HL Deb 19 February 2003 vol 644 cc1205-19

7.37 p.m.

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham) rose to move, That the draft regulations laid before the House on 9th January be approved [6th Report from the Joint Committee].

The noble Baroness said: My Lords, as my right honourable friend the Secretary of State for Work and Pensions announced in the other place on 27th January, the new child support scheme will be launched on 3rd March. This means that parents whose child maintenance liability starts on or after 3rd March will have it calculated under the new rules, as will some existing cases which will convert to the new scheme early—a point on which I can elaborate fully if your Lordships are at all interested. The commencement order giving that effect has now been made. I am sure that your Lordships will join me in welcoming this development in the Government's plans to provide a simpler and more effective child support system.

I turn to the business before us today. We have before us amendments to eight sets of regulations which relate to the operation of the current and the new child support schemes. We also have some amendments to the transitional regulations which govern the conversion of cases from the current scheme to the new scheme. I apologise for the somewhat obscure language which makes sense only if one sees them as amendments to regulations amending existing regulations amending existing layers of legislation. They are necessary to update provisions for the new scheme as the world has moved on since we originally made the regulations. Examples of this are the amendments which relate to the new tax credits. Many of the amendments made by regulations relate to the introduction of new tax credits from April 2003. The treatment of working tax credit and child tax credit for income purposes in child support is covered in Regulations 6 and 8. Those provisions for working tax credit largely carry forward the existing rules for the working families' and disabled person's tax credits.

For the child tax credit the rules are slightly different, because it is support paid to the main carer throughout periods of work and non-work. In the current scheme, it is ignored when assessing either parent's "assessable income". However, in the assessment of the non-resident parent's "protected income", any award of child tax credit counts fully. In the new scheme, payment of child tax credit to the nonresident parent or his new partner will count towards his income. That is our best effort at a direct read-across, and I think that it is a pretty tight fit. It ensures that the personal choice of a couple as to who should receive the child tax credit for the family will make no difference to child support liability.

Regulation 2 makes a straightforward amendment to update the collection and enforcement regulations which relate to the current and new child support schemes. It carries forward the provisions in existence for working families' tax credit. It ensures that when a deduction from earnings order is in force, payment of child support maintenance is taken from the earnings, rather than any working tax credit paid to the employee through their wage. That policy is entirely a practical measure. The protected income calculation takes into account the circumstances of the household. It is right therefore that working tax credit is.fully taken into account.

In the "assessable income calculation", working tax credit is taken into account only where the nonresident parent is the main earner.

Lord Higgins

My Lords, as always on such highly complex matters, the noble Baroness is tending to read from a prepared script. Very often we find that if she expresses matters in her own words, they are more comprehensible. So far as Regulation 2 is concerned, what exactly will happen?

Baroness Hollis of Heigham

My Lords, Regulation 2 means that working tax credit is not treated as earnings for the deduction of direct earnings orders. Say that Brian gets a wage of £150 a week and gets a top-up, for whatever reason, of working tax credit of a further £50. He is due to pay £30 child support. That is taken from his earnings, not from his tax credit. That is what Regulation 2 achieves. It is an entirely practical measure.

The two measures taken together are intended to help to strike the right balance between the important work incentive of getting regular maintenance to parents with care and ensuring that non-resident parents can afford their maintenance liability. It would be exceedingly rare that the maintenance liability due to be deducted from the wage packet would not be wholly covered by the earnings in payment. That is the point that I was making. The amendment that Regulation 2 effects ensures that there can be no confusion on that point.

One could just conceive, for example, that someone might work for 16 hours a week, in which case their tax credits might be higher than their earnings. There could be such rare cases in relation to earnings and maintenance, but they are quite hard to envisage. Someone with a war pension, for example, for a condition that did not prevent them from working might be in that situation, or someone with fairly high tax credits because of the number of children in a second family.

Noble Lords will notice that Regulations 5 and 7 amend the regulations that cover the current and new child support schemes. We are continuing to make explicit the rules that protect the interests of disabled children. Recognising the particular vulnerability of families who care for disabled children, the amendments update the existing provisions. They specify that, as now, no reduction of benefit may be made when a parent with care refuses to co-operate with the CSA without satisfying the good cause test if he or she is in receipt of the disabled child element in child tax credit.

