Examination of witnesses (Questions 80 - 88)
WEDNESDAY 22 JULY 1998
BARONESS HOLLIS
OF HEIGHAM,
MR MIKE
STREET and MRS
FAITH BOARDMAN
Mr Pond
80. There is of course another approach
to that uncollected debt and that is to say, if it is uncollectable,
perhaps public resources are being wasted by chasing it.
(Mrs Boardman) I think that is a very genuine
issue.
81. One would not want to see those non-resident
parents who simply have refused to pay the proper amounts getting
away with it by having it written off. You have said many of the
problems arise from arrears and many of my constituents are frankly
unable to get out from under the debt because of the initial arrears.
It is very arbitrary as to when they are first contacted by the
CSA. Is there not a case for some sort of partial amnesty for
those sorts of cases in order to get the debt off your books and
to start with a clean slate with the new system?
(Baroness Hollis) The question is who is the money
owed to. If that money is owed to the parent with care, I am not
at all sure that we have the moral authority, let alone anything
else, to say, "We are wiping out money we should have paid
to her". I think it is a different situation perhaps if it
is owed to the taxpayers and there is a degree of guilt, if you
like, by the Agency in the fact that we were incompetent, we made
mistakes or whatever. We are very clear that there is going to
be no general amnesty for arrears but at the moment the Agency
does have the practice that, where the arrears were largely due
to the inability of the CSA to process with due speed and the
money is owed to the Treasury rather than to the parent with care
directly, we seek to collect six months' worth of the arrears
and not more than that provided he then goes on to pay regularly.
Whether that is a system we should, could and ought to put into
the new rate is one of the issues we are going to be considering
in the course of the consultation period.
Chairman
82. I have two outstanding areas. I would
like to go all the way back to the assessment formula. Is there
a possibility of opening up an argument about gross versus net
in terms of the assessable figure which is used? I do not know
what justification there was or if there were crucially important
reasons for going for net rather than gross, but is it possible
to continue a discussion and dialogue on that question in the
course of the consultation?
(Baroness Hollis) It could be. We just thought
that most people tend to talk about their take home pay rather
than any other figure. There certainly are questions and the Green
Paper makes it very clear that there are questions as to what
should count as take home pay; issues like overtime which may
be erratic and fluctuate; issues of commission, peaked earnings
just before a Christmas period, if you have salesmen's commission,
issues even like pensions. To say that they are second order issues
is to suggest that they are trivial. They are not, but there are
a lot of issues that we are seeking advice on in the process of
consultation. I would guess it is open to us to go back to considering
gross but in practice most people talk about take home pay. The
formula is based on that. One could go for gross pay and then
slice from that and obviously if one was doing it via the Inland
Revenue that would be perhaps a more appropriate device, but that
is not quite where we are.
Mr Roy
83. Would it not be possible to take the
figure from the previous year's earnings and then everyone would
know what they had to pay for that full year?
(Baroness Hollis) What then happens if, as we
know, particularly in some construction trades, he moves in the
space of six months from being employed to being self-employed
to being unemployed to being self-employed? Are we saying he has
to pay last year's maintenance figure despite what his current
earnings and income are? I think it is difficult.
Chairman
84. Finally, you have very helpfully set
out your hoped for timetable. Of course, it is understandable
that these things slip. Parliamentary draughtsmen are a law unto
themselves as we all know. Looking at the logistics of the Committee
doing what we hope will be a useful preliminary prelegislative
report, we would really need to have sight of the draft Bill and
extensive notes on clauses by Easter, if that is at all achievable.
I know that you will use your best endeavours and I know that
these delays will not be something that you would seek but if
you could bear that in mind, that would certainly be of considerable
assistance.
(Baroness Hollis) Certainly. We will do our best.
I fear the decision is not for us to make.
Mr Wicks
85. Given this balance whereby you are telling
us that 90 per cent of the time at the moment is spent on assessment
and only ten per cent on enforcement and you want to shift it
in the other direction, let me just play devil's advocate. Given
that you are not very good at enforcement and collection, why
do we automatically assume that, in the future, it should be the
CSA undertaking that role when, among other options to be considered,
we have a body called the Inland Revenue which would know about
net pay and seem to be better than the CSA at collecting money?
It happens in Australia. The Treasury will resist it, as they
do many things, but why not go for it anyway.
(Baroness Hollis) Two points. First, about the
Inland Revenue and, secondly, about the future agency, under whatever
name it is. At the moment, the Inland Revenue does not collect
the information any assessment would need to have. The Inland
Revenue does not collect information about children. Therefore,
if the Inland Revenue were to assess and collect, they would have
to collect information that they currently do not collect.
