HC Deb 31 January 1994 vol 236 cc715-22

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

10.40 pm
Mr. Hugh Dykes (Harrow, East)

Naturally, in one sense, I am delighted that, as a result of the circumstances and of the statement that we have just heard, this Adjournment debate is taking place somewhat earlier than the Minister and I might have expected. That is good, as it means that we can devote our intellectual powers—which I hope are considerable on this occasion—to this very important matter. I am very glad of the opportunity to raise a serious problem affecting a constituent of mine, Mrs. Terri West, and her family as a result of the activities, decisions and rulings—at least on a provisional basis—of the Child Support Agency.

There have been many cases of husbands or former husbands suffering from sharply increased payments for which their circumstances did not allow. In numerical terms, those have constituted the main preoccupation of most hon. Members. In this case, things have gone in the other direction, with the wife, or former wife, suffering very grievously as a result of at least the provisional ruling of the Child Support Agency. I shall go into the details of the case in a moment.

I am very grateful to my hon. Friend the Under-Secretary of State for Social Security for coming to the House to reply to this important debate. I hope that he will indicate tonight—and if the occasion so demands, as I think it inevitable that it will, in later correspondence —that this case will be examined very thoroughly, not only because of its grievous effect on one of my constituents, who has fought with great courage to highlight it, but also because of its effect on a large number of other people. We are receiving more and more evidence of the numbers involved.

The tax status of a former head of household is also affected—a very important matter about which there must be consultation between my hon. Friend's Department, the Treasury and the Inland Revenue. This affects the Child Support Agency's behaviour and procedures in its still early days, notwithstanding the improvements that my hon. Friend and his colleagues introduced just before December as a result of the various helpful suggestions of the Select Committee on Social Security. The rigid procedures of the Child Support Agency need to be made more subtle and more supple with a view to dealing with problems such as those that I wish to highlight.

The appeal and reviews too are affected. We must make sure that those work correctly, and not to the detriment of hard-pressed families such as the one involved in this case. There has been a considerable amount of press publicity about this matter. It is not easy for a member of the public to take such a decision, especially when he or she bears in mind the possible effect on the children—in this case, one son and one daughter, who attend local schools and are doing very well—as well as on the rest of the family including, in this case, Mrs. Terri West. She has shown great foresight in her determination to draw attention to her case. Often people will think of doing so, but the thought of the publicity that will inevitably rain down may deter them from action which could benefit many hundreds of others, if not more.

The problem arose because of the CSA's assessments in this case. Thankfully, I can emphasise that they are only provisional. The trouble started recently as a result of the agency's determinations. As I will explain later, I have not found its replies so far to be satisfactory.

In 1986, a divorce court ordered Mrs. West's ex-husband to pay £75 a week maintenance in respect of their two children, but that was reduced to £57 as a result of the CSA's ruling.

I thank the press for their interest in the case; various journalists who have been in touch with the West family, me and others; the solicitor acting for Mrs. West—Mr. Anthony Andrews; and others closely involved.

I and others are alarmed at the way in which the agency examined the status, income potential and wealth of the ex-husband in this case, and we question whether its adjudication is right and fair.

That mother of two children is struggling bravely. As we know all too well from our surgery cases, people still suffer from harsh economic conditions even in the south, where we are traditionally used to prosperity by comparison with the north of England. Mrs. West visited my surgery some time ago, having decided that she would not take the matter lying down. I am glad that she has committed all her energy to arguing her case, and I am proud to do so on her behalf in this Adjournment debate.

I ask my hon. Friend the Minister to give a cogent answer tonight as to why the CSA reached the wrong conclusions in Mrs. West's case and is treating her and her family in an oppressive way. He may be tempted, understandably, to say that CSA rules and procedures mean that he cannot comment too much on the confidential details of an individual case. But that will not be enough: he must give at least a part answer tonight. If he wants to defend the CSA, I shall listen carefully and perhaps his answer will continue in later correspondence. If, however, the CSA's rules of confidentiality are just used as an excuse not to answer properly the public's queries, problems and complaints, much more frustration will be generated.