To take account of parents with special circumstances, a system of departures from the standard maintenance formula exists in the current scheme. It is being replaced by a system of variations in the new scheme. Both schemes are broadly similar in effect, as the award of a departure or variation alters a non-resident parent's maintenance liability either up or down, but some of the grounds on which they are awarded are different. For example, with regard to the "special expenses", the new variations scheme focuses only on those costs related to the child.

To put it in my words, the new scheme does not allow any consideration of, for example, housing costs or travel-to-work costs to come into effect. Again, if noble Lords wished, I could seek to develop the distinction between departures and variations in the new scheme. Clearly, what we are trying to do is narrow it as tightly as possible, so that only in exceptional circumstances associated with a child will there be any alteration in the maintenance liability.

The amendments made by Regulation 4 to the departure regulations and Regulation 10 to the variation regulations—the first is the current scheme, the second the new scheme—replace references to the existing tax credits with the new tax credits from the date on which they are introduced.

I shall move on to the amendments that are not related to the new tax credits. They are mostly technical. In Regulation 6, we are making provision for the new "Supporting People" payments, which were previously part of the housing benefit scheme, to be disregarded. The amendments also allow us to change the name of the invalid care allowance to carers' allowance, which has already been welcomed by noble Lords.

Regulation 3 makes changes to new scheme regulations relating to effective dates for supersessions. In that context, the effective date means the date from which liability is changed. "Supersession" is the term used when one decision is replaced by another. Regulation 3 adds two new supersession provisions. The first provides for cases where a qualifying child leaves the parent with care's household but other qualifying children remain. They may have grown up or moved in with the NRP. The second covers cases where the parent with care has another qualifying child with the same non-resident parent, usually under circumstances in which there has been a temporary reconciliation. To my surprise, there are rather more of those than I had previously thought practically possible.

Regulation 7 makes changes to the maintenance calculation procedure regulations, some of which are consequential on the introduction of new tax credits to which I referred earlier. It also makes a number of clarifying changes to the regulations that provide for cases arising in the period immediately before and after the launch of the new scheme. It shall not go over them in detail, although I am happy to have a go if noble Lords wish, but I shall simply mention a couple of the more important changes.

Regulation 7(7)(a) adds two new paragraphs, paragraphs (1B) and (1C), to Regulation 31 of the maintenance calculation procedure regulations, with which I am sure that noble Lords are familiar. The paragraphs make transitional arrangements for cases where there is more than one application for child support and the applications straddle the date on which the new scheme is introduced. Paragraph (1B) provides for the circumstances in which the new Schedule 3 to the maintenance calculation procedure regulations will apply. The schedule determines with which of the applications we should proceed—in other words, which has priority. Paragraph (1C) has the effect that if the "effective date" of the application is before 3rd March, the case will proceed as an application for the current scheme. If it is on or after 3rd March, the case will proceed as a new scheme maintenance calculation.

In Regulation 9, we are making some further amendments to the transitional regulations. The changes are to ensure that the provisions work as we intend. For example, they clarify the regulations to ensure that existing cases linked to new scheme applications for maintenance will immediately convert to the new scheme. It is vital that the old-scheme case converts to the new scheme to prevent the non-resident parent being faced with a maintenance liability that he could never afford to pay.

I think that that is rather important, so it may be worth adding a gloss to it. There may be a case of an NRP, a parent with care and one child in that relationship. As a current case, they stay in the system until all existing cases go over to the new scheme. After 3rd March, let us suppose that the parent with care has a new relationship with someone else and has a new child. That means that there will be an assessment for the new child under the new scheme, simultaneous with an assessment under the old scheme for the existing child. Put the two together and someone might well be asked to pay far more than they are able to afford or than they should pay. Therefore, that becomes a linked case. The existing case goes over the borderline. The existing parent with care's maintenance is recalculated as though it were a new case, so that the NRP pays one maintenance for the two separate children. If necessary, phasing will take place to ensure that the existing parent with care does not find too much of a financial change in her circumstances.

