Child Support Act 1991

HL Deb 09 February 1994 vol 551 cc1657-88

8.47 p.m.

Earl Russell rose to ask Her Majesty's Government whether they are planning any amendments to the Child Support Act 1991.

The noble Earl said: My Lords, when a debate in another place was got back on course in 1628 one of the reporters remarked: As when a good old hound recovers the scent, so the rest come on in full career". The noble Lord, Lord Houghton of Sowerby, was one of the good old hounds who recovered the scent in 1991 when we first debated the Child Support Bill. We, my Lords, are the rest who come on in full career.

It is not only Members of the two Houses of Parliament who have been inundated with correspondence on this subject. The National Association of Citizens Advice Bureaux regards 1,000 evidence forms in a year on any one subject as a sign of something pretty seriously wrong. On this subject it received 290 evidence forms in October and 430 in November.

I shall not go on simply saying that there is a vast amount of concern about the Act. We know that. The question I am trying to address tonight is what should be done instead. We on these Benches, as the Minister knows, are committed to a fundamental review of the Act. He may know that my honourable friend Mr. Kirkwood this morning made a statement saying that if that review is not genuinely fundamental and if we do not have substantial changes we may not be able to support the continuation of the Act in any form. If we are considering a fundamental review, we need to ask these questions: what are the good features of the Act; what are the bad features; and what are the features which are capable of being made acceptable?

The good feature of the Act is the use of the power of the state to help to collect maintenance in cases where it has proved extremely difficult to collect. I have not heard that aspect questioned at any stage of the debate this year. It is a factor that accounts for the cases which the department has quoted where the Act does good. We admit that such cases exist. We do not wish them to cease to exist. However, when the Minister claims the formula as one of the virtues of the Act on the ground that it introduces consistency where there was previously discretion, we say that for us the formula is at best neutral. Because they do not take account of individual cases and circumstances, formulae are not the most liberal of methods. The formula which achieves the appearance of consistency by treating highly different cases as the same is not achieving consistency unless it is the spurious and limited consistency achieved by Procrustes for those he put in his bed. The formula will need serious attention. It has to take account of the infinite variousness of human relationships and especially of the infinite variousness of marriages as economic partnerships.

Another factor that we believe is entirely wrong is the amount of money being demanded in maintenance assessments. We believe that it was right that a number of maintenance assessments should rise. We do not say that all the assessments should go back to their previous levels. Nor indeed are large numbers of the people who write to us protesting about the Act. We say that the increases are altogether too big. It strikes me as one of the curious aspects of the modern Conservative Party that while it underrates the amount that people can pay in the form of taxation, it tends to overrate with equal consistency the amount of money which people can pay out of the other pocket which is labelled private.

The size of the alleged tax bombshell of the past general election was £1,250 a year. If I may follow the example of Goldman Sachs and add a new word to our currency, when I find someone whose maintenance assessment has been increased by £2,800 a year, I say that his assessment has been increased by 2.3 bombshells. Let us suppose that Mr. John Smith had proposed increasing people's taxes by £2,800 a year. I do not believe that the Government would have stopped at "tax holocaust"; they would have needed some expression a little stronger. As I believe everyone knows, we proposed increasing income tax by one penny. The only one of my correspondents who quoted his tax assessment is paying 150 per cent. of his income tax in child maintenance. Let us suppose that we had proposed to increase income tax by 37.5 pence. I am sorry to disappoint the noble Viscount but I shall not stretch my imagination to work out what Conservative Central Office might have said about us. For all I know my powers of invective might possibly be greater and I do not wish to give Central Office that assistance.

The amount that is demanded of people will have to come down. In particular we should consider the possibility of a cap on maintenance assessment: that no one should pay more maintenance assessment than they pay in income tax. Even under this Government, the burden of income tax is not that negligible. I do not believe that the Government would wish to tell voters that it is.

We need to consider achieving a realistic formula. That means that there must be a realistic system of appeal. No formula, however perfect, will cover everything. Every formula will cause highly undesirable results in some cases. On these Benches, we have always been unhappy about the total exclusion of resort to the courts under the Act. It seems to us a breach of justice. In another place, Mr. Burt said that that would merely return us to the discretionary system which previously existed. Some of us might prefer to re-phrase that by saying that it might return us to somewhere rather nearer the real world.

It is difficult to say that it is impossible to have a system of appeal. The Australians have set out specified grounds of appeal and appear to have done so with success. Therefore, however much we improve the formula, it is no good having a formula unless there is a system of appeal. I think it unlikely that these Benches will support the continuation of a formula without an appeal system.

The formula has to include an assessment on disposable income and not on gross income. Sums of this size bite deeply into people's available income. The Government have only two options: either they must treat as allowable expenses certain activities they do not wish to stop people doing; or they must bite on the bullet and accept that people will give up those activities.

Let me take the first activity which I should have thought the Treasury would allow as desirable: going to work. I take a case from my correspondence. A man in Henley-in-Arden had to travel 30 miles daily to work. There was no public transport available, an increasingly common case. He was buying a car on hire purchase. If he paid his child maintenance, he was unable to continue his hire purchase payments on the car. He called the Child Support Agency hot line and asked for advice. The agency advised him to sell his car. I wrote to Mr. Burt and asked for an assurance that that was not government policy. Mr. Burt wrote me a long and careful letter in which he stated that he was sorry to say that he would probably disappoint my correspondent. He did not give the assurance required. That is surely against the public interest.

The point was raised on 2nd February in another place by the Member for Castle Point on behalf of a constituent who had to commute to London. Mr. Burt told him that his was a highly exceptional constituency. If he intends to classify all the commuter constituencies around London as highly exceptional constituencies, he will find rather a lot of them. He may even find that he loses a good deal of support in those areas. If he wishes to do that, that is his right, but I feel some sympathy for the people by whose suffering he does so. If you are going to lose support, do not do so at the expense of ordinary voters. It is not fair on them.

The next point that must be considered is debt. No marriage breaks up without a reassessment of debt. It involves not only the house; it often involves the breaking up of a business partnership. That can be extremely complicated. The Minister may say to me that debts can be abused and indeed they can. So can alcohol. But if the Minister gave that as a ground for prohibiting it, he might receive a dusty response from this House.

The next point that must be considered is the cost of access to children. The Minister can say, as the Government have said before, that there may be a difficulty in assessing the cost. I suggest that he uses the American tax withholding system. You have a sum on account, then you put in receipts for what is actually spent and either get a bit more or pay back a little of it. It is a system I have operated with American tax; it works. If the Minister intends to persuade fathers to operate the system under a policy entitled, "Children come first", he cannot do so in a form which prevents fathers ever seeing their children. Flesh and blood simply will not consent to it. I shall say no more about step-children because I dealt with the issue last week.

The Minister must deal with the point of capital settlements. He told us last week that it was impossible for the Government to do it. It is perfectly possible for the Australians. Why not for us? I am sure that our Civil Service is as good as its Australian counterpart. I should have thought the matter was within its competence. If not, then bad luck for the Act itself, because capital settlements, especially involving housing, are vital to many people's lives. There must be a disregard for those who receive the maintenance, a point I am sure the noble Baroness, Lady Hollis, will make at greater length. Perhaps I may say that she will be speaking for me too on that point.

The same applies on passported benefits. In 1991 we divided the House on the issue of passported benefits. We were right to do so because to introduce the system and leave the women who are receiving the child maintenance worse off than they were before offends the sense of justice of the fathers as well as the mothers and, indeed, of any ordinary people who hear of it.

There must also be more thought about the benefit penalty. Mr. Burt said in another place that there had only been 160 cases so far. I am glad to hear that. I congratulate Mr. Burt on the sensitivity with which he has handled the issue so far. However, he will not be in office for ever; that sensitivity will not necessarily continue. Also, the number who receive the benefit penalty is not the full measure of the amount of hardship caused. Many people have voluntarily gone off benefit rather than go through the process of assessment.

The citizens advice bureaux have found one case of a woman who voluntarily took the benefit penalty rather than maintenance at a level which would disturb the children's relationship with their father. That may sound saintly, but there are saintly people about and one should not unnecessarily punish them for that. The issue must have attention.

There has been sensitivity so far on the issue of harm and undue distress to the mother—a concession in 1991 which is valued deeply. It has not always worked perfectly. There was a case at a citizens advice bureau in Lancashire of a woman who claimed domestic violence. The Child Support Agency told her to run along and not be a nuisance. That, I think, is an example of the evils of performance-related pay. The person who was ignoring an Act of Parliament was under a financial inducement to do what he did. That is why it appears to us on these Benches that performance-related pay, even if those to whom it is given resist temptation, comes perilously near the character of a corrupt payment.

9.4 p.m.

