HL Deb 28 February 2005 vol 670 cc87-93

7.46 p.m.

Baroness Hollis of Heigham

rose to move, That the draft regulations laid before the House on 2 February be approved [8th Report from the Joint Committed].

The noble Baroness said: My Lords, we move from the sublime to something, but I am not quite sure what.

The regulations before us today amend several regulations that provide for the old and new child support schemes. We have provided a quasi-Keeling schedule. Some of the amendments are purely technical. If your Lordships will allow, I shall give a brief explanation of the more significant changes. I shall be as brief as I can.

Regulation 2 inserts a new Regulation 8A into the maintenance arrangements and jurisdiction regulations. In the new scheme, parents who have a court order made on or after 3 March 2003 can apply for a maintenance calculation once the order has been in force for a year. In those cases, maintenance liability starts two months and two days after the date of the application and the order then ceases. Where we do not calculate child support maintenance within that time, the new regulation provides that payments made under the order after liability starts are treated as payments of child support maintenance. In other words, basically, where we have failed to make a maintenance calculation in time, the court order payments can run on and be taken into account. That seems common sense, and that is what people plan.

Regulation 3 amends Regulation 23 of the maintenance procedure regulations. It applies where there is a maintenance assessment and one qualifying child leaves the household of the person with care but other qualifying children remain. It provides that the maintenance assessment is superseded with effect from the first day of the maintenance period in which the child left the household. It also ensures that in those cases, or where one of the children ceases to be a qualifying child—for example, all on his or her 19th birthday—the tolerance rule will not apply.

As your Lordships will know, the tolerance rule means that if any assessment results in a change of maintenance of less than £10, it is not acted on because it is regarded as relatively minor and below the threshold. However, where a child no longer qualifies, that disregard, so to speak, because of the tolerance rules, should not be applied and the maintenance would therefore be adjusted even if otherwise, the change would fall below the threshold.

Regulation 4 amends the maintenance assessments in special cases regulations. One amendment clarifies the policy intention. That is as the result of some question marks thrown over our proceedings by the child support commissioner. This is a difficult area. When determining the amount of tax-free earnings in calculating the income tax of a self-employed person, it should be based on the standard personal allowances generally applied to a person in the individual circumstances, rather than his individual tax code.

Further amendments take account of the Armed Forces compensation scheme and provision of financial support under the Adoption and Children Act 2002, generally maintaining parity with treatment under existing schemes. Again, there is no significant challenge under that Act.

Regulation 6 amends the maintenance calculations and special cases regulations. The amendments in Regulation 6(2) ensure that non-resident parents receiving payments under the Armed Forces compensation scheme will have flat-rate liability in the same way as those receiving payments under the war pensions scheme.

In the new scheme, special treatment applies to a non-resident parent who supports other non-qualifying children; for example, any who live abroad. The treatment produces a lower child support liability than otherwise would apply. Currently the provision applies only if the child maintenance is paid under a maintenance order, which covers orders made in Great Britain.

Regulation 6(4) extends that provision so that it applies also where the support is given either under the terms of an order made by a court outside Great Britain or under a legislative scheme of a jurisdiction outside the UK. Regulation 6(5) mirrors for the new scheme the amendments to regulation 4 relating to income tax and earnings from self-employment.

Regulation 7 amends the transitional regulations. Paragraph (3) amends regulation 27 of those. It clarifies how the rules on amounts to be paid are to be applied where a change is to be made during the phase-in period. That is where a non-resident parent who previously had a liability to more than one person with care now has a liability to only one.

Regulation 8, which applies to the new scheme, makes amendments to the variations regulations. A variation can be allowed where a non-resident parent has special expenses because of the costs of looking after a child with a long-term illness or disability. In considering an application, any financial assistance, including DLA paid to the non-resident parent to help with those costs, is taken into account. The amendment at 8(3) expands that provision to cover where those payments are made to anyone in the nonresident parent's household.

The next change has been made in response to a number of representations. That point was raised by Mr Webb, the honourable friend of the noble Lord, Lord Oakeshott, about what was seen as an unfair manipulation of the rules as they stand. That is possibly the most significant of all the regulations that we are talking about today.

The way in which some non-resident parents receive their income is reducing their liability for maintenance in the new scheme by an unacceptable degree. Regulation 8 inserts a new regulation, 19(1A), which extends the existing ground whereby a parent with care may seek a variation relating to income not taken into account. It will apply to cases where the non-resident parent has the ability to control the income he receives from a business or company. It covers cases where the Secretary of State is satisfied that the non-resident parent is receiving such income that would otherwise not count as income in maintenance calculations; for example, a company director who receives his income in dividends.