Noble Lords may not think that that happens all that often, but something like 20 per cent of cases might be linked cases. A family tree for one new case showed that 29 other cases in the current system were affected. In consequence, all came over the line. Noble Lords will see why the provision is in place, but it means that there is not the clean, tidy line between existing and new cases that one might otherwise have expected.

The regulations before the House today underpin our commitment to ensuring that child support works for both parents and children. I am satisfied that they are compatible with the European Convention on Human Rights.

To summarise, I suggest that seven of the 10 regulations either incorporate the existing treatment of incomes and bring them forward into the new scheme or replace existing working families' tax credits with new credits. That leaves three regulations which either are not technical or do not involve rewording but have some policy substance to them.

One is Regulation 3, which adds new supersession provisions. If there is a change in family circumstances and a qualifying child leaves the household, that will have implications for the assessment. The second is Regulation 6, whereby the policy changes introduce "supporting people" payments and the renaming of "invalid care allowance" to "carers' allowance".

The third regulation of substance, which again is technically drafted in complex ways, is Regulation 9. It deals with the issue of linked cases, whereby people move from the current to the new scheme by virtue of either partner—the parent with care or the NRP—entering a new relationship. Alternatively, it deals with issues of phasing and changes in circumstances. I give way to the noble Lord.

Lord Higgins

My Lords, the noble Baroness referred to a "linked" case. Is that a case where an individual—either with or without care—has other relationships? In effect, does it link what one might call a "serial" partner?

Baroness Hollis of Heigham

My Lords, that is exactly right. It is where either the parent with care or, for the purposes of calculation of maintenance, the non-resident parent—usually the father—has an existing maintenance liability under the current scheme and enters a new relationship after 3rd March. As a result, his maintenance liability must be recalculated.

However, we are not trying to charge him with two liabilities which run simultaneously—one under the old scheme and one under the new. Under the old scheme, he might pay, say, 30 per cent of his income; under the new scheme, he might be required to pay 15 per cent. If the two were put together, that would clearly be an unreasonable amount. The linked case is the current parent with care, who must be treated for assessment purposes as though she were a new case. Therefore, the NRP's maintenance can be recalculated for both children in both relationships and equitably divided. Thus, the noble Lord is right; the linked case is where there are a number of serial relationships. Usually that occurs with the NRP but sometimes it may involve the parent with care.

As I said, there are three regulations with policy substance. If noble Lords wish, I shall be happy to expand on any of those points. Apart from that, I hope that your Lordships will be willing to support the regulations, which I commend to the House. I beg to move.

Moved, That the draft regulations laid before the House on 9th January be approved [6th Report from the Joint Committee].—(Baroness Hollis of Heigham.)

Lord Higgins

My Lords, the noble Baroness and I have debated the child support situation over a number of years. We are extremely grateful for her expertise in explaining what these regulations do. Anyone who listens to this debate will be inclined to believe that the issue is unbelievably technical and dull. However, we must remember that, underneath it all, lie very strong emotions.

I remember that when the Child Support Agency was first introduced, I invited a number of constituents to speak to me. About 70 turned up and I was struck by the sheer bitterness shown on occasion by the individuals concerned. For example, where a man had remarried or changed partners, the incumbent partner was determined that the previous partner and the children of that first relationship should not receive anything. Therefore, we must take on board that these are very emotional matters.

On the other side of the coin, I well remember how some individuals unjustifiably suffered considerable stress and trauma because of the difficulties of administration. Therefore, these are more than simply technical matters; they have a real human content.

Having said that, one aspect of the matter is of concern. We are told that this will be a simpler system. Of course, over a long period it may become a simpler system—the so-called "new" system is certainly simpler than the old. But the old system will continue. On top of the old system, which is very complicated, and the new system, which is almost as complicated—or at any rate somewhat less complicated—we have a transitional arrangement, which itself is immensely complicated. Therefore, it will be some time before the simplification takes effect. Perhaps the noble Baroness will tell us at what stage she believes the transition will be completed. My understanding is that it may take four or five years or even more.