Lord Kilbracken

My Lords, I am grateful to the noble Earl for putting down the Question today and also for all the work he has already done in drawing the attention of the public and the world to the iniquities of this pernicious statute. I do not hesitate so to describe it.

I have an interest to declare in that I am what is called, with such inaccuracy and insensitivity, an absent father. I spoke about that a week ago. However, I have no financial interest to declare because although I am an absent father, my own case has not come and I believe cannot come before the Child Support Agency. Therefore mine is not a financial interest.

I wish to draw attention to three or four matters on which I think that the present Act is grossly deficient and unfair. The first is connected with what is known as "clean break" arrangements. I should mention that such arrangements are now made and have been made for several years in, I understand, about half of all agreements made at the time of the divorce. The thought behind them is that the wife—and it is almost always the wife—should receive the matrimonial home and/or a large part of the available equity. In return, she receives less in the way of maintenance both to herself and for the child or children of the marriage than she would otherwise receive.

However, the Child Support Agency—unlike the court in such cases—under the formulae set down by the Act and the regulations, in deciding what maintenance the children should receive, cannot take any account of the fact that the wife has gained in the form of the house or other equity. It seems to me that in these cases the husband's only remedy, if indeed it exists, is to return to the court and ask for the agreement to be modified because the child maintenance has been agreed. His only other recourse is to sue his lawyer for negligence if he has recommended that course of action after the Child Support Act has become law. I am glad that the noble Lord, Lord Meston, appears to find that an insufficient reason to feel any anxiety. My proposal is that, in fairness, the Child Support Agency should not take on cases in which "clean break" arrangements have been made so long as those arrangements are being adhered to by the father.

Secondly, there are three or four cases in which certain expenditure by the father should be taken into account by the formulae in working out the maintenance payments but is not. The noble Earl referred to expenses that would be incurred by the father in travelling to and from work. Such expenses can arise where he wants to remain in the part of the country where his children are but has a job, for instance, in the City and has to travel backwards and forwards between Brighton and London. Such expenses are not deductible for tax purposes. But in my opinion they should be deductible in determining how much of his income should be taken into account for the purposes of the formulae.

Much more important, although it does not affect everyone, is the question of school fees. It seems quite remarkable that if parents decide that their child should have a private education, which will cost nowadays somewhere in the region of £4,000 or £5,000 a term —let us say, £12,000 or £14,000 annually; and that is not just for Eton but for quite minor so-called public schools—then no part of what the father pays in respect of that private education is taken into account at all by the formulae. That is despite the fact that if the child goes to a boarding school he will be at that boarding school for 36 weeks of the year, or whatever it may be, and during that time the mother is still entitled to receive as much as she received before he went there. In whatever way the father manages to pay that money —by running into debt, by taking another mortgage on the house or by selling the family silver—the fact that he spends all that extra money on the son and diminishes the amount that it costs the child's mother is simply not taken into account at all.

The next point which seems to me to be quite extraordinary relates to what it costs the father to spend time with his children at weekends or during his holidays—I know from personal experience and I assure noble Lords that that time can be very considerable—is simply ignored unless the child spends 104 nights a year with him. How the regulations got hold of that extraordinary figure of 104 nights a year, which is two-sevenths of the year, I do not know. But it means that if a father spends 103 nights a year with his child, which may cost him £500 or £800 a year, that time is not taken into account at all in working out the maintenance that is payable. Let us suppose that he spends 104 nights of the year with his child, which is two-sevenths of the year. In that case he has to give the mother only two-sevenths of what he would otherwise give her. Were he therefore to spend half the year, or 182 nights a year, with his son he would have to pay her only one-half of what he now has to pay her. One thing to remember about that is that it very often happens that a father picks up his son or daughter at 9 a.m. on Saturday morning, spends the whole of Saturday and the whole of Sunday with him or her and returns the child to its mother at 10 o'clock on Sunday night. That counts just as one night when working out how many nights the child spends with the father.

I spend a great deal of time with my son—every other weekend and half the holidays. In fact, it usually comes to more than that because his mother has taken a full-time job and cannot give him so much of her time. I was quite surprised to find, having added up the figures today, that my score for the past 12 months has been only 99 nights—"99 not out" and I am hoping to reach a century this weekend. In other words, although I spend far more time with my son than the average absent father, I would not qualify for a rebate of two-sevenths on what I would be giving to his mother under the Act.

Another point is that there are mothers who are quite devious. Certain mothers, having reckoned up and seen that the magic figure of 104 nights was approaching, would do what they could to deny access so as to keep the figure below 104 and thereby obtain an additional £800 a year, or whatever it maybe.

The only other example that I want to give is where mortgage payments have to be made by the husband in respect of what used to be the marital home and has now become the wife's house under a clean break arrangement. As I understand it, if the husband is making such payments of that mortgage, they are not taken into account. He might just as well not be making them. In my opinion, in all those cases the expense involved to the father should be deductible from his income under the formulae mentioned in the Act.

I should like to raise one last personal point. I keep asking myself: if ever this did come to the Child Support Agency, what would be the position with regard to the reimbursement of my expenses incurred through attending your Lordships' House? I hope it is quite clear that those expenses are not income. They are not liable to income tax and do not have to be declared to the Inland Revenue. They are merely the reimbursement of the expense it costs me to come to this city to appear in this House. I wonder what would be the position if some noble Lord—not me, of course—found himself in that same situation. Would such very generous reimbursement of expenses be considered relevant for the purposes of calculating the maintenance payable? I hope that that remains a hypothetical question.

9.18 p.m.

Lord Simon of Glaisdale

My Lords, we are all deeply indebted to the noble Earl for enabling us to consider the serious issues in relation to child support on a wider basis than we did last week when we considered the regulations. With all his engaging buoyancy, the noble Viscount can hardly feel that the Act itself or the regulations emerged unfrayed from your Lordships' scrutiny last week.

There are two matters arising out of last week's discussion that I wish to take up before coming on to the opportunity given to us by the noble Earl to consider questions of the support of children outside the nuclear family when it is subsumed and, within that, the effect on single parent families. The first is purely a question of parliamentary procedure.

When I spoke last week I ventured to draw attention to the advantage of the affirmative resolution procedure because it enabled the noble Viscount to explain the regulations to us in a way that is not open under the negative resolution procedure. But I nevertheless drew attention to the fact that he shied away from a most important point that was raised by the Joint Select Committee on Statutory Instruments; namely, the extraordinary way in which the department was claiming to use the word "transitional" in relation to the regulation-making power.

The noble Viscount said that he would deal with that matter when he replied, and very convenient was that for him because the point was this. I ventured to quote what the department wrote to the Joint Select Committee, and I said —I am sure rightly—that what the department was claiming under the word "transitional" was to correct mistakes that were made in the Act itself which would not have been made if they knew what they now know. That is indeed an extraordinary use of that word, as the committee pointed out.

When the noble Viscount came to reply, he merely read out what the department had written to the Joint Select Committee which, I may say, I had read out earlier. We therefore had no opportunity of checking with the noble Viscount whether he agreed that what was claimed under the word "transitional" was to make regulations correcting mistakes in the Act itself which had subsequently come to light and which would have been corrected if they had been known of at the time. But that is a matter of the political parliamentary machinery.

Another point arises from the regulations. One of the attractions held out to your Lordships in the Act was the great saving of public funds. I took a fairly favourable view of that, naturally, as an ex-Treasury Minister—though it hardly commended itself to most of your Lordships. But your Lordships will want to know now how far that figure must be mitigated in view of the regulations altering the impact of the formulae. I hope that when the noble Viscount replies he will tell us that.

I turn from that point to the general question raised by the noble Earl's Question. I refer to the machinery. I beg the noble Viscount not to say again that the general principle of the Act is approved; namely, that parents shall contribute to their children's maintenance so far as they can and so far as is equitable. That is quite useless because that was precisely what the previous law endeavoured to do, and indeed did. The difference was that that law was administered by magistrates taking account of the local economic and social circumstances, and, as the noble Earl, Lord Russell, and the noble Lord, Lord Kilbracken, said, able to adjust the decision to all the manifold circumstances that obtain after a separation and the children need support.

I can see no escape from the iniquities of the Act —indeed, even mitigated by the regulations—save its total repeal and reversion to what we had before; in other words, maintenance assessed by human beings in a magistrates' court rather than by officials applying a completely unintelligible formula. The great architect, Lethaby, used to describe the arts and crafts endeavour as making things by human beings for human beings. That was how the previous law was administered. It was administered by human beings sitting in the magistrates' court for human beings—the wife, the husband and the children, with all their manifold differences of circumstances. That is the first thing I think should go out on this review—get rid of the Act altogether.