In her letter to me of 26 January, Mrs. West places great emphasis on the crux of the matter. Her husband is not a conventional employee for tax purposes, and now has another potential or actual marriage partner—to whom he is paying an allowance for her work as a secretary in his own company. He created a one-man, limited company. His above-the-line deductions for legitimate business expenses according to Inland Revenue calculations made the below-the-line amounts far too low and the CSA's assessment ridiculously low for a former husband who is extremely prosperous and well off and who can pay far more for the upkeep of his former family—for the care of his children, in particular, and other expenses incurred in maintaining Mrs. West's household.

A moral obligation is involved. If an ex-husband has with his former spouse brought children into the world, there must be a solemn moral obligation as well as a legal requirement for him to acknowledge his obligations, even if he has developed a second family, and to make sure that the children by a former marriage are not harshly treated in the already hard climate of the modern world.

Mrs. West wrote: The most important fact that creates my situation is the fact that the CSA cannot consider the income of a 'one-man' limited company, enabling my ex-husband to finance a large amount of his expenditure through his company, ie cars (registered solely as business use)—a Porsche and two BMWs … and entertainment". He was also allowed to write off other costs as legitimate household expenses—such as a cleaner. The CSA ends up considering only the income that he contributes himself, after—as Mrs. West says in her letter—paying his second wife a salary of £20,000 as company secretary, which Mrs. West contends is an accounting procedure rather than a genuine form of employment.

In a genuine company, there may be an arm's-length relationship between directors, all the legitimate expenses and the normal salary arrangements for someone who may be classified as an employee or a self-employed director. That is one thing, but in a self-created, one-man company, are such arrangements really fair to a former wife and her children?

Mrs. West continues: My maintenance agreed by the court in 1986 was £300 per month"— I have already given quotations to that effect— and … has been reduced to £57 per week". The maintenance, under the proposed amendments to the Act in February will be reduced by up to £22 a week because my ex has second family, leaving a sum of approx £35 a week, this amount will then be reduced by a further 25 per cent. because my children are between 11–14, resulting in a figure of approx £26 per week for 2 children … My exempt income has been assessed at £171 a week, and any amount I earn over this amount will reduce his payments further". If she could earn £800 a month—she cannot at present; it has been a tremendous struggle for her— my ex-husband"— a wealthy entrepreneur with a gross total of £54,000 per annum— could end up paying a notional amount of probably just over £2 a week.

That is a scandalous state of affairs which cannot be allowed to continue. The Government did not set up the CSA with such a device in mind; they did not want people to be able to escape their obligations. Whatever the rights and wrongs—whatever the circumstances in which families break up, and the reasons for which they do so —these arrangements are entirely wrong.

In her well thought out and well written letter, Mrs. West observes: If this amendment goes ahead, I will then be forced into a position of selling the family home, as my sole income it; £78.20 per week from Family Credit and my mortgage is £300 per month including endowment policy. Talk about desperation and frustration!

In his reply of 27 January—for which I thank him—my hon. Friend the Minister stated: As you know, strict rules of confidentiality will not allow me to discuss Mrs. West's particular circumstances on Monday in the House. I will of course, be able to address the principles of her case. I ask my hon. Friend to bear in mind that I need some clear, cogent answers to the Government's dilemma about such cases. What further changes do they intend to deal with the CSA's behaviour?

Later, my hon. Friend's letter states: Mrs. West has suggested that the Agency should assume the profits of Mr. Tsangarides' business as his income because he is the only director. Mr. Tsangarides is Mrs. West's former husband. This is not appropriate as the absent parent is employed by his company and it is his salary, bonuses, commission and taxable benefits that should be taken into account. This has always been the case … If someone is dissatisfied with a decision about their assessment they may apply for a review of the decision of the child support officer and a different child support officer will re-examine the decision in question. I received a letter dated 28 January—the day after my hon. Friend's reply—from Ros Hepplewhite, the chief executive of the CSA. It referred to the rules of confidentiality, but added: Where such verification of financial evidence is required, and is not provided …a…Child Support Agency Inspector has the power to demand to see the accounts and such evidence or information as is deemed necessary. I submit that in this instance that conclusion was erroneous and inaccurate. It is essential that the review gets to the facts and helps Mrs. West and her children by adjusting the figures. Perhaps my hon. Friend's letter to The Mail on Sunday yesterday will turn out to be more correct than we think at this stage.