Baroness Hollis of Heigham

My Lords, when the noble Lord refers to "transition", does he mean phasing or does he mean the move from A-day to C-day?

Lord Higgins

My Lords, I am not sure that I caught the noble Baroness's last expression. I am saying that we have an old system and a new system. As I understand it, a large number of people will remain on the old system and will gradually be moved to the new system. If I have that wrong, no doubt the noble Baroness will be able to explain the situation.

However, I consider there to be a real problem. In changing from one system to another, people may find that they would have been far better off on either the earlier or the new system. That point has been raised at various stages during the debate. Therefore, people who want to move from the old to the new system because they believe that they will be better off may well feel for a considerable time that they have been unjustly treated. Rather ironically, that is so except in the example mentioned explicitly by the noble Baroness; that is, where people shift from one system to another because the individual concerned has had a series of relationships. Therefore, the issue involves real problems.

My other point, and the reason why my right honourable friend Mr Willetts in another place expressed some relief when the Statement was made by the Minister on 27th January, is that these changes have been long delayed. I believe that they were originally promised to take place in October 2001. The date then changed to April 2002 and then, before the change occurred, in the March before that, they were delayed indefinitely. Therefore, as I understand it, at least we now have a firm date—namely, March—for people to enter the new system. However, as I said earlier, we do not know—no doubt the noble Baroness can help us—how long the two systems will continue side by side with people feeling that they would prefer to be on the new system rather than the old or, in a few cases, the other way about.

To exacerbate the complexity of the matter, one basic problem has been with the IT side where the computer system has not proved satisfactory. As I understand from the Minister's Statement on 27th January, additional costs will be incurred. Perhaps the noble Baroness can tell us the calculated total cost of the computer system and, in particular, how much extra burden has fallen on the taxpayer as a result of what I understand was a negotiated settlement between the provider of the IT system and the Government.

Clearly, as there was a negotiated settlement, to some extent it was felt that the problem was due to the company and, to some extent, that it was due to the Government. In particular, I believe that the problem was felt to be due to the changing of the specification because of the underlying changes with regard to the tax credits scheme.

Of course, much of the problem arises from the Chancellor of the Exchequer's obsession with tax credits. I shall not go over again all the debates that we had about the changes in terminology relating to different kinds of tax credits, some of which were abolished before they had even been introduced. But an extraordinary amount of jargon is involved and it confuses the situation significantly.

In particular, the noble Baroness said that in future, instead of what used to be called departures from the normal specification of the case, we shall move to a system of variations. I am not in the least clear about why we have to change the jargon from one thing to another. Perhaps again the noble Baroness can explain why that is so. The idea that individuals will understand what officials are talking about when they say, "You have a system of variation" whereas they used to say it was about departure, particularly if they are changing from the old system to the new, is worrying.

I intervened at an early stage in the speech of the noble Baroness with regard to Regulation 2. There was an extremely good debate, if I may presume to say, in the First Standing Committee in another place on 3rd February which to some extent dealt with this problem. I wonder whether I might have the attention of the noble Baroness because I want to understand this. On that date the Minister stated: The amendment made by regulation 2 is part of the delicate balance between ensuring that a non-resident parent complies with his child maintenance obligations, and that work pays. The amendment made by it to the collection and enforcement regulations relates to both the current and the new schemes. Working tax credit will be paid directly to an employee along with their wage. The amendment provides that the employer cannot deduct child support maintenance from working tax credit under a deductions from earnings order. It must be deducted from earnings".—[Official Report, Commons First Standing Committee on Delegated Legislation, 3/2/03; col. 4.] The noble Baroness, expressing this in her own words in response to my intervention, gave an example which, strangely enough, arithmetically was the same as the one I was trying to work out; namely, that of someone who has £150 per week earnings and £50 per week top-up. As I understand it, the regulation states that if that person has an attachment of earnings order, it has to come off the earnings and not off the top-up. As the noble Baroness knows, I am a simple soul in these matters. I have problems in understanding whether there is really any difference.