Along with that I cannot help feeling it regrettable that we have had not one word of regret from the department for the injustices that admittedly—because they have had to be put right by regulations—have been perpetrated. If there was still any complacency, I should have thought that it would have to go in view of the two speeches that your Lordships have already heard and in view of the two briefing papers from the citizens advice bureaux, which were absolutely devastating and showed how much injustice is still outstanding.

I turn from the matter of machinery to the general question of single-parent families. I find it extraordinarily difficult to know how they are made up. The figures I have seen have varied enormously—I think probably because certain components like divorcees and cohabitees outside marriage and ex-cohabitees are growing rapidly. But there is one component of which we should not lose sight and to which I shall come later. I refer to widows and widowers. There are many examples where a widow left as sole parent has brought up the children admirably. We can all think of some of our colleagues in that respect.

The second thing that has to be said is that of the other components, many no doubt cope very well with their difficulties and do their best, and often an admirable best, for the children. Nevertheless, these matters must be looked at statistically as well as by anecdote. There is no doubt statistically that the single child in a single-parent family is at a grave disadvantage unless it is not, so the surveys show, due solely to the poverty that is so often attendant.

In discussing what we should do to mitigate that harm it is necessary to look at what we should do immediately and in the long run. For example, immediately we are bound to say that the widow who is the sole parent shall have proper social support. Unless we are prepared to concede that, the welfare state or the welfare society, however one looks at it, is meaningless.

Then there are the divorcees. Since it is our fault in manufacturing a wholly unsatisfactory divorce law facilitating easy divorce and often with gross injustice, it is surely our immediate duty, pending the improvement of the divorce law, to see that the divorcee is properly looked after. That applies also in the case of the absent father, as he is called. The noble Lord, Lord Kilbracken, mentioned the clean-break divorce, as it is called. That was a piece of humbug supervening on the greater humbug of the Divorce Reform Act 1969. As the noble Lord explained, the theory was that the father surrendered his interest in the equity of the matrimonial home to the caring mother on condition that maintenance should be either eliminated or mitigated. The only effect was that the burden of maintenance was shifted to the general taxpayer. That was pointed out —the noble Lord, Lord Meston, would have noted it —in a very able letter to the Spectator a little time ago from the secretary of the Family Law Bar Association.

I have dealt with divorcees. The same applies to the ex-cohabitees because it is our fault also, in our debasement of our concept of marriage, that there are so many unions now outside marriage. I noted the other day from the general household survey, that women who cohabited without marriage in 1981 were 11 per cent.; in 1992 it was 21 per cent. That is merely carrying forward the spirit of the permissive society; and as we permitted it, we, as a society, are under obligation to shoulder the support.

So much for the immediate rectification. In the long run, the overriding aim should be to restore the status and prestige of marriage. We should certainly cease treating a divorced wife more favourably from the point of view of finance or property than a woman who stands by her marriage. That is merely encouraging divorce. Changing that is, I should have thought, an elementary step that should be taken by a Government who profess the aims that the present Government profess.

Next, we want a far sounder divorce law. As was pointed out at the time of the Divorce Reform Act 1969 by the two most knowledgeable Members of your Lordships' House, Lord Hodson and Lady Summerskill, the fact is that there are mighty few people in this country who can support two families. The noble Baroness, Lady Hollis, made that point last week; and I see that she nods in approbation, perhaps because she made it herself last week—

Baroness Hollis of Heigham

My Lords, I agree with it.

Lord Simon of Glaisdale

My Lords, that is the first thing. We must go back to having a divorce law which does not allow for merely consensual divorce whereby the burden of the children is shuffled on to the general taxpayer—still less have the divorce provision that we have at the moment, whereby a woman who has stood by her marriage may nevertheless be cast off because she has ceased to find favour in her husband's eyes.

I should like to say one final thing about the clean break. The noble Lord, Lord Kilbracken, suggested that the provisions could lead to the reopening of all the maintenance assessments that have been made by the courts on the basis of the so-called clean break. However, there has recently been a decision by Mrs. Justice Booth in the Family Division in which she said that such assessments cannot be reopened. I think that she did that reluctantly; but that is the law as it stands.

The noble Lord, Lord Kilbracken, said that he hoped that there might be a second specific: namely, to sue the lawyers who had led the parties into this deplorable mess. I cannot encourage that—not only because I would not like to see lawyers so treated, but because the situation is absolutely hopeless. No lawyer could possibly have envisaged so fantastic a measure as the Child Support Act, which has led us into this trouble. I do not think that either way will work, but I hope to hear from the noble Viscount, Lord Astor, how he answers the points that have been put to him; how he answers the other points that are raised by the citizens advice bureaux; and generally how he sees the Act operating more equitably than at the moment and, in particular, what can be done to rectify the mischief that has been done.

Lord Kilbracken

My Lords, before the noble and learned Lord sits down, perhaps I could just say that what I was proposing was that there might be a cause for action against the lawyers if the course of action had been proposed after the Child Support Bill became an Act.

Lord Simon of Glaisdale

My Lords, no. The fact is that the Child Support Act has virtually killed off the clean-break divorce. I bow to the more current information of the noble Lord, Lord Meston, but that is what I understand.

9.40 p.m.

Lord Meston

My Lords, I ought to begin by saying that all this talk of suing lawyers is making me very nervous! We are fortunate that my noble friend's Question gives us an opportunity to take a fresh look at the impact of the child support legislation and at ways of improving it beyond merely tinkering with the amounts stipulated by the regulations. This is not an occasion yet again to go over ground already travelled several times in earlier debates on the legislation and the subsequent regulations.

However, it should be said that in respect of men who have given up all or a larger share of their capital interest in a former home, it is quite clear that the Government have simply not got the point. It really is not an adequate answer to say that such a person will have an allowance for his own housing costs. The Act has and will hit hard those who entered into such capital settlements before the legislation was even thought of. It is now a strong disincentive for future settlements on similar terms, as the noble and learned Lord indicated.

The result will be a return to settlements which require women to sell up their homes when the children have grown up in order to pay a deferred capital share to men who by then may not need it and who during the period of deferment will have had exactly the same housing costs as if they had given up all their interests in the property. Paragraph 4.12 of the 1990 White Paper at least contemplated the possibility of reducing the formula amount by using standard accounting techniques for converting a lump sum into an equivalent weekly amount.

The Government did not take up the idea in the legislation and the Select Committee of another place, in its report of December last year, seemed to have accepted the Government's view. At paragraph 74 it stated rather lamely: We can see no sensible way of attempting to place a current value on settlements made in the past in order to give some notional figure for current income which could be taken account in the formula. The only option for absent parents who find themselves having to make increased maintenance payments under the formula, having previously made capital settlements, is to return to the courts to see if the existing orders can be varied on the basis of altered circumstances". As the noble and learned Lord pointed out, there is no such option in reality and it is astonishing that the Select Committee thought that that was possible. Surely it is not too much to ask the Government to think again on this topic.

We all appreciate that this legislation inflexibly covers all types of fathers from those who care nothing at all about the welfare of the children they produce to those at the other extreme who care very much about their children and who mind very much about being described, whether accurately or inaccurately, as "absent parents". It also covers the large number of fathers in between who want to contribute as best they can to their children but who also want a reasonable opportunity to rebuild their lives.

Family lawyers have the practical experience of trying to deal with the impact of child support legislation on parents who want to resolve their financial and property affairs on divorce or on breakdown of a relationship, preferably in a civilised and sensible way. The heart of the problem is that lawyers and clients are now confronted with a rigid system of child support superimposed on an essentially flexible system of discretionary law governing income and capital distribution after divorce and governing provision for children under the Children Act 1989.

The two organisations representative of the family law practitioners—namely, the Family Law Bar Association and the Solicitors Family Law Association —put at the very forefront of their joint submission to the Select Committee of another place the proposal that wherever there has been an assessment, there should be the opportunity to apply to a court for a review of that assessment. The model for that proposal was and is the Australian system which allows for the application for review to an independent child support review office and further review by the court. The review allows a discretion to depart from the formula in circumstances specified in statute.

It is, frankly, regrettable that the Select Committee expressed no comment or opinion whatever on that proposal. But in the circumstances, it is probably not surprising that the Government did not address the idea in formulating their recent rather limited changes. However, it was noticeable that on the day after the Government's announcement of changes on 22nd December, leading articles in The Times, the Guardian and the Independent all spoke of the continuing inflexibility of the system and of the need for a right of independent appeal to ensure that the system works fairly.

So far, the Government's only response to that idea has been to suggest that the Australian system of assessment is cruder and that our more sophisticated system does not require such a review mechanism. There are two short answers to that suggestion.

Baroness Hollis of Heigham

Rubbish.

Lord Meston

My Lords, not as short as the answer offered by the noble Baroness, but I suggest that there are two relatively short answers: first, that no formula, however sophisticated, can be devised to deal with the infinitely diverse financial circumstances of different families; and secondly, if our assessment formula is more sophisticated, it is unlikely that there will be as many reviews in this country to deal with the special circumstances for which a review is justified.