I have had representations from various members in the other place about the manipulation of income artificially to reduce the liability for maintenance. The amount of income received in that way will be added to the non-resident parent's net weekly income and used to calculate his or her liability.

Paragraph (5)(b) substitutes the existing threshold position. It limits the new variation to cases where the income that I have described is over £100 per week or an aggregate of over £100 where a combination of existing and new provisions applies.

Paragraph (5)(c) provides for a variation where that type of income is diverted to other persons or for other purposes; for example, invested in the company. It also removes the provision that allows a variation on the grounds of diversion of income to be given only where the diversion has taken place in order to reduce child support liability.

In conclusion, the regulations before us make amendments to ensure that new and old schemes operate as fairly and effectively as possible. Most of those regulations are in direct response to issues raised either by MPs or the Child Support Commissioner, suggesting that there was some ambiguity in our proceedings. They underpin our continuing commitment to making sure that child support produces the intentions of Parliament. I am satisfied that the regulations are compatible with the European Convention on Human Rights and I commend them to the House.

Moved, That the draft regulations laid before the House on 2 February be approved [8th Report from the Joint Committee].—(Baroness Hollis of Heigham.)

Lord Higgins

My Lords, this can best be described as a "fiddling while Rome burns" regulation. It is extraordinary that the Government should come forward with these proposals when we do not even know who is in charge of the Child Support Agency. On 17 November Mr Alan Johnson, the Secretary of State, announced to the Work and Pensions Select Committee, I should tell you that Doug has decided that now is the time to stand aside and to allow a new chief executive to tackle the challenges ahead".

Yet apparently as of 17 February he was still in place. It is all very well to describe people in charming and informal "Doug" terms, but what is happening with regard to the head of the Child Support Agency? We cannot judge whether the proposals in the regulations are going to do anything to reduce rather than increase the general confusion and chaos in the Child Support Agency.

If one looks at the latest figures, there is still confusion between the old and new schemes. We still do not have any clear indication from the Government when those on the old scheme are going to switch over to the new scheme. In all events, of the 478,000 applications for the new scheme since April 2003, only 61,000 non-resident parents have made the first payment; that is only 13 per cent.

Baroness Hollis of Heigham

My Lords, the noble Lord is looking at clearances not including closures. He must look at the total picture. A large proportion of parents, even when the parent with care has made an application for maintenance, go on then to reconcile and obviously no such payment of maintenance goes on to mature. He should not blame on the CSA something that in his private capacity I am sure he would welcome: reconciliation of parents with children to support.

Lord Higgins

My Lords, the noble Baroness has debated the CSA on many occasions. I admitted right at the beginning in 1997 or 1998 that the situation was difficult. That is a long time ago. I am happy to look at the matter in the broader picture, but the CSA's annual report for 2003–04 has an outstanding debt of £720 million, of which £140-odd million is from new scheme cases that date from March 2003. A further £947 million is classified as "uncollectable".

Apparently 25 per cent of single parents failed to receive a penny in child maintenance. That is an appalling situation. The Commons Work and Pensions Select Committee published its report recently. It says, Whether measured by official targets or any other criteria the CSA has failed; levels of complaint continue to increase, unrecoverable debts rise, the level of staff turnover is going up, the management information to monitor progress is not available and, it is clear that at present the two sectors of the public it is intended to serve treat it either with despair or contempt". That is an All-Party Committee of the House of Commons. We have this order before us, but we should have, in government time, a serious debate on the appalling situation that is recognised by the Select Committee.

I come again to the main point about the order. Is it going to add to the confusion or improve it? Looking at the length of the Explanatory Memorandum I am reminded of a remark by the late Barbara Castle shortly before she died, when she was having trouble with her eyesight. She said, "I asked my secretary to read out a clause and I replied, 'I don't understand a word of it; read out the Explanatory Memorandum'. My secretary said, 'That was the Explanatory Memorandum'.".

While the situation is collapsing the Government find it necessary to bring in further proposals. One does not know to what extent they improve the situation or make it worse. In all events it is clear that the situation is extremely bad. The Government should soon give us some idea when they think the switch from the old to the new scheme is coming in and what their contingency plan is, if after a reasonable further period of time the matter is not resolved, and we are in a difficult situation in knowing whether one should approve such an order.

8 p.m.

Lord Oakeshott of Seagrove Bay

My Lords, on behalf of my honourable friend the Member for Northavon, perhaps I may thank the noble Baroness for the way in which she explained the specific concerns on that part of the order. In general, we on these Benches have serious concerns about the general operation of the Child Support Agency. Of course, the noble Baroness will be only too aware of that as she has been the responsible Minister since 1997. But this is not the time or the place to go into detail. There will be other opportunities that we will pursue.