At the end of the week the individual concerned receives £200 and has an attachment of earnings order. The employer who has the sad responsibility of dealing with such matters as regards both the attachment of earnings order and the top-up is told, "You must not take it off the top-up; you must take it off the earnings". However, at the end of the week or, more accurately, by the weekend, the situation is no different. If the attachment of earnings order is for £20, it does not matter much to the individual. It is purely—I do not know what is the expression—an illusory regulation to say that it must come off the earnings rather than the top-up and that if one makes the regulation, in some miraculous way the incentive of the individual to work is somehow preserved even though by the weekend the amount he receives is precisely the same. I should be grateful if the noble Baroness could clarify that particular point.

As regards the overall situation, the argument is that as a result of the changes the department will be able to spend more time on enforcement—that is to say, on collection of the money from the individual responsible for paying the maintenance rather than on making the calculations although, as I said, the two systems plus the transition arrangements will all happen at the same time. Can the Minister tell the House how much is expected to be received at the end of the day, or rather how much is expected to be paid in maintenance as the scheme develops over the period? Can she also tell the House—we have debated this matter on previous occasions—how much of the maintenance has now effectively been written off? It became apparent under the old scheme that some of the maintenance was never going to be paid.

The system seems arbitrary in as much as some people will be on the old system and some on the new system. I do not want to delay the House too long. However, it is important to get these points on the record. In the course of the debate in another place on 3rd February the Minister, rather oddly, perhaps, said that he would write to the other Members of the Committee about various points he had not clarified in his speeches. Were those letters made generally available? I have not been able to find them. It would be helpful to people outside, the various voluntary bodies and so forth, in trying to understand this matter to know whether such letters are available at present and if not whether there is some way of making them so.

I believe that in some sense we are making progress. I expect to a significant extent that that is as a result of the interest which the noble Baroness has long taken in this matter. Clearly, it will be far more complex in the immediate future. It would be nice to know when we hope to find that everyone is on the new system. Perhaps by that time it will be rather like New College, Oxford, which is a long way in the future. I fear for those who have irate constituents returning from the Child Support Agency to their constituency interview nights where individual Members of Parliament are asked to explain what all this is about. Fortunately, I shall not be in that situation. That is something from which for the moment at any rate I have escaped. However, I believe we need to spell this out. We are grateful to the Minister for doing so and no doubt for the further elucidation she will manage to achieve in replying.

8 p.m.

Earl Russell

My Lords, the noble Lord, Lord Higgins, asked why it was necessary to change the jargon. One of the minor pleasures of research was discovering the original meaning of the word "jargon". It is the French for a cypher key. I found an ambassador, newly appointed, complaining, "Vous m'avez envoyé le chiffre, mais pas encore le jargon". We need a new jargon because we have a new cipher. We have a new system of child support and a new system of tax credit. So the Minister has the job of putting together a jigsaw and fitting the pieces together. It reminds me of those infuriating small-piece jigsaws where the pieces were almost too small to see and on which I used to break my nails and ruin my temper when I was about six. That is in the nature of the case.

A question is raised regarding our present system of legislation: are we attempting—as I have argued in the past—to legislate in too much detail for a series of human conditions which, as the Minister has illustrated in several of her remarks about repartnering and so on, are not simple enough to be reduced into the general series of rules to which we try to reduce them?

Human beings have the infuriating habit of remaining individual and not behaving in the way expected of them. That particularly struck me when reading Regulation 3, which incidentally is a wonderful example of what I shall in future regard as "the Higgins principle"—that when the Minister explains the provision herself it is a great deal simpler than it ever is in the legislation as drafted. I look at paragraph 5 of the Explanatory Memorandum. I shall not quote the regulations because even in such informed company, they are very nearly impenetrable. It states: Regulation 3 inserts two new provisions which, in specific circumstances, provide for setting effective dates of supersessions in the new scheme. The first is where one or more of the qualifying children leave the person with care to whom the existing calculation relates, but other qualifying children remain with that person with care. The previous calculation will be superseded to take account of the departed qualifying child from the first day of the maintenance period in which the person with care ceased to have care of the qualifying child". It is a little like the question with which the Sadducees tempted Christ about the woman who had remarried many times. They asked: Now, in the resurrection whose wife will the woman be? Christ was able to avoid answering the question. The Minister is I am afraid perhaps not in so happy a position.