The joint FLBA/SFLA submission gave a list of examples of the kind of situation in which a review may be required. I shall not take time reading them out now. But statistics show that even in Australia only 11 per cent. of assessments are the subject of review; under 4 per cent. of payers receive a decrease on review; and 2 per cent. of recipients receive an increase. Moreover, the average increase is about twice the average decrease so that the result is fiscally neutral. Moreover, the cost of running a review office can certainly be set against the cost of the existing appeal tribunals.

That proposal deserves better attention than it has received so far. It is not a panacea for aggrieved fathers or for indignant mothers. A general sense of grievance will not be sufficient to justify a discretionary review. Special circumstances set out by law will be required to provide the basis for such a review. However, it is quite clear that the existing system will not work fairly and will not be seen to do so without a proper safety valve in the form of an independent appeal mechanism.

The debate in another place on 2nd February ended abruptly at 10 o'clock with the Minister having just begun a sentence with the tantalising words, "As to the future". I hope that the noble Viscount can give us a glimpse of what was to have followed.

9.50 p.m.

Lord Stoddart of Swindon

My Lords, I, too, wish to thank the noble Earl, Lord Russell, for raising this matter again and for giving all of us an opportunity to say a few more words about the Child Support Agency and the Act which brought it into being. The Minister knows that I was very much opposed to that Act, and remain opposed to it, because I believe it was conceived out of hysteria and ignorance. It was processed through Parliament with scant regard for the consequences and indeed is being implemented in chaos and with a ruthless disregard for the interests of so-called absent parents, especially those who have been meeting their responsibilities.

The Act of Parliament was introduced allegedly to deal with runaway fathers. Perhaps noble Lords remember that Mrs. Thatcher, as she then was, had her picture all over the papers. The newspapers proclaimed that she intended to deal with runaway fathers. But of course things have not turned out that way. This business of chasing runaway fathers has turned out to be a racket to extract considerably more money from people who have already made provision for their children, either on a continuing basis or by means of a clean break approved by the courts.

In case anyone thinks I am being a little tough on the Government and the Child Support Agency, I should perhaps refer to a couple of CSA memos which were leaked to the Guardian newspaper. The memos state that in order to meet financial targets—there is nothing about fairness there —cases with potential should be dealt with first. I emphasise the word "potential". Then other cases would be dealt with comprising existing income support claimants chosen by CSA staff made up of good quality cases from the "stocktake" where the absent parent is already paying, or from cases held over from April where the CSA was fairly confident of a large maintenance assessment and where the absent parent would be able and willing to pay. The memos emphasise that the name of the game is maximising the maintenance yield and urged officials not to waste time on the non-profitable stuff.

I suppose the document is authentic. Perhaps the Minister will tell me if that is not the case. If the document is authentic, that is a terrible way to deal with people. What a way to deal with parents! I hope that the Child Support Agency has learnt something from the outcry that has arisen throughout the land over its handling of these cases.

The amendments made last week to the regulations were of some help but the fact remains that the Act was cobbled together in haste and remains defective, as we have heard tonight from every noble Lord who has spoken. The debate has focused on the defects of the Act in great detail. I hope the Minister has taken notice of what has been said.

I agree with the noble and learned Lord, Lord Simon of Glaisdale, that the best thing the Government could do would be to scrap the Act, scrap the whole business and start again after proper consultation and after proper discussion in Parliament. The Government should introduce a Bill enabling us in Parliament to decide the regulations and not a group of unaccountable civil servants egged on by a greedy government who are determined to get as much money as they possibly can out of this measure. Perhaps we could then produce something that is more in keeping with our democratic heritage rather than the Stalinist model with which we are now stuck.

Since the Government are unlikely to do that they had better consider some amendments. Many have already been proposed. The first amendment that ought to be made relates to a point that I raised when we had a debate on the regulations last week. I said that I did not believe that there was equality of treatment between the father and the mother. That was confirmed in a letter which appeared in the Daily Mail yesterday, 8th February. It is headed "Biased bureaucrats". The letter is interesting. It reads: The numerous reports of fathers being financially crippled by the Child Support Agency have made interesting reading, as I count myself among them. However, my situation is different. My wife left me and our two children in August 1992 to live with another man. We have since divorced and she has remarried. A month after our split, I was made redundant. My wife offered maintenance of £20 per week per child which, on the advice of my solicitor, I accepted. In April last year, the CSA became involved and I was told by my solicitor that, based on the earnings of my former wife and her husband, I could expect more. But, rather than increasing the payment, the CSA reduced it to £4.05 per week per child, leaving me £125 a month worse off. Moreover, I was informed that any additional sum my wife paid voluntarily would be deducted from my income support. To say that I have received less than fair treatment at the hands of the CSA is putting it mildly". We would probably agree.

I sincerely hope that the CSA will have seen that letter and will investigate. It seems to confirm what I said last week, that perhaps an even-handed approach is not being adopted as between husband and wife, or between male and female partners. Therefore, that is a matter which has to be addressed.

The other point I wish to make is this. When the carer —the person who has physical charge of the child—is allocated the whole of the allowance of £44 per week, why should the so-called absent parent have to meet the whole cost of that care? If parents are equally responsible then surely they should each meet half of the carer's costs. In other words, instead of having to find the whole of the £44, the absent parent should be expected to find only £22. It is a difficult matter, but nevertheless I believe that it has to be considered.

Moreover, the Government should ensure that where care is shared the financial arrangements should be based on a 365 day, pro rata basis—as my noble friend mentioned—and not on a notional formula which does not treat the so-called absent parent (who is often not absent by choice) fairly.

We have heard a great deal about clean-break settlements which have been made by the courts. My own view is that where a court makes a settlement it is the court which should break that settlement. I understand everything that has been said, particularly by the noble and learned Lord, Lord Simon of Glaisdale, and the noble Lord, Lord Meston, and I appreciate the difficulties. But among fathers who have made such clean break settlements there is a sense of grave injustice. They believed when they made them that they were making those arrangements for all time, and that they were reasonable and acceptable not only to the wife or other partner but also to the courts. When those fathers sign such an arrangement and for whatever reason, fair or unfair, it is set aside by an unaccountable agency, they rightly feel very frustrated and angry about the whole business. I believe that somehow or other where clean break settlements have been made, the courts that made and agreed them must become involved in breaking them. I do not know how, if that is not lawful at present. The Government, of course, have the power in their hands to bring forward suggestions through legislation or by regulation.

In any event, as the noble Lord, Lord Meston, said, there should be an independent appeal procedure. It cannot be right that people who are suddenly confronted with huge increases in their outgoings should have no redress, and no one to whom they can put their case other than the people who have made the assessment in the first place. That is against all sense of justice and against the British system of justice.

Other factors have been referred to. I wish to emphasise them. Unavoidable expenses in maintaining employment should certainly be exempt when assessing the non-resident parent's income. If a man—in some cases it may be a woman—is desperately seeking to keep himself off the dole and works to ensure that his children can be properly maintained, but in order to do so he incurs very much higher expenses than usual, they should be taken into account. He is making every effort to do what the Government and everyone else believes that he should do: that is, maintain his own children. He should be assisted in such circumstances.

As has already been mentioned, the expenses of the non-resident parent when visiting children should be taken into account where they are excessive through no fault of the absent parent. Very often the children are removed to far away places in order that the absent parent cannot gain access. Because those circumstances are not taken into account when making the assessment, the absent parent is denied access to his children.

We then have to deal with the problem of passported benefits. It is quite wrong that the parent who has care should, at the margin, be denied those passported benefits; he or she will be very much worse off. That cannot be right and the Government ought to take note and do something about it.

There is a great danger that the operation of the Child Support Act may well encourage the break-up of families. That is the very reverse of what we wish to do at present. The BBC "Panorama" programme on Monday showed the damage that is done to children through divorce and the break-up of a family. We have to take that factor very seriously indeed. I agree with the noble and learned Lord, Lord Simon of Glaisdale. We have to try to reverse the trend. We have to ensure that children can be brought up so far as possible in a caring and loving home with two parents. That has been unfashionable and politically incorrect for a long time and it is about time that we made it politically correct. Why should we do that? Because the children want it and they do better under that system. That has now been shown, but in my view the Act encourages the break-up of families.

I believe that men are now seriously considering their position. They know perfectly well that if they are not careful they can be saddled with a heavy burden for a long time. It may be that, side by side with sex education, young people should be made aware of the serious implications of becoming parents. As an aside, I suggest that parents should perhaps now advise their boys, as well as their girls, to say "no".