Mr Wicks: Obviously it would need
some changes. You would need some assessment unit perhaps attached
to the Inland Revenue but we are entering a new ball game where,
among other things, the working family tax credit is coming in,
which is about children.
Ms Hewitt: And taxing of child benefit.
Mr Wicks
86. I would have thought that, within Whitehall,
this should have been seriously considered.
(Baroness Hollis) It has been and we rejected
it because the Inland Revenue does not collect this information,
firstly. Secondly, the Inland Revenue works on an end of year
adjustment to what you should pay and that is the basis for your
coding for the forthcoming year. Fine, if you are in steady employment,
but the cases that we have most difficulty with are people who
are in unsteady, irregular or changing employment, some people
who will deliberately change employers in order to conceal their
addresses. How then do we get money to the parents? It is all
right for the Treasury. They can wait 12 months for their money
to come, but if we are trying to get a regular, weekly, fortnightly
or monthly flow of money to the parent with care based on his
current ability to pay you cannot do that 12 months in arrears.
There are two problems with the Inland Revenue. They currently
do not collect the information, though I take yours and Patricia's
point that they may in future and that would obviously change
the situation but, secondly, the whole process of doing it in
arrears and of making adjustments in the lump sum cannot make
sense to the parent with care who needs the money on a regular
basis, reflecting his current contribution.
87. You say it has been considered. It would
be interesting to see the working documents on it, but I feel
that, in an era where we are going to introduce working family
tax credit and child care tax credits—I do not know if we
are going to bolt on to the Inland Revenue bits about working
families and child care, but given this as well with the CSA,
would it not have been worthwhile to have thought through a process
where we could get the Inland Revenue to become more sensitive
about families with children, given the reform process, and to
think rigorously about this as an option?
(Baroness Hollis) We did. We had discussions with
the Treasury on precisely this and the team of officials that
I chaired included Treasury representatives. It has been explored
at considerable length, but the obstacles, I repeat, are not just
what the Inland Revenue currently fails to know about which may
change. The problem is also that the Treasury can afford to wait
for the adjustment until a year afterwards when they suggest what
the total income and total PAYE has been and so on. A parent with
care cannot. They have to know that they are getting that money
weekly, fortnightly or monthly. If his circumstances change but
that is not caught up with by the Inland Revenue until a year
later, either he will be the loser or she will be the loser. That
is on the Inland Revenue side but on the positive side—and
this goes back to a point that Faith made—I have confidence
in believing that the new, revamped organisation will be able
to ensure that the money flows. With the figures that we are talking
about, 66 per cent cash compliance, the scheme becomes cost neutral
at 75. We are aiming to 80 to 85 or more than that because instead
of taking six months to make an assessment, you can turn it around
in four to six weeks and you can do so because no longer does
the non-resident parent control the 100 pieces of information
that go into making an assessment, instead you only need two pieces
of information of which he will only control one, which is his
earnings—and you can get that from the employer—and
the other, which is the number of children, you can get from the
lone parent. If he fails to tell you about the second child, he
pays more. He no longer controls that information. If we turn
it around in four to six weeks, we can make that initial assessment
be the active assessment and we can get that money flowing. Not
only do we not think that the Inland Revenue in the current situation
is the best organisation to do it; we actually believe that, under
our new, proposed system and the new rate, the new Agency will
be an effective ensurer of money going to the children. After
all, it is the children who need it.
Mr Wicks: We wish you well.
Chairman
88. Indeed we do. Thank you very much. You
have given us a lot to think about. Mrs Boardman, the last time
I said this on the floor of the House, I got about 50 letters
but can I ask you specifically to thank the staff who work in
the Agency because I know they have an impossible task. I know
that sometimes the people who are using the system feel that they
do not get the service levels that they deserve and maybe that
is true. We have a lot of work to do. You have said so this morning,
but they do an important job in difficult circumstances and we,
in this House, do not say thanks often enough. Would you find
some way of reporting that back, at the risk of me getting another
50 letters saying that none of them deserves to get paid at the
end of anything? I do not agree with that but if you could do
that I think I would be grateful.
(Mrs Boardman) I will do that with great pleasure
and I know that they will be grateful for it. They do work extremely
hard. Many of them are very committed to the basic principles
of what they are trying to do and often feel that they are struggling
against a system which they did not invent but which they are
trying their best to administer. I am very grateful for that.
Chairman: Not at all. Thank you three,
and particularly the Minister, for coming. It has been a useful
session and we look forward to continuing the dialogue.
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