I understand what these regulations intend, but they call into question a point I have been raising from the very beginning of the CSA legislation: whether it is always a correct assumption that there is one parent with care and one parent without care.

I remember one of the happiest families I have ever known. The four children were from four separate combinations of parents. They were as happy as the day is long. In those circumstances it could be very difficult to decide exactly who is the primary carer and at which date one ceased to be and the other became so. It is perhaps better to lay down principles on which these matters can be approached without attempting to provide for every detail, when we know perfectly well that if we tried to do so we should fail.

The point has already been raised about disabled children not being disentitled to benefit. That is a crumb from the Treasury's table and all crumbs from that table must at all times be welcomed. God knows there are not very many of them. I take the Minister's perfectly logical point about extra costs. The costs of disability are a good deal higher than they are often reckoned to be. But it raises the question: under what circumstances and to what extent should people he disentitled to benefits? It also raises the question whether there should be a lesser or no disentitlement.

In that context, I ask the Minister to keep an eye on a case in which Mr Justice Collins gave judgment today regarding deprivation of benefits for asylum seekers. I shall not ask her to comment in detail: I am in no position to do so myself. The judgment is only a few hours old and the transcript is not yet available. I understand that an issue in that case was at what level of destitution does disentitlement create inhuman or degrading treatment under Article 3 of the European Convention on Human Rights? It appears to be the prevailing level of opinion among lawyers that there are some levels of destitution above which it does and some below which it does not. Lawyers have yet to decide what these are.

I hope that the Department for Work and Pensions will follow the progress of that discussion with some care because if it does it may save itself some cost in litigation, which I am sure would be welcome to everyone concerned.

My honourable friend Mr Webb, when he discussed the regulations in another place, was concerned about the provision that the tax credit goes to the higher earner, because he thought that that created a perverse incentive for the wife to keep down her earnings so as to receive the tax credit. There may be a problem in that area. I appreciate that anomalies are likely to arise in all circumstances. I should like the Minister to be prepared to repeat the words of the late Lord Whitelaw: "I am investigating alternative anomalies".

There are also considerable problems concerning the transition. I respect the way in which those have been approached—on the whole, in a logical and humane way. Whether it will succeed in solving the problems is another matter. The operation that has been attempted is immensely complicated. Although I admire the good will with which most of it has been done and the care that has been put into it, I do not think that we have heard the last of it. I doubt whether the Minister does either.

Baroness Hollis of Heigham

My Lords, I am sure that the last point raised by the noble Earl is correct, if only because child support interfaces with a full array of benefit structures and tax credits. As those change, so must taxes. But behind that is an issue of simplicity. Sometimes we mistake that, because we are moving to a simpler system, the computer system must be simple. It is not. It is precisely because the parent with care will for the first time, if he or she is on benefit, be receiving up to £10 of maintenance paid that there must be an active interface with the IS/JSA system—which currently does not exist. That is one reason for the complexity of the IT system, despite the simplicity of the structure.

To illustrate that point, I was amusing myself this afternoon—your Lordships may think that I ought to have better things to do—by considering the current system of assessment. Currently, to assess an NRP's contribution, one must go through the following steps. First, one must work out family income, then the maintenance requirement, then net income, then exempt income, then assessable income, then protected income, then disposable income and, finally, the child support liability. Those are eight steps that, after the original calculation of income, involve about 39 lines of financial calculation.

Under the new system, one works out family income, net income—after deducting pensions and the like—and then calculates liability. Those are three steps and, after, one has assessed family income, eight lines of calculation. From eight steps to three; from 39 financial calculations down to eight. I rest my case. It is precisely that complexity that baffles both parents with care and NRPs about how the calculations have been arrived at and whether they are accurate and that. unfortunately, can produce errors in calculation, and so on.

I suggest to the noble Earl, Lord Russell, and the noble Lord, Lord Higgins, that under the new system it will be possible to work out everyone's calculations for child support in about 37 seconds flat, based on a ready reckoner table that will be easily available. It will be a simple and straightforward calculation.