I return to the vexed question of access, which I raised last week. Whatever the Government may say, whatever we may believe in this place, the fact is that parents, particularly fathers, feel that if they discharge their financial responsibilities to their children they are entitled to have contact with them. They say that if parents have equal financial responsibility for the maintenance of the children, then they should have equal rights in respect of contact with their children. I believe that is true, provided there are no good reasons why they should not; for example, if they beat up their wives or their children, or some other reason. I believe that both parents are entitled to that contact with their children.

All too often, unfortunately, we find that men, in particular, who are making proper financial provision for their children are now being wilfully denied access, even when a court order is in operation. Something must be done about that. Undoubtedly, men feel hard done by at present and if they are to have financial responsibility they must have access rights as well.

In conclusion, I say that the Government will ignore at their peril the outcry that there has been about the Act. They passed it wilfully, in spite of the opposition in this House and in spite of the warnings. It was conceived in haste and it is about time the Government realised that it will cause them only pain for so long as it remains on the statute book in its present form. I urge the Government to do something not only for the sake of the people in the country who are paying the price but also for their own sake at the next general election and the local elections which will come shortly. If they are not careful, they will find their numbers decimated.

10.8 p.m.

Baroness Hollis of Heigham

My Lords, like others I wish to thank the noble Earl, Lord Russell, for giving us this opportunity, perhaps for the first time recently, to scrutinise the working of the Child Support Act and the agency. It is a significant measure because it will bring about 20 million people within the remit of the social security system, many of whom would never dream of that being so. Therefore, there is an important set of questions that we must consider tonight.

Notwithstanding the noble and learned Lord, Lord Simon, on this side I believe it is worth repeating that we believe that absent parents and not the state should, wherever possible, support their children. I say that because for the rest of my remarks I wish to criticise the Child Support Agency. The more we learn and read about it, the more we receive letters and talk to people who are affected by it, the more we are all left with a deep and abiding sense of its unfairness.

To whom is it unfair? First, it is unfair to the poorest women and to the lowest paid men. We have not heard very much about women tonight. But lone parents with children are already very poor. On average, such women with children have only two-thirds of the income of a couple with a similar number of children. They are the main clients of the Social Fund. They take up, for example, 49 per cent. of its loans. They are quite likely to be in debt with fuel and water bills, and therefore will already have their income support top-sliced. Their children are likely to be on free school dinners. The children themselves are likely to be poorly nourished, poorly clothed and show poor school performance. That mother receives £2 per day per child—the price of a hamburger—to feed, clothe and keep her child warm.

Under the Child Support Agency that mother will lose her benefit pound for pound. Indeed, as my noble friend Lord Stoddart rightly said, she will lose it more than pound for pound. She will lose passported benefits, of which free school dinners for two children are worth £10 a week alone.

We are pleased that the Government agreed to raise the protected income for men for additional costs from £8 to £30 to cover such items as travel costs and the like. Why should not the Government consider a similar disregard, as the chairman of the Select Committee and the chairman of the Social Security Advisory Committee said, and as the noble Earl, Lord Russell, said, which would at the very least cover the loss of passported benefits and prevent the mother and her children being made even poorer by this alleged child "support" Act.

Nor is the formula fair to women on family credit, any more than it is fair to women on income support. Assuming that a woman on family credit gets, say, £40 maintenance, £40 earnings and £30 family credit, the family credit is fixed six months at a time. Should the maintenance falter and the absent parent become unemployed, her family credit will not rise accordingly to compensate. For five months that woman could be required to live at an income well below income support level. But she will not be eligible for income support if she works more than 16 hours a week. If she is wise, of course, she will probably give up her job and go fully on to income support. Will the Minister please look at this point? Will he also assure us that where family credit is based on full maintenance payments, which the Government have now decided, quite rightly, are to be phased in, that family credit will now immediately be adjusted to compensate for those phasing-in arrangements? Otherwise, a welcome concession to the father will be paid for quite directly by the mother and her children, and that would be monstrous.

Only better-off women will be better off under the Child Support Act—that is, if they receive no benefit and will in future receive maintenance in an assured way. We are pleased for them and that is forward looking for them. But it is worth remarking that they can look forward to maintenance of around £60 to £80 per child per week, whereas the state saw fit to support that same child on £15 a week.

The formula is therefore not only unfair to poor women, those on income support and those on family credit; it is also unfair to low-paid men. Those below the protected income level will lose 85p in the pound. Those who are much better off will lose only 25p in the pound on the top slice of their income, and less than that if they have three children. So the poorer you are as a man, the higher the proportion of your income will be claimed by the Child Support Agency. I repeat: poorest women and lowest paid men both do worse out of the CSA. That is not fair. It must be reformed.

Secondly, the CSA is deeply and abidingly unfair as between first and second families, a point which was explored by your Lordships tonight. It is unfair precisely because absent parents, usually men, on earnings below average, as the noble and learned Lord, Lord Simon, rightly said, simply cannot maintain two families at or above the poverty line. Obviously it is right that such an absent father should so far as possible be expected to maintain equally all his children from whatever marriage. But the formula does not achieve or indeed have that intention.

Let us consider housing. As the noble Lord, Lord Meston, rightly said, whatever the Minister says, there is no connection between equity forgone and subsequent housing costs incurred. Clean break settlements often involve quite substantial equity in housing and they have been ignored. So, no solicitor of any separating father will in future allow his client to sign away the family home.

So to the stress of separation and the strain of relentless poverty, which the caring mother will face, will now be added the trauma of homelessness, either immediately or when the youngest child is 18. Under the despicable proposals of Sir George Young, she will no doubt find herself in bed and breakfast or temporary accommodation rather than in a settled home. Does the Department of the Environment ever talk to the Department of Social Security, when each tries to ship its costs of support to lone parents onto the other, leaving the lone parent stranded and forlorn?

Children belong to their parents but they also belong to all of us because we have a public policy interest in their welfare and well-being. We are making their future even more bleak in this, the year of the family.

Nor is the Child Support Act fair in terms of the obligation facing an absent parent who is now in a second family. My noble friend Lord Stoddart rightly described the problems of the soft target. That absent parent entered marriage and made that family in good faith. Court settlements are behind him and maintenance is being paid. If that maintenance is inadequate, that was the judgment and fault of the court and not his.

Half of all absent parents are in a second family. Half of those have children in that family who are dependent on the step-father usually, at least to begin with, brought by the new partner. As a result that partner is not on income support. In the early stages therefore the mother will not bring enforced maintenance from her absent partner. Indeed, if the absent partner of the new parent is sick, unemployed or dead, she has no maintenance to bring.

What do the Government expect the step-father to do? If he does the decent and humane thing and supports the children, he is financially penalised. But if he does not do so, that second family will break up as surely as the first and the domino effect of deprivation will extend.

It is clear from research into the children born in the cohort of 1958 that children in step-families are fragile. They are more likely to truant and leave home and the girls are more likely to become pregnant when young even than are the children of lone parent families. Every aspect of the Child Support Agency's treatment of such step-children adds to their vulnerability. "Oh," say the Government, "let the step-father adopt them." That is an appalling recommendation, which I hope that the Minister, in common decency, will not repeat tonight. It means that if one is unemployed and too poor to maintain one's natural children, another man should adopt them so that he can claw back money that would otherwise be taken by the Treasury—even though all the research into the children in broken families shows that contact with the absent father in a supportive, friendly and non-controversial way is crucial to their emotional health.

Does the DSS not know of that research, much of it sponsored by that department? If it does know, why does it not care about it? There is a very simple and sane solution recommended by the Select Committee—and it is interesting to see how the Government have picked and chosen among the Select Committee's recommendations—which says that one should count in the step-father's exempt income support for step-children until, or if and when, that is displaced by maintenance from the partner's absent spouse.

Still dealing with the problems of the relationship between the first and second families, is it really fair that the income of the partner of the absent father, the new wife, and any other adult such as her adult sons in that household, should be taken into account when determining the amount the second family recycles back to the first family? That may include supporting the unemployed new male partner of the first family. Is the Minister really comfortable that the wife of the second family will be working to support the male partner of the first family? Is that fair? But that is the Act. It is not surprising that there have already been 900 contested paternity cases as a consequence of the Act—I do not blame them.

The Secretary of State said in another place that the three objectives of the Child Support Agency were, first, to give a child maintenance from both parents; secondly, to increase incentives for lone parents to work; and, thirdly, to reduce the burden on the taxpayer. On the first of those, yes; child maintenance will come. But the child on income support will not benefit because child maintenance does not mean child support. Children in many first families will often find their mothers poorer; stepchildren in second families are, in financial terms, invisible, non-existent or, to coin a phrase, zero-rated. Let us hope that they do not need to eat as well!

