Select Committee on Social Security Minutes of Evidence

Examination of Witnesses (Questions 240 - 259)




  240. Welcome to Peter Watson-Lee and Simret Parmar from the Law Society. We are delighted you are able to join us. I am sorry you did not have more notice but we have managed to get your submission in front of the Committee. You are very welcome and we are very pleased to have you this morning to add to the work of the Committee on this inquiry. Do you have anything you would like to say by way of an opening statement in terms of your perspective of the White Paper proposals?

  (Mr Watson-Lee) I do apologise, we have had slightly late notice and accordingly this submission is very brief. We had our meeting scheduled for this morning to discuss it and put forward proposals, so that may well come. We can obviously sympathise with and understand the wish for a more simple and understandable system but we do have a grave concern about the rigid formula and what has been called rough justice. We do see that there may be many losers—mothers whose income is going to go down; a situation where the net income of the father is a fiction compared with what he really has; fathers who find suddenly their rent is not taken into account and the like. I fear the high explosion you mentioned earlier may still be there and may still come out. I would like to concentrate on what my colleague before me concentrated on, which is the relationship between courts and the CSA. We all recognise this country has a very comprehensive county court system across the country with district judges who are respected and very knowledgeable and experienced and who are dealing day-to-day, as we talk, with family matters, with maintenance matters and with all that that involves, and that exists and it has a great support system, the court buildings are all there and the infrastructure is there. I do recognise, and it came out in the question from the last speaker, there are two groups of people, two groups of parents, who are going through separation. There is the group who are mainly married and they tend to have other rights which need to be sorted out—spousal maintenance, certainly if they are married with some assets they have to sort things out—and they will often be going through the court system. Ninety-six per cent of those cases are settled without actually appearing before a court, many of them are settled by negotiations by solicitors and mediators, but they will be going through that system whereby they are being looked at and the whole cocktail of their finances are being looked at and studied and considered. Then there is the second group, which is those, mainly co-habitees, who have not got other legal rights, or maybe married people with very little income, and one accepts that is the group which was badly served by the previous court system because nobody was taking their cases to court, it was left to `Liable Relative' section of the DSS which was, sadly, under-funded with few resources and few powers, and one accepts that failed and therefore was why the CSA came about. It is worth for a second just looking at how the CSA has worked, because when it came in the CSA was meant to deal with all cases including that first group, the group of people who have been dealt with by the courts, but it never has taken that group on because when it first started the burden of work was such it just never took it on. We then had the great advantage of one of the shortest orders I have ever seen—two lines—the Child Maintenance (Written Agreement) Order 1993 which said that if the parents do agree matters then the court can still deal with them. That has therefore managed to keep out from the CSA the vast majority of private cases, and we can see from the statistics that only 8 per cent of CSA work is private cases, all the rest is benefit work. Because so many cases can be settled by negotiation, it has enabled family law solicitors to keep them out of the CSA, enabled them to be settled hopefully fairly and reasonably, sometimes including trade-offs between different parts of maintenance. We are very pleased to see that this to continue. I would just say about that though that it does seem to discriminate in favour of the unco-operative father, because if the unco-operative father thinks that the court can only look at child maintenance if he agrees, he is not going to agree, it rewards the unco-operative father. Certainly it will reward the unco-operative mother as well if she knows there is no upper limit and thinks if she does not agree she is going to get a larger percentage than by agreement. We should not be rewarding the unco-operative person. What we are saying is this, if the court is seized of the matter and if the case is going before the court and the judge is looking at all income and outgoings and assessing what the wife and family need to fund the house, if they are looking at spousal maintenance, let the judge also make an order for child maintenance, do not distinguish the two. I have had many cases where you end up with the whole hearing before the judge, you deal with spousal maintenance and everything, and then the CSA six months later have to go through the whole process again. It is a total waste of time. The second aspect of that matter which concerns us greatly is almost the very last paragraph in here, that even once the court has worked out an agreement, or the parties have worked out their own agreement, it is suggested that after 12 months one or other party can go back and say, "Now I am going to the CSA". Again, that is going to drive a coach and horses through fair settlements because, obviously, if the maintenance is higher than the CSA ordered, the father, when one year is up, is going to go straight back and say, "I am going back to the CSA." There may be many cases where a father should be paying more than the CSA says and, again, there will be cases where there have been trade-offs and maybe it is the father who has got the children and the mother is paid a lesser sum so she does not get maintenance, and within a year the father will be going back saying, "Tear up that agreement, I am going to the CSA." So we are saying, please do not cause that, please remove that clause which says having gone through all that within a year they can go back. If it is with the court, let it stay with the court. The other aspect is more far-reaching and we go a step further than our colleague did before. We do not see this necessarily as a simple formula. You only have to look at the White Paper's appendix 2, how you define income, the complications there are enormous. What is net income? You do not take into account investment income or where a company director decides to take dividends rather than salary. What about overtime payments? You might take them into account but you might not. What about commission payments? What about bonus payments? What about share schemes? What about all the perks you get? What about if you have accommodation provided and those who do not? As a solicitor acting in this work I know the problems. If you have the figures before you, you can usually calculate what the result should be, it is getting those figures from the reluctant husbands which is the problem. We think there are many problems with this. We agree that the exceptions are not wide enough, there should be many more exceptions, but even with those exceptions there is major scope for argument. The one exception we are very pleased to see is the exception about taking account of the payment of the mortgage. We are concerned that it is only if all the equity is transferred, we cannot see necessarily why that should be the case and we would ask there be a delay allowed before the house is transferred, so if it is taken into account there is a period to enable that to be done and I can elaborate on that in questions if need be. What we are talking about is that there are many points where there need to be reviews and appeals. We are saying, let the courts deal with this. We have the structure there, we have an experienced bench of district judges who are used to dealing with these things. If it goes to the court, there is great benefit in that there is legal aid available. These are decisions about child maintenance which can blight the lives of people for many years if they are dealt with unfairly. It is right that people in dealing with such fundamental and important issues which will impact on their family should have the availability of legal advice and legal aid. One may say that we are concerned about the number of cases over-running the courts. The courts have ways of dealing with this, they are able to make cost orders. One of the problems of the CSA is that there is nothing to stop you making a review. Why not do so? It is not costing you anything. Judges are well-used to being able to weed out vexatious and ridiculous time-wasting applications. We say, let the courts be recognised, they are dealing with such matters, let them deal with the appeals, do not set up yet another system of tribunals. We have the system, use that and once the courts are seized of the matter, let them deal with it.