Lord Higgins

My Lords, I am grateful to the noble Baroness. I understand her point. That would be true if we were proposing immediately to transfer from the old to the new system for all the people who are currently entangled in the scheme. But, as I understand it, that is not the case. It may be that the case of the first kind that she described will continue to have to be made for a long time. Perhaps I have misunderstood, but that appears to be the case.

Baroness Hollis of Heigham

Yes, my Lords, I think that there is a profound misunderstanding that also occurred during the debate in another place because of the use of the words "transitional" and "phasing" and uncertainty about their exact meaning.

On how long it will take, the reason that we have broken introduction into A-day, for new cases, and C-day, representing conversion for existing cases, is precisely so that we do not try to achieve a big bang. We know that if we try to do so, we can be pretty sure that the computer system will produce major inconvenience. We are trying to introduce a learning loop so that the new cases that trickle in—well, not so much trickle, but come in—month by month, will give us a learning period before the bulk migration of existing cases.

We are not precise about when that will be; we will go to C-day when we are confident that A-day is working well; but the original planning assumption was of a period of about a year. In about a year's time, if the IT system is working well, if the Secretary of State is persuaded that we do not need further delay, and so on, we should be ready to bring existing cases over to the new system, at which point there will be only one system.

However—and this is where phasing comes in—a minority of non-resident parents, especially those who have high housing costs that are being extracted from the formula, may experience significant alterations in their liability. Given that, we think that it would be unreasonable if we were suddenly to ask them to pay all that in one year, when their wage increases might be insufficient to cope with it.

So we are phasing in the move from a current liability to a new liability in increments of £2.50 for amounts of under £100 a week, £5 for those of 100 to £400 a week, and £10 for those of over £400 a week. Therefore, if a parent's liability is increasing, he can cope and plan for it. Equally, if the liability is decreasing so that the parent with care loses money, she can cope, too. In other words, we will move from A-day to C-day when we feel that the situation is ready, but our original planning assumption, which I mentioned when we debated the Bill, was around a year. Once we have done that, and everybody is in the new system, we will phase by steps the financial adjustment so that people are not suddenly hit with a very large sum with which they cannot cope. There was some confusion when the matter was discussed in another place. I am sorry about that.

I have already mentioned that a complex computer system operates behind a simple front-of-house system. The noble Lord, Lord Higgins, asked about the additional costs. They have increased from £427 million to £456 million—an increase of about 7 per cent. I do not think that the noble Lord will regard that as an unreasonable increase in cost, given the extra time.

The noble Lord, Lord Higgins, pressed me about variations, asking why we need to move from departures to variations. First, variations are much more narrowly focused than departures. One of the reasons for complexity now is that, in the effort to be fair under the previous government—I did not necessarily disagree at the time, so it is not a party political point—more and more considerations were brought into effect, which altered the maintenance liability. They were called departures, enabling the original assessment to be altered. We are stripping those out and introducing a simple system in which the only alterations will be child-focused. At present, for example, travel-to-work costs are taken into account, but the care of an elderly relative is not. Why, under the old system, do we prioritise some costs over others? Under the future scheme, we seek on average a lower liability, leaving more money in people's pockets to prioritise as they see fit. It will be up to them to weigh travel-to-work costs against the cost of care for an elderly person. We will not say that one cost matters and the other does not; nor will we recognise one in the formula and not the other.

The reason why we need different words is not just that they cover different aspects—I could enlarge on what they do precisely—but because the two schemes will run together during the interim year between A-day and C-day, with departures under the current system and variations under the new. We need to have different language or jargon, as the noble Lord said.

The noble Lord, Lord Higgins, is right that Regulation 2 merely clarifies beyond doubt where the deduction is made, because it could result in occasional irregularities. It is a minor clarification. I do not think that we should place much emphasis on that trivial point, but I will be happy to enlarge on it if the noble Lord wishes.

Lord Higgins

My Lords, as I understand it, that is not the Government's argument. They say that if you do not do it in the way proposed—namely, insist that the amount is knocked off earnings rather than from the top-up—there is somehow a disincentive to work.