On the second of Mr. Lilley's objectives—the incentive for lone parents to work—research by Bradshaw and Millar, and Holterman shows that lone parents already desperately want to work. Three-quarters of single parents want to and intend to work but usually they can do so only when the child is over five and there is adequate childcare. We were the first to congratulate the Government on making some moves in that direction in the last Budget. It is still not enough. But why are we being so punitive? As Bradshaw and Millar show in their research, the average time for lone parents to be on income support is, what? Between 15 and 20 years? No. It is between two and two-and-a-half years; that is all, and generally until the youngest child is old enough to permit them to work. The person who stays on income support longer tends to be the much older divorced woman who finds it hard to re-enter the labour market. For all others income support is a transitory stage through which that mother passes usually into work, occasionally into marriage, and it supports her and her children while they remake and reshape their lives.

So, Government myths to the contrary, there is no terrifying dependency culture out there. Instead there are young women, single mothers working desperately hard with their children on minimal income to bring them up, fit them out for life and, as soon as possible, achieve their own economic independence on a total weekly income of usually around £77 for a mother with two children that many of us would spend on an evening's dinner. Too often we have had character assassination of women who are unsung heroines; not because they are lone parents but because they are poor lone parents.

With regard to the third of Mr. Lilley's criteria, yes, it probably will reduce the burden on taxpayers. After all, four-fifths of the money is being recycled back to the taxpayer. We support the contention that when the father can, he should maintain his children. But the evidence suggested and repeated tonight shows that for many families the poverty of the first family will not be relieved by pressing the second family down into poverty as well.

There was an alternative, as has already been mentioned—the Australian system. Despite Mr. Burt's remarks to the contrary in another place, it is a simple and sophisticated scheme which we could and should have adopted. It is based on gross rather than on net income, to be sure. But as the Australian Government's handbook explains, that is to ensure that there is no fiscal inequity between the fathers in first families who receive no tax relief and other absent parents. It goes on to say that that is reflected in an altered percentage of taper. But leaving aside the difference between gross and net, what are the other features of the Australian system that we should have adopted?

First, introduced in 1989, it is not retrospective. Existing court settlements are respected but uplifted, with court approval, by the CSA and collection is enforced by the CSA. Only parents separated after October 1989 come within the full remit of the Child Support Agency. Therefore, parents who had made future plans in good faith did not see them come tumbling down due to retrospective legislation.

That is too late for us now, but we could at least adopt the second distinctive feature of the Australian system. As the noble Lord, Lord Kilbracken, emphasised, property settlements, including those of clean-break arrangements, are taken into account and can proxy for up to 25 per cent. of maintenance awards. The third feature of the Australian system is that the parent with care has a right to retain a modest amount of maintenance—what is called in Australia a free area. It is a disregard worth about £12 a week for two children, something, again, which all commentators have called for. Thereafter there is a taper of 50 cents in the dollar.

Above all, the Australian system has a review or appeal procedure by which the formula may be departed from on defined grounds laid down in the law. I shall mention four of the grounds on which one may ask for a departure from the assessment: the unusually high cost of travel access, often between states; the extra cost of maintaining a handicapped or chronically sick child or relative; where one parent is repaying the joint debts incurred by both; and where the absent parent is paying the mortgage for the parent with care. These are defined and narrow grounds laid down by legislation; so defined and so narrow (but nonetheless fair) that, as the noble Lord, Lord Meston, cited, only one in 10 of maintenance awards actually goes to the review officer. It is not floodgate stuff. I hope that we are not told that tonight. One in 10 goes to the review officer. About half are successful. Of those one-third are increased at the request of the parent with care and two-thirds are reduced at the request of the absent parent. Such a procedure is seen, felt and experienced to be fair. We could even now adopt it.

It is too late for our Child Support Act to be retrospective but we could at least learn from the experience of other countries. Had we done so the complaints about the workings of the Child Support Act would have been minimal and the Child Support Agency would have found itself working with the grain of public consent.

With some temerity, perhaps I may disagree with the noble and learned Lord, Lord Simon. I believe that the old court-based system had to be amended. Its awards were sometimes too low, were paid irregularly, were not increased over time and were not always enforced. But the Australian Child Support Agency addresses each and all of those problems. It has the powers to make good existing court settlements. There is much to be said for standard formulae which are not subject to the whims of discretion, as we see, for example, with the social fund. But we need at the same time a basis from which there can be departures from that formula for good and specified cause, again, as in Australia.

We believe that parents should support their children. That is their family covenant. But absent parents on below-average earnings cannot support both families without plunging those families into poverty. We have as a society also a covenant—that all children should have the same chances and opportunities that we would wish for our own children. Nothing less is anywhere near good enough. This Act does not offer those children such chances and therefore it must be reformed.

10.29 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Viscount Astor)

My Lords, the noble Lord, Lord Meston, reminded your Lordships that in a debate on the regulations in another place on 2nd February my honourable friend the Parliamentary Under-Secretary of State ran out of time and ended the debate in mid-sentence while saying "as to the future". I know that your Lordships would have preferred that he was able to finish the sentence, so I intend to start by taking your Lordships back to the future after dealing with the concerns raised tonight.

I have listened with care to the contributions which your Lordships have made this evening. Only last week we debated proposed changes by regulations to the child support scheme. I hope that these are still fresh in the mind so I will not repeat them here this evening. During the course of our debate last week and in the debate in another place, it was evident that there is still widespread belief in the basic principles of the Child Support Act.

The Government have a responsibility in framing social legislation to balance the needs of all concerned. In this instance our responsibility lies primarily with the children for whom we arrange maintenance. We have also to consider the parents with care; absent parents, second and step families and the taxpayers in our deliberations and I believe that all parties are treated equitably by the changes to the child support scheme.

There are, however, some aspects of the child support scheme about which noble Lords have indicated continued concern. The noble Earl, Lord Russell, expressed concern about the costs incurred by absent parents in travelling to work and in travelling to see their children. They are, of course, very important items of expenditure, but absent parents will be able to meet the costs from the large margin of their net income which, under the formula, is left after meeting their maintenance obligation. Noble Lords will recall that as a result of the changes which came into effect this week more absent parents will have more money to meet these sorts of expenses.

Of course, there will be hard cases; but the majority of these are the direct result of the deficiencies within the old system. That system allowed other expenses to be placed before child support; it allowed absent parents to move to commuter belts to enjoy a better quality of life; it allowed their fares at the expense of their children. That cannot be right. It will be difficult for an absent parent with high travel costs to adjust their incomes to meet their new liabilities, but for years it has been an awful lot harder for parents with care and their children, struggling to make ends meet on woefully inadequate amounts of maintenance.

To try to incorporate into the formula a range of specific costs, such as travel to work and visiting first families, would provide a shopping list of items that would be viewed as essential by some but not by others and would have the effect of reducing the priority given to child maintenance. Indeed, under the old court system this is invariably what happened, resulting in unrealistically low levels of award.

This view was supported by the Social Security Select Committee which, in its recent report, concluded that it would be better to increase the level of protected income. As noble Lords will know, these changes were introduced last week.

Maintaining their children should be the parents' first priority. Allowing for individual items of expenditure in the formula would give those expenses a higher priority than child support. As a result of the increase in protected income, the net income of the absent parent will be at least £30 a week above the appropriate level of income support. In a substantial majority of cases the absent parent will be paying no more than 30 per cent. of his net income in maintenance even once the phasing period is over. As I said, the old system of allowing other expenses and debts before child maintenance, as the noble Lord mentioned, resulted in increasingly low levels of payment.

The noble Earl also said that the formula needs to take account of other individual circumstances. I believe that the formula already does take account of individual circumstances. It looks at the income and the outgoings of both parents, including housing costs and the ages and numbers of the children. It produces realistic amounts of maintenance which reflect the true costs of bringing up a child.

The formula produces maintenance assessments which reflect the true cost of maintaining a child, while also ensuring that absent parents can afford to meet the payments. There can be no comparison between tax and the needs of a child. It is true that for some absent parents the maintenance assessment represents a substantial increase in payments when compared with orders made by the courts. However, as I said, many court orders were very low, did not reflect the cost of maintaining a child and were not increased in line with the cost of living.

I make no apologies for stating again that there can be no clean break between parents and children. Under the court system, parents had the right to seek periodical maintenance for a child or to seek variation of an existing order following a capital or property settlement. It has always been open to the Secretary of State for Social Security to seek such a variation where the taxpayer became involved in supporting the children. Often, a property settlement which transfers the equity in the home also transfers a debt in the shape of mortgage repayments. Where the parent with care is on income support, as many are, the taxpayer foots the bill, not only for the day-to-day maintenance of the children but for the repayments on the mortgage as well.

Baroness Hollis of Heigham

My Lords, perhaps the noble Viscount will permit me to intervene. Does that mean that where a parent passes over a substantial equity without any mortgage liability to be borne by the taxpayer, the Minister accepts that there is an argument for that equity to be taken into account in the settlement?