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

I congratulate my hon. Friend the Member for Harrow, East (Mr. Dykes) on having the good fortune to secure this debate and on his enterprise in applying for it. I am also pleased that we are having the debate slightly earlier than might otherwise have been the case, which is for the convenience of hon. Members who are present in the Chamber.

I am glad to have the opportunity to discuss the operation of the Child Support Agency. As my hon. Friend is aware, and as I made clear to him in a letter, I am unable to discuss the circumstances of individual cases. However, my hon. Friend is entitled, as are others, to an explanation why. It is not an attempt to evade the issue. It is a recognition of two particular matters. First, such cases involve not just one party who has given consent to disclosure of information. At the very least, another party and children are involved. Therefore, care must be taken, particularly when allegations may have been made by one party rather than another. For those reasons, it is right that some confidentiality is kept.

Secondly, as my hon. Friend said, a review process is available. That review process has already been applied for and the case is being examined extremely carefully. For those reasons, it is not appropriate to go into the individual circumstances of the case in great detail. However, for the convenience of the House and of my hon. Friend, I can assure him that I have listened very carefully to the circumstances that he has raised tonight and I read carefully the letters and the previous explanation of the case given by my hon. Friend. The matter is receiving my attention and that of the CSA. I hope that that reassures my hon. Friend.

Mr. Dykes

Is my hon. Friend also liaising directly with the Inland Revenue on this matter?

Mr. Burt

With respect, it is not appropriate for me to discuss precisely what efforts are made in any particular case to verify matters. However, I will refer later to the principles behind my hon. Friend's question and he will see precisely how the agency might try to deal in general with the difficult circumstances that he has described and he may apply his own conclusions about how we might be dealing with particular cases.

My hon. Friend made a number of valuable comments, the principles of which I will deal with shortly. I am sure that it would be helpful, however, if I first set out the purpose and provisions of the child support scheme. I have, of course, put the points before the House on other occasions in the past, but I make no apology for doing so again, partly because my hon. Friend has done a valuable service by referring to a woman's circumstances.

In recent weeks, we have heard a great deal about the position of absent parents. Nine out of 10 absent parents are fathers and there has been an over-concentration in the media on the circumstances affecting them. The circumstances of the case raised by my hon. Friend have brought to mind the fact that women can be left looking after children in extremely difficult circumstances. That is one reason why the legislation came into effect and why the agency was created. It is only right that I should stress that point.

The child support scheme was introduced because of growing concern about the lack of proper financial provision for children whose parents lived apart. The purpose of the scheme is to obtain maintenance for children and to improve on a discretionary-based system which had failed to halt the number of absent parents not paying maintenance. The scheme is designed to ensure that, wherever possible, parents pay for the maintenance of their own children rather than expect other people, often on a low income, to do so through their taxes. My hon. Friend was absolutely right to refer to the moral dimension of that.

The principle of parental support for children is not new. However, there is no doubt that the old, court-based system was failing the vast majority of children. More and more parents with care were becoming reliant on the benefit system as their means of support. By 1991, almost two thirds of parents with care received no regular maintenance from the absent parent. Where maintenance was in payment, the amounts seldom reflected the true cost of bringing up children.

It became increasingly clear that in many cases absent parents' incomes were improving, but that their children were not sharing in their parents' increased prosperity. There were inconsistencies in amounts awarded, although the circumstances of the people involved appeared to be very similar. The White Paper, "Children Come First", quoted the example where research had identified two fathers each with one child to maintain, each earning £150 per week net. One was required to pay £5 per week in maintenance, the other £50 per week. That cannnot be right. That is why maintenance is now decided not on an arbitrary basis but by a formula which was extensively discussed, both inside and outside Parliament. It ensures that both parents, where they can afford to do so, contribute to the maintenance of their children.

