and the amount of maintenance that he will be asked to pay will thus be reduced.

The hon. Gentleman made the allegation that the Child Support Agency only benefits the Treasury. That is not the case. I emphasise, first, that the services of the agency are available to parents who are not in receipt of any benefit, so it is wrong to suggest that the scheme is purely a money-saving measure. The question which should be asked is not, "Should we have introduced an Act to save the taxpayer money?" but rather, "Should the taxpayer have been involved in the first place?" Where the absent parent can afford to pay, I think that the answer should be no.

The hon. Gentleman mentioned the subject of second families and the difficulties caused to them. I understand his worries. The formula includes, as he is aware, a protected income calculation, which is designed to ensure that absent parents are not asked to pay maintenance at a rate which would take them down to income support levels. That is an especially important safeguard for absent parents with second families. The calculation takes account of the expenses, not only of the absent parent, but of his new partner and any stepchildren. It is in that part of the calculation that the absent parent's new partner's income is taken into account, because the entire household's income and expenses are compared to ensure that they keep a margin of income above income support levels. That calculation can only reduce the amount of maintenance that an absent parent is required to pay. Absent parents will never be required to pay full maintenance to the first family if it would reduce the living standards of the second family below the protected level. To that extent the second family takes precedence over the first.

The hon. Gentleman has mentioned the issue of phasing. As he is aware, some absent parents will have the formula amount introduced in two steps to help them adjust. He is aware of the provisions. It has been said that that matter could be reconsidered and that is one of the subjects that the current Select Committee is considering.

The hon. Gentleman mentioned the important issue of policemen, service men and others and I am anxious to make a comment about that. We have spoken to the Home Office and the Minstry of Defence about that issue. They are quite categorical. Policemen and service men will not lose their jobs because of increased liability for child maintenance. Counselling will be available for individuals who experience difficulty in managing debts and help will be given in dealing with creditors. The police force and the services are well aware of the problems that can arise from an unexpected debt and it is not fair to suggest that in all those cases, or in any of those cases necessarily, people will lose their jobs solely because of the matter that the hon. Gentleman has mentioned.

The hon. Gentleman also mentioned expenses. It has been suggested that the assessment formula should take account of the absent parent's expenses, such as the costs of travel to work, contact with children and debts. The formula does make provision for essential living expenses and, additionally, absent parents are left with a significant proportion of their net income after paying maintenance. That ensures that they have choices about how to spend their disposable income.

However, as I put as strongly as I could to the Select Committee, we do not think it right to allow for other expenses in the formula, as that gives them precedence over the basic needs of their children. To do so would create pressure for more and more expenses to be defined as essential and for child maintenance to be pushed further and further down the list of priorities. The ultimate result would be a return to the unrealistically low sums which were common under the previous system and indeed the conditions that inspired the House to make a change from the previous system, because it did not adequately deal with the situation affecting the children.

The hon. Member has again called for the suspension of the operations of the Child Support Agency, as he did last week. Even if it were warranted—which it is not—to suspend the operations of the Child Support Agency, it completely ignores the impact of such action on many thousands of children, often in situations in which no maintenance had previously been paid. If the hon. Gentleman thought through the consequences of such a suggestion, he would realise that it would result in great hardship. Many parents with care would find that established maintenance payments would suddenly cease, and many would, therefore, be forced back to benefits. I am afraid that only a failure to understand both sides of the issue could have led the hon. Gentleman to make such a call.

I shall briefly make two or three final points. First, as to shared access, where an absent parent looks after a child for a period, the hon. Gentleman knows that that is catered for in the formula. Secondly, in relation to the question of overtime, the agency well understands that earnings can fluctuate and it can take account of that. Indeed, one of the benefits of the previous system was that it was difficult to go back to court to deal with variation orders. Under the new system, that can be done and it can be done without any increase in fees. If one went near a court in the past and one was charged new fees by a lawyer, it would turn out an awful lot more expensive than the fees charged by the agency.

Lastly, the hon. Gentleman made arguments about the support offered by his party, in one way or another, for the principle of the Child Support Act 1991. As far as I am aware, the Third Reading of the Act was not opposed by the Opposition. The Labour party conference of 1992 urged repeal; the Labour party conference of 1993 did not urge repeal. I am still not quite sure whether the Labour party has now changed its view in any way.

The hon. Gentleman has advocated a return to a court-based system in what he said at the end of his speech. If that is now the view of Opposition Front Benchers, I would be very interested to hear it.

Question put and agreed to.

Adjourned accordingly at half-past Ten o'clock.