Viscount Astor

My Lords, the noble Baroness will have to allow me to finish what I am saying about clean-break settlements.

In its report, the Select Committee concluded that there is no sensible way in which the capital value of past settlements can be taken account of in current maintenance assessments. The formula already reflects the practical consequence of settling a house on the former partner. In such cases it is likely that the absent parent, unable to call upon the equity of the matrimonial home, will incur higher housing costs than would otherwise be the case. The absent parent's costs of rehousing himself and any new children are deducted pound for pound from his assessable income, so reducing his maintenance bill.

Your Lordships have expressed concern that in future absent parents will not so readily agree to clean-break settlements and that as a result the matrimonial home will be sold and the parent with care will be made homeless. Where there is a family home, the courts continue to decide how that asset is to be divided. They are required to give first consideration to the welfare of the children, which includes the need for a home, when they settle property issues in divorce. They will know in advance how child maintenance is worked out. So decisions about the family home can be made in full knowledge of how much child maintenance will be payable.

The situation of absent parents with second families which include step-children—

Baroness Hollis of Heigham

My Lords, I am sorry but can the Minister answer the question I put to him? I believe that the note may now have come from the Box.

Viscount Astor

My Lords, the noble Baroness keeps interrupting and asking me questions when I am half-way through my speech. She really will have to contain herself and not be like a jack-in-the-box until I have covered all the points.

Baroness Hollis of Heigham

But—

Viscount Astor

No, I shall not give way. The noble Baroness must allow me to proceed with my speech. She has spoken and she must give the Government time to reply—

Baroness Hollis of Heigham

But the Minister is not replying.

Viscount Astor

Nor must the noble Baroness make sedentary interventions.

I accept that there are circumstances where, for instance, the step-child is the child of a widow or widower or where, for some other reason, it is not possible for their other natural parent to provide them with financial support. However, I must reiterate that it is not considered to be right that an absent parent's step-children should be given priority over his or her own natural children. Where it is possible, the agency will seek to obtain adequate provision for the step-children from their natural parent, but where this is not possible the formula provides a safeguard for these children in the form of the protected income calculation.

The protected income calculation provides that an absent parent retains enough income after paying maintenance to meet his or her day-to-day needs and that of any second family. To ensure this, an adjustment is made to the assessed amount of child maintenance where the absent parent's disposable income would otherwise fall below his protected level. The protected level of income reflects the day-to-day expenses of the absent parent and his latest family. In this calculation, the entire second family is considered. In effect, therefore, the needs of the step-children are placed before the needs of the natural children. There would be cases where the protected income assessment abates the whole of the assessed maintenance, and in that case there is in effect no payment by the absent parent to the parent with care.

Your Lordships will recollect that one of the changes which we have just introduced increases the protected income levels for second families. This will benefit any step-children in the maintenance assessment unit, as will the new phasing provisions which I described earlier.

Your Lordships have mentioned the Australian appeal system. That system allows appeals against the amount of a formula assessment in certain circumstances. The appeal was originally to a court but since July 1992 the work has been transferred to the Australian Child Support Agency where it is carried out by specially appointed review officers. There are some very particular reasons why an appeal system is necessary in Australia. There are some very significant differences in the way in which child support is assessed which makes it essential to have a mechanism for varying the amount of maintenance in certain cases.

The assessment is far more broad-brush, taking the gross amount of the income declared in the absent parent's tax return for the year before last (multiplied by an indexation factor) and allowing for day-to-day expenses for the absent parent and any child of his own living with him. Unlike our system, there is no allowance for housing costs. Once this basic amount for living expenses has been deducted, the child support payable is a fixed percentage of the remaining income. The percentage varies according to the number of children involved; from 18 per cent. for one child up to 36 per cent. for five or more. The amount does not vary depending on the age of the child as it does in this country.

Moreover—and this is an important point—there is no equivalent of "protected income" provision which ensures that the absent parent and his current family keep a minimum amount of income after paying maintenance. In Australia, therefore, it is entirely possible for an absent parent's income after paying maintenance to drop below benefit levels, particularly if he has step-children. Thus discretion is required to avoid severe hardship which could otherwise occur.

There are two grounds of appeal. First, that the absent parent's ability to pay the formula amount is reduced because of the cost of providing for himself or another child or person he is liable to maintain; or because of the costs associated with access to the child of the assessment; or because he is meeting other particular costs of the child in the assessment.

The second basis for appeal is that there has been an unjust and inequitable result from the application of the formula because either it has not taken account of the full financial resources of either parent, or the value of a financial or property transfer made for the benefit of the child has not been taken into account.

On the surface a discretion-based appeal system seems like a simple solution to all the criticisms that have been levelled against the Child Support Act. Advocates of such a system argue that it would preserve the basic structure of the scheme while at the same time introducing an effective mechanism for dealing with hard cases. Such a solution is not the panacea it might at first appear. If the right of appeal were to be universal the flood gates would open. Everyone will apply and the Child Support Agency and the formula will, in effect, become redundant. This would herald a return to the old system where a whole list of expenses were placed ahead of the child's support with the result that many awards were for derisory amounts.

If a right of appeal were to be limited to specific circumstances we would still have another problem. If the entry rules were drawn too wide we would still be left with the situation that I have just described; if the definitions were too precise we would still be left with hard cases. This would leave us with the worst of all worlds: a formulaic system seriously undermined by discretionary adjunct that is divisive and unfair. To suggest, therefore, that we could introduce discretion through an appeal system that is open to all and capable of solving all problems, and yet preserve the integrity of the system, is not practical. The plain truth is that there are two options: discretion or a formula. These options are mutually exclusive; you may have one or you may have the other, but there is no middle road.

Lord Simon of Glaisdale

My Lords, why does the noble Viscount say that? Why are they mutually exclusive? Why can you not have, as in Australia, initially a formula to be applied and then a discretion to review it when it operates harshly and inequitably?

Viscount Astor

My Lords, I understand the point that the noble and learned Lord is making, but I have described that the appeal system in Australia is very different and is done on a very different basis.

We believe that you either have to have a system that is discretionary or which has a formula. We tried discretion and it does not work. We know that the old court-based system failed the vast majority of parents with care and their children. There were far more hard cases under that system. The I million parents reliant on income support were a testament to that.

Lord Stoddart of Swindon

My Lords, the noble Viscount says that you cannot have a mixed system, but of course you can have a mixed system. We have already got it in the social security system. If a person is dissatisfied with his social security allocation, he can appeal to a tribunal. Surely that is possible for child maintenance. Why cannot that be done? There is a precedent for it.

Viscount Astor

My Lords, the noble Lord, Lord Stoddart, is talking about adjudication within the benefit system. Of course there is that adjudication in the benefit system, but it is based on law and what someone is or is not entitled to. It is based on case law built up over a period of time. Therefore, it is not a discretionary system in any way. We do not have that in this system and that is why it is different.

Baroness Hollis of Heigham

My Lords, that is precisely the Australian system which we were recommending to the Minister; namely that it is a discretion which is shaped and laid down by law. What the Minister described as part of the social security system is exactly the same as that in the Australian Child Support Act in which, as I understand it, the absent parent's income is analogous to social security rates. The noble Viscount may have been misinformed about that matter. What he describes already exists in Australia and works perfectly well.

Viscount Astor

My Lords, I am well aware of what exists in Australia. I have already described that to the noble Baroness. However, I am trying to explain that the system is different in Australia because it is based on entirely different matters. That is why the Australian system cannot be transferred here and be made to work. I realise that the noble Lord, Lord Stoddart, disagrees with me. We shall have to disagree on that point.

We believe that the formula must be given time to work. It is inevitable that people must adjust their outgoings to meet their liabilities. We cannot escape that and I recognise that, for some, it will not be easy. However, I believe that the changes that we made last week will go a long way towards easing those transitional problems.

I turn now to the noble Lord, Lord Kilbracken. The noble Lord talked about attendance in your Lordships' House. That is often a pleasure for many of your Lordships and, indeed, as noble Lords may have noticed, attendance in your Lordships' House can also be hard work for others. But I assure the noble Lord that work-related expenses are not taken into account when calculating an absent parent's net income.

The noble Lord, Lord Kilbracken, spoke about the 104-night rule. Where a child spends on average at least two nights a week with the absent parent, his maintenance is adjusted. Use of the figure of two nights ensures that absent parents have significant care of a child before the maintenance is reduced.

He asked also about school fees. The formula takes no account of payment that absent parents make in respect of school fees because the basic needs of the child and, therefore, the cost of providing day-to-day support should come first. It would not be right for an absent parent to pay for a child's private education while the taxpayer pays for his every-day needs.