The formula is designed to produce consistent and realistic amounts of maintenance for children, taking account of the fact that children do not look after themselves, and, at the same time, ensure that children share in their parents' increasing prosperity. The formula takes account of the number and ages of all the children, and the income and essential expenditure of both parents. It is based on income support rates. Those are regularly updated and they provide a ready means of updating the amount of child maintenance to be paid, unlike the court-based system where there was no automatic increase. Court orders could remain in force for years at the same rate.

The formula applies to all families where maintenance is an issue, and it therefore eliminates inconsistency. It applies to people who are getting benefit and to those who are not. The formula is detailed because it is intended to deal with the complexities of individuals' circumstances. The effect of the formula is that people in similar financial situations will pay similar amounts of maintenance.

Undoubtedly, in some cases, once the formula is applied, the amount of maintenance paid to the parent with care for children, whether it was by order of a court or voluntary agreement, reduces. A reduction in those circumstances is a consequence of applying, for the first time, a set of rules that treats the income and outgoings of both parents in a similar manner. Where a court order included an award for the parent with care, that element remains. The parent with care can, if she chooses, apply to the court to have the order varied. I understand that that might be the circumstance in the case dealt with by my hon. Friend.

One of the fundamental principles of the new system is that parents have a legal responsibility to support their children financially if they can afford to do so. There is, however, no responsibility on a new partner to contribute to the maintenance of her partner's child from a previous relationship. If the couple have a child of their own, the new partner's income is looked at to see whether she can afford to contribute to that child's support, enabling the absent parent to contribute more to the support of his first family.

When the Child Support Agency works out how much maintenance is to be paid, it looks at the assessable income of both parents. Assessable income is income available for child maintenance. It is income left after allowance has been made for day-to-day expenditure against net income. Net income is the total income from all sources available to the absent parent or parent with care. The agency asks for evidence of income in all cases, with the main source of information about earnings coming from salary slips. If there is difficulty in collecting evidence of income, the agency can appoint a child support inspector to examine wage records where the absent parent is employed, or accounts if he is self-employed.

Inspectors have the power to enter any premises specified in their certificate of appointment and can look at whatever documentation they consider appropriate. Failure to co-operate with an inspector is a criminal offence. Inspectors, in practice, are used only as a last resort where an employer or self-employed person is not co-operating with the agency. Such investigative powers were not available to the courts under the old scheme and so, in some cases, awards would have been made without the full facts being known.

It is not uncommon that the two parties involved have a differing view of each other's income. That has always been the case in ancillary proceedings. Anyone with experience of such work in the courts knows that it was not uncommon, often representing a woman in financial proceedings, to receive an affidavit from the other party, look at the income declared and say, "You must be joking," and have a discussion with the client about the revealing or non-revealing of income and assets. It is impossible fully and properly to resolve that problem.

The difference perhaps between the courts and the Child Support Agency is that the Child Support Agency has available to it rather more extensive powers of investigation at its own expense rather than at the expense of one of the parties. In the past, just as it was impossible sometimes to trace an absent parent who had disappeared completely and a private investigator had to be employed, the same applied to expressions of concern about income and the like. It was necessary to employ private investigators to try to find out what the real income was. The Child Support Agency has more powers. But trying to ascertain what might be the true state of a party's finances, especially in the case of self-employed people, will always remain a problem. However, as I said, the agency has powers in this case to co-operate with a variety of other agencies to identify exactly how much money might be available.

It is not uncommon that, even if the basic facts of what the income might be are agreed, there might still be different interpretations between each of the sides as to how the money is obtained and what it is for. The earnings of a self-employed person are not always straightforward. There will be circumstances where, although one party feels aggrieved or unhappy about what has been accepted as a true indication of those earnings, they are legally correct. Accepting that that is the case can be difficult in some circumstances.