Baroness Hollis of Heigham

My Lords, I shall enlarge on the point. The noble Lord has argued that working tax credit, and family credit before it, was regarded as a benefit as opposed to earnings. One of the propositions behind the new tax credits is that they are not vulnerable to sanctions or deductions. For example, leftover money from the Social Fund would not be deducted against them, but against earnings. We are trying to protect that distinction so that any liability for maintenance falls on earnings. We do not expect problems, but we are making it clear beyond doubt.

The noble Lord raised a major point. He asked how much we expect to obtain under the new system. At present, the cash case compliance on the existing system runs between 70 and 75 per cent. It is less for self-employed and slightly more for people in the disciplined services—soldiers, police, and so on. I am afraid that we cannot get any further under the existing system. We are achieving 52 to 54 per cent full compliance. The rest is half partial compliance and half no compliance. We cannot push the system any more. For example, taking housing costs into account, there are 49 different types of mortgages. Quite junior staff must be aware of every change in any mortgage to recalculate the appropriate maintenance to see whether it makes a difference to liability or whether it breaches the tolerance rules. The system is collapsing under its own complexity, and every time that we tried to make it fairer, we made it more complex.

I hope that, once the scheme is bedded in and has settled down—that may be five years on, when phasing is complete—we will get compliance of 85 per cent or more. We cannot get much beyond 90 per cent, simply because some NRPs have died, some have gone abroad, some are untraceable and some have changed identity. I hope that we will do better in getting money to poorer children.

The noble Lord asked how much had been written off. The amount of real maintenance that has been lost—as opposed to the punitive interim maintenance assessments, which were nominal—is about £1.5 billion, of which £0.5 billion ought to be collectable. The noble Lord also asked about the letters. I think that the delay may have been caused by delays in receiving Hansard or by the House of Commons' half-term break. I am not sure about that, but I will ensure that the letters that need to be written also come to the Library of this House and to Front-Bench spokesmen, whether or not they have already gone to the Commons. I apologise if that has given rise to any difficulties in preparing for tonight.

The noble Earl, Lord Russell, made a point about tailoring things to suit individuals. We have argued the point before. I prefer to have a lower assessment, giving people more money in their pocket and allowing them to make their own decisions and be treated as moral adults. I hope that those on the Liberal Benches will one day come to support us in that position.

The noble Earl also asked about sanctions. I take his point about Mr Justice Collins. Any legal decision that reflects on what counts as an adequate basic level of provision will be of interest to the department, and we will keep the position under review. The sanction regime affects few lone parents. More importantly, I hope that, with the maintenance disregard of up to £10 a week that lone parents will keep, such parents will, for the first time, have a real interest in co-operating with the agency. At the moment, for a lone parent, the CSA represents all hassle, no cash and debt collection that is not always efficient. In future, such parents will see up to £10 going to their child. The child will know that its father is investing in its financial life. For that money to flow regularly, the lone parent will need to maintain relations that are as cordial as possible—sometimes in difficult circumstances—with the nonresident parent. If that happens, the child will be the beneficiary, financial and emotional. We are using gentle encouragement to try to ensure that, although the parents may have broken up, the child will remain in touch with both parents.

The noble Earl, Lord Russell, asked about a point that was made in another place by his colleague Professor Webb. We are trying to prevent any manipulation of income within a household such that the moneys that should go to the first family are reduced because of virements or switches of tax credits within the family. I am sure that most people will not engage in such fraudulent behaviour, but, as the noble Lord, Lord Higgins, said, there is great bitterness left over from the CSA. CSA staff have been the lightning conductor between conflicting and, often, hostile versions of events.

I pay tribute to the staff. They have been extraordinarily professional and have made huge improvements in the past couple of years. MPs regularly tell me that the number of complaints has reduced. However, the system is imploding on itself. If we are to get money to children, strengthen child support and tackle child poverty, we must get the new system working as quickly and decently as we can. I hope that your Lordships will accept the regulations as part of that move.

On Question, Motion agreed to.