The noble and learned Lord, Lord Simon of Glaisdale, talked about, among other things, the transitional provisions. I believe that the provisions which we brought before your Lordships were not merely to correct mistakes but to deal with a transitional problem which was not previously identified. We could have made permanent changes to the formula. We could have achieved the same effect using the powers in Schedule 1 to the Act, rather than using a transitional power. Part 3 of the regulations merely modifies the formula, in some cases for a limited period. It does not amend the Act.

Earl Russell

My Lords, may I clarify what the noble Viscount says? Is he saying that whenever the Government change their mind, that is transitional and, therefore, justified under transitional provisions?

Viscount Astor

My Lords, the noble Earl, Lord Russell, makes an interesting point, but here we are dealing with a specific aspect of the child support regulations which passed through your Lordships' House last week. I am replying to that. I am not dealing with all legislation which the Government may or may not produce before your Lordships. We must stick to the subject that we have before us, which is the noble Earl's subject.

As I have said, Parliament agrees regulations which are put forward by the Government. It was quite out of order for the noble Lord, Lord Stoddart of Swindon, to criticise civil servants. That is not a usual custom of your Lordships' House. Ministers are responsible to Parliament and the Government are responsible for bringing forward regulations. I believe the noble Lord knows that as well as anyone here tonight.

The Child Support Agency was set up to collect maintenance from absent parents who are not paying and to ensure that those who pay do so at a realistic rate. I must remind your Lordships that in 1979 50 per cent. of lone parents in receipt of income support were receiving maintenance payments, but by 1989 this figure had fallen to 23 per cent. In 1991 two-thirds of lone parents were dependent on income support to meet their day-to-day expenses. Clearly even where maintenance was being paid it was in many cases being paid at an unrealistically low rate.

I believe the noble Lord, Lord Stoddart, also accused us of targeting payers. I do not think that is the case. It is not true that the agency has concentrated on the so-called soft cases. I must inform the noble Lord that of the approximately 1 million cases that the agency will deal with in its first year over 60 per cent. will involve absent parents currently paying no maintenance at all. The noble Lord must take account of that.

I now turn to the effect the child support scheme has had upon parents with care. One of the basic aims of the Child Support Act is that the burden on the taxpayer should be reduced where parents can afford to support their children. It is a natural consequence of receiving maintenance that many parents with care will no longer receive income support. Many lone parents tell us that they want to work and regular maintenance provides a platform between benefit dependency and total independence.

Of course, such parents will no longer automatically qualify for entitlement to free school meals and exemption from National Health Service charges such as prescriptions and optical and dental charges. But parents on low income will still be eligible to apply for a range of income-related benefits such as housing benefit, council tax benefit and family credit, as well as help with NHS charges on income grounds. This phenomenon is not new. It could have applied to those floated off income support due to maintenance arranged under the old court system or indeed to any other form of income the person may acquire.

It is true that free school meals are only available to children in families receiving income support, but the line must be drawn somewhere. I should also point out that an amount is built into the family credit rates to reflect the cost of school meals, so it is not a case of withdrawing assistance totally once people leave income support.

Some parents with care may be worse off. However, many will actually receive more in maintenance than they had been receiving on income support. And what is really important is that this now frees them from the benefit trap. For example, it could free them to take part-time work.

Baroness Hollis of Heigham

My Lords, what are the Minister and the Government proposing to do about those parents who the Minister recognises will now be worse off?

Viscount Astor

My Lords, I have said I recognise that some parents might be worse off but I hope I have explained the position clearly as regards family credit and the benefit trap.

For some parents with care the changes which we have just introduced will mean a reduction in the child maintenance they receive. However, most will still receive more maintenance than they did under the old court-based system, even after these changes have taken effect. Additionally, those in receipt of income support will have their benefit adjusted to compensate for the reduction in their income.

The noble Baroness asked me about the effect the changes will have on parents with care in receipt of family credit. Family credit is payable for 26 weeks and not normally adjusted for changes of circumstances. Changes in maintenance will not therefore be taken into account until a renewal claim is made. Because income can move up or down, some will gain because of this rule while others lose. Other in-work benefits, such as housing benefit, can be adjusted immediately, minimising the effect on any losers. Family credit is a broad brush benefit with the awards made for six months. There will always be people who will gain from changes of circumstance during the award and there will be people who will not. That is the nature of the benefit. Changes in maintenance during one duration of a family credit award are treated exactly the same as changes in any other income. Other in-work benefits, such as housing benefit, can be adjusted immediately, minimising the effect on the parents with care who will see their income reduce.

We have decided that it is inappropriate to disregard maintenance in income support, for various reasons. The first is that income support is payable as a last resort to people who have no other means of support. To allow a disregard would be to make double provision. Such a move would provide a perverse incentive to remain on benefit. For that reason we have put the disregards into the in-work benefits such as family credit. We know that the majority of parents with care wish to work, especially as their children get older, and regular payments of maintenance, together with the disregards in the in-work benefits, will help them to achieve that goal.

There is also an argument of equity. Why should one parent with care on income support be better off than another simply because the Child Support Agency has managed to secure maintenance for her?

Before maintenance is paid at all, allowances are made in the absent parent's net income for his essential living expenses—and housing costs, and living expenses and housing costs for any child living with him. The income left is known as the assessable income.

Earl Russell

My Lords, perhaps I may check whether I heard the noble Viscount correctly. Did he say, why should a woman be better off than another previously on income support simply because the Child Support Agency had secured maintenance for her? If he said that, does he understand that he has made a fundamental statement about the purpose of the Act?

Viscount Astor

My Lords, I am aware of what I said. I gave the noble Earl a number of reasons why we feel that there should be no maintenance disregard in income support. He will recall that there were three reasons.

To return to the formula, the absent parent is expected to pay half this income as child maintenance only until the basic maintenance requirement is met. Where the absent parent has assessable income left over after he has met the basic requirement the formula provides for an "additional element" at the lower deduction rate to be paid. The lower deduction rate reflects the fact that as parents' income increases, a smaller proportion is spent on the children and more is retained by the parents to spend on themselves. The recent changes mean that an absent parent with one child will pay 15 per cent. of his remaining assessable income in child maintenance; a parent with two children will pay 20 per cent.; and one with three children will pay 25 per cent., up to the maximum amount.

Before any maintenance is paid, a check is made to ensure that the absent parent retains enough income after paying maintenance to meet his or her day-to-day needs and those of any second family. That is known as the protected income calculation. The recent changes to protected income significantly increase the level of income kept by lower-paid absent parents. The net income of absent parents will now be at least £30 a week above the appropriate level of income support. In a substantial majority of cases, the absent parent will be paying no more than 30 per cent. of his net income in maintenance.

The reforms introduced last week will deal with some of the anxieties raised over the past few months, in particular those highlighted by the Select Committee. We said at the introduction of the scheme that we would keep the legislation continually under scrutiny. That still holds good. However, we feel that it is vital to give the recent changes time to take effect. We expect the changes to have a more significant impact than most absent parents have recognised. Once they see how their maintenance bills have been reduced that will become readily apparent. Long-term changes should rightly be assessed over a period of time, but we have demonstrated that we can respond to anxieties after proper consideration.

I have listened with care to all the points that have been made this evening; and of course I shall study Hansard with great care. I shall indeed bring all the anxieties raised tonight by your Lordships to the attention of my right honourable friend the Secretary of State.

Lord Simon of Glaisdale

My Lords, before the noble Viscount sits down, is he in a position to answer the question which I specifically asked? When the Act was introduced to us, a very large sum was held out as inuring to the benefit of the taxpayer due to increased contributions from absent fathers. I asked whether that figure has not now been modified by the regulations. Can he give us a few figures?

Viscount Astor

My Lords, I apologise to the noble and learned Lord. I took note of his question, which was: what is the reduction in savings to the taxpayer as a result of the changes? Next year's costs are expected to be in the region of £100 million, with long-term costs of £95 million. These estimates are derived using the original assumptions about volumes of cases, throughput, compliance rates and many other factors which affect the agency's work. With a brand new scheme such assumptions may obviously need to be reviewed in the light of experience. The cost of those measures may therefore change because they do not at this stage make allowance for possible variations on those assumptions.

I apologise for not answering the noble and learned Lord earlier. I trust that that has now answered his point.

Lord Simon of Glaisdale

My Lords, on the contrary, I thank the noble Viscount for answering now.

Lord Stoddart of Swindon

My Lords, the Minister will recall that my noble friend Lady Hollis asked him about clean breaks where a considerable sum of money had been handed over and there was no charge against that money. He promised to answer that question. Indeed, he refused to give way to my noble friend on the ground that he would come to that item. Will he now give us the answer?

Viscount Astor

My Lords, I gave the general answer to your Lordships. The point is that even where there is no outstanding mortgage, such a situation still leaves the taxpayer to meet the ongoing needs of the child in most cases.