Once the agency has worked out how much child maintenance the absent parent should pay, both parents are notified in writing. The notification gives details as to how maintenance has been calculated, including details of the assessable income of both parents.

Mr. Dykes

My hon. Friend is giving the impression that he agrees with the agency's adjudication in this matter. If that is correct, it is very disturbing.

Mr. Burt

My hon. Friend is wrong; I am not suggesting that at all. I am not dealing with the facts of this specific case. All I am saying is that, just as in the past there was a dispute between the revelation of earnings in ancillary financial proceedings, and a dispute between the parties as to whether the figures were true and an adjudication had to be made—sometimes when the adjudication was made, there was still disappointment on one side or the other—the same circumstances can apply with regard to cases under the Child Support Agency. I do not know the circumstances of this specific case which a review or any subsequent appeal will find. I have no knowledge. All I am doing is setting out the process that the agency must follow to verify the facts. It may be that the facts are agreed, but there may still be a difference of opinion between the two parties with regard to the amounts that may be revealed. However, that is not a matter for me.

Mr. Dykes

What is the point then of a Member of Parliament raising the matter in an Adjournment debate?

Mr. Burt

That is not a matter for me. My hon. Friend did not approach me about the case before he applied for the Adjournment debate; otherwise I would have told him that the individual circumstances could not be discussed, as I made clear to him in a letter. I am more than happy to discuss what information I can with my hon. Friend in private, but I gave the reasons why I could not go into the matter in the House. A review is taking place, and other people's circumstances have to be taken into consideration. It was my hon. Friend's decision to apply for the Adjournment debate, not mine.

Having received a notification, either party has a right to ask for a review or to appeal. The agency is therefore obliged to set out in sufficient detail the calculation of the assessment so that both parties may make an informed decision as to whether the assessment is correct. A balance has been struck between the need for confidentiality of the information which is given to the agency and the obligation to provide information that is essential to enable a decision to be made on whether to apply for a review or to appeal. If parents with care or absent parents believe that the information the agency has used to work out how much maintenance should be paid is incorrect, they can ask for a review or seek an appeal at no cost to themselves. The agency does not disclose information other than is necessary for either party to make an informed decision about whether to seek a review or appeal. That procedure has been properly followed in this case.

The vast majority of lone parents are in receipt of an income-related benefit. However, we know that most of them wish to work now or at some time in the fairly near future, usually once their children are established at school. Maintenance payments therefore are valuable income which lone parents can take with them when they return to work; it is income additional to earnings. The Government recognise that lone parents may face extra problems combining the role of bread winner and child rearer and therefore there are special rules in the benefit system to help those lone parents who want to work.

The Child Support Agency has received its fair share of attention in the past few weeks. It is important to realise that the media choose to give only one side of the story in the vast majority of cases. But a more balanced presentation which seeks to explain that there are two sides to every story would go some way to balancing the scaremongering articles and programmes that certain elements of the media feel obliged to present.

Perhaps the tide is turning slowly. I was pleased to see an article in The Times today that put the case of one of the large groups whose voice has been largely unheard in the present debate—parents with care. The article stated: The Child Support Agency has really done its bit for me. It has managed to get money that I would never otherwise have had … I didn't know what to do until the CSA took on my case. They have been super—really helpful. The views of a parent with care seldom seem to get the publicity that they are due.

We recognise that, while the basic principles behind the new system are supported by Parliament and the country, there have been genuine concerns about the way in which the system has worked in detail. We recently announced proposals to bring forward a package of changes to child support arrangements which take account not only of the Select Committee's thoughtful and balanced report, but reflect representations which have been received from hon. Members and the public.

I hope that the changes will help. I can assure my hon. Friend in relation to the case which he has raised today that I am looking extremely carefully at the circumstances. The case has gone to review where it will be properly considered, and, should any lessons be learnt which are capable of wider application, he has my assurance that that will be the case. I expect to be discussing the matter with him privately in the future. I am grateful to the House for the opportunity to discuss the case.

Question put and agreed to.

Adjourned accordingly at ten minutes past Eleven o'clock.