As regards this order, perhaps I may ask the idiot question. As a result of these regulations and the switch to the new system, will children or resident parents be worse off? If so, in which cases and why?

Baroness Hollis of Heigham

My Lords, like the noble Lord, Lord Oakeshott, at this time of night, I am reluctant to get into too wide a debate on the CSA. I have two broad points to make before trying to deal with specific issues in response to the noble Lord, Lord Higgins.

There are two major problems, a fact that we should all respect. First, we have the CSA because too many non-resident parents, who are mostly fathers but occasionally are mothers—which is not a gender point, although fathers make up 92 per cent of non-resident parents—fail voluntarily to support their children. If they supported their children, the CSA could act like a building society. It might not always be as efficient, but it could act like one.

The CSA exists, with the difficulties that it has, because the lone parent with care is unable to extract money from the non-resident parent for the support of their mutual children when their relationship breaks up. Usually, the situation has resulted in acrimony, hostility and bitterness, and sometimes violence and lying. Our staff, who have done an heroic job and to whom I want to pay tribute, are in the middle of two warring parties, one of whom—the non-resident parent (NRP)—seeks all of the time to walk away from his responsibilities as a father and to dump them on other fathers, called taxpayers. If they were willing to pay and accepted their responsibilities, the core of our problem would not arise, including debt arrears, compliance and enforcement.

However, there is a second problem, which your Lordships are right to criticise. We introduced a new computer system—a new formula—after extensive consultation, which had very widespread support. It was very simple, using the 15, 20, 25 per cent rule. But to do so we had to develop a new computer system, which has not produced the successful and speedy development of applications that it should.

Therefore, in direct response to the question asked by the noble Lord, Lord Higgins, about when we will move the old cases to the new system, we will do that when we are confident that the new computer is robust enough. Perhaps we may remind ourselves that the old system, with all its faults, is working fairly decently: between 75 and 80 per cent of cash and compliance orders are made. Money continues to flow. Were we to bring those cases, parents and children, to the new system and—as with other major computer systems in both the public and the private sector—the system crashed, the money would stop. At the moment, money flows.

I would not be party to bringing people across from the old system to the new system unless I was completely confident that the new system would be able properly to cope. So I cannot give the noble Lord the answer. I wish that I could. If I knew it, I would give it to him. I would emphasise that in the past six months to a year or so, the work with EDS has improved very substantially. It has given us far more in the resources of senior management and has been working far more with us to resolve our problems. We are making steady improvements on the new system.

Of those people on the new system, nearly all private cases receive their money as efficiently as under the old system. It is lone parents on benefit who are not. They are not getting the £10 premium, which I very much regret. But they are getting their full benefits. Therefore, they are in the same position as if they had come into the old system from the beginning and had not come in under the new system. While, certainly, the computer has failed to be sufficiently robust yet to bring the new cases over, none the less, people under the old system are continuing to get their money. I do not think that anyone would wish to jeopardise that.

The noble Lord, Lord Higgins, asked about the chief executive, Doug Smith, who has been a civil servant for more than 40 years. In the normal course, he would have moved on or stood down from his existing post many months back, given that most senior posts revolve after three to four years. He has always made it clear that after three to four years in the post, with more than 40 years in the Civil Service, he would expect to retire.

Currently, we are recruiting a replacement. It would be absurd for Doug Smith to go until there is a replacement in place. We are looking at a wide range of people inside and outside government service, which takes time, notice and so forth. But I hope to report that we have someone in post by early spring. While that new replacement is being appointed Doug Smith remains in post and does, I know, a first-rate job.

But the core of the problem remains. If people refuse to pay and there is not an effective computer system that allows you to expedite the payment system, the enforcement and collection, we are obviously dealing with a very difficult situation.

The noble Lord, Lord Oakeshott, asked why we are making these amendments. Most of these regulations are technical, but where they are not we are responding to concerns raised by Members of the other House and, in some cases, the commissioners, where some non-resident parents have avoided payment by manipulating their income. It is right to correct that situation.

Finally, the noble Lord, Lord Oakeshott, asked which children will gain and which will lose. That varies by amendment. On looking at manipulation of income, which I was concerned about, children should gain because there should be a fairer assessment of the income in the NRP's household. Where, however, for example, we are dealing with children in the second household, some of the disability considerations will come into play, which will handle the situation more fairly.

As regards the tolerance rules, if a child is 18 years old, he or she is not due to be supported anyway and the tolerance rules do not come into play. For the most part, the thrust of the regulations is to ensure that there should be no manipulation or avoidance by the NRP in the support that he should give his children. In that sense, so far as the regulations are effectively applied, children should be the gainers within a context of greater fairness.

With that explanation, I hope that your Lordships will be able to accept these regulations.

On Question, Motion agreed to.