Mr Pond

  241. Many of the points you make are well taken I think, but let me put a point to you which a cynical observer may make and give you an opportunity to respond to it. You have said that the whole principle of rough justice could lead to trouble and indeed two previous sets of witnesses who were also lawyers of different types made the same point. To some extent you may say that I have to be careful what I say because the majority of people sitting on this Committee in front of you are lawyers—I have worked it out at 60 per cent—and a cynic might say they would say, wouldn't they, that a formula is much less acceptable because of the rough justice element than giving a greater role to the courts and therefore a greater role to the legal profession. So, first of all, I want to give you an opportunity to say, "No, that is not the case, it is all based on our experience", but I would also like you to say why that experience is so different from the experience of the great majority of people who have responded in the consultation process and who, as Joan Humble said a few moments ago, believe the rough justice approach of the formula is the way they would like to go?
  (Mr Watson-Lee) Maybe it is part of my trade but I deal with individuals on a day-to-day basis, I have individual clients and I get deeply involved in individual cases and I see how that impacts on individual lives. I have to say that one of the phrases in this document which turned me cold was the comment, "Only 6,000 people are going to be concerned about this, therefore it is not worth doing it." That terrifies me. If there is going to be a backlash against this Act, it is going to be disgruntled individuals who are going to cause it, and I am concerned about individuals, I am concerned about what is fair. The impact of child maintenance is going to affect the parents for many years, it will have a fundamental effect on the child. If I was looking for money, I would not be in family law, I would be dealing with personal injury work or something of that nature.

Mr Dismore

  242. Not these days!
  (Mr Watson-Lee) Lawyers do not get rich in child support work, the only thing that lawyers do get rich in is when law is bad law and there is work needed to sort it out. Good law is what we want and if it works properly nobody is going to make a fortune out of it.

Mr Pond

  243. My second point was your definition of income. You raise the important point that investment income is not considered as part of net income, and that is something we would want to look at, but your point I think was that it becomes very complex because of the need to define income in a particular way. Is it not the case that tax law is almost wholly based on the definition of income? The Inland Revenue does not have great difficulty at the moment in determining what is income for tax purposes and what is not, so why should it be different for the CSA?
  (Mr Watson-Lee) I can see that has to be the definition for the CSA but what I am saying is that people can massage that. The courts have a lovely phrase, they look at earning capacity, so a judge is quite entitled to say to a builder, "You have earned £30,000 in the last four years, last year you earned £5,000 and now you are saying that is your income, but we will look at what your earning capacity is." Judges are able to do that and income is not the only thing. The man who is extremely wealthy and hoards all his wealth in gold which is not income producing can come before the CSA and say, "I have nothing, I have no income", whilst a judge can say, "Hold on, there is great wealth there, you can sell some of it to provide for your children."

Mr Leigh

  244. I liked your pious statement that lawyers only benefit from bad laws. All I can say is that all laws must, by definition, be bad laws. This is all very well and I instinctively agree with you but I think you have got some problems here because people will simply say that solicitors have been stung by legal aid and you are looking for a whole new avenue of work here.
  (Mr Watson-Lee) This is our great frustration because we said this to some extent when the first CSA came out and we got exactly the same response, you are looking after yourselves. It is our problem, every time we say this we have the same refrain. It is not the case, we want a system which works. I deal daily with these cases and I am not going to lose money out of this, I am still extremely busy since the CSA came in, what I am concerned about is getting reasonable and fair settlements and doing justice to my clients.

  245. Our last witness said that courts will award 15 per cent for one child, 20 per cent for two, 25 per cent for three, are they doing that at the moment? What happens at the moment?
  (Mr Watson-Lee) At the moment you appear before a district judge and the first thing he will say on any of these issues is, "Where is your child support maintenance calculation?" That is the starting point he will work on. I suspect a vast amount of the orders will be on this CSA level but there are good reasons in many cases to depart from it—the wealthy husband with low income but other capital who might pay more; the very wealthy father whose teenage children want to live with the father because he has got the computers in the bedrooms and the wife is struggling to set herself up in low pay work because she has never worked before, she is in the hotel trade or something like that, and you will say, "Let's have a trade-off, I will not claim child maintenance from you if you do not claim any maintenance from me." That is a fair trade-off and the wife will accept it to help in setting herself up. But under this, firstly, the wife is never going to do that deal and, secondly, the father will say, "I will go to the CSA after all."

  246. I think these 6,000 parents whom you just mentioned, whom Nicholas Mostyn also referred to, is an interesting point. Presumably that is an issue where you could say they should go to the courts?
  (Mr Watson-Lee) Yes. One of the exceptions could be if the parent with care does have a substantial income. I quite liked Mr Mostyn's view of it, that maybe we should have a cut-off point which is above the average wage when it should be looked at and that was an exception which enabled you to go to court and have a look at it. The exceptions need to be tightly controlled, the judges are not going to want to deal with vexatious matters, it is going to have to be a significant change. Yes, I can see that if the parent with care has considerable wealth, for example, the father may have care, and that must be taken into account.

  247. Fair enough, courts taking on more and if there is no legal aid involved that is great because there is no public cost at all, but in the vast majority of cases legal aid is going to be involved and I am not sure where the saving will be. It is far more expensive to deal with these matters through legal aid, through lawyers, than through a formula devised by the CSA, is it not?
  (Mr Watson-Lee) The courts have brought in many new systems, we are bringing in a new ancillary relief pilot system, and the courts are more efficient. I am saying that legal aid should be available. The legal aid test has to be, "Would a person of modest means litigate this case?" So a lot of cases would be refused legal aid but there would be valid cases where the person is paid or paying an unfair amount of maintenance and I think legal aid should be available to enable them to have a court look at it. It will get dealt with once and will probably be in place for the next 15 years. If he accepts it and it is fair, and he pays it because of that, because he feels he has been given a fair hearing, there will still be great gains.

  248. Fair enough but there is a trade-off, is there not? It will cost more. You accept that?
  (Mr Watson-Lee) There will be trade-offs, yes.

Mr Dismore

  249. Can I be clear what you are saying? I should declare I am a member of the Law Society. The differences between you and what James Pirrie was saying earlier are that James was saying, as I understood it, that cases involving taxpayers stay within the CSA system, cases without taxpayers do not. Is that your position? Are you saying that the courts should administer all child maintenance arrangements?
  (Mr Watson-Lee) No, I suppose we are slightly different on that. I am saying that the CSA will be there to make assessments and can do it in all cases. If the case comes before the court, because it is going to come before the court anyway on spousal maintenance, on the capital in the house, the court can be seized of the matter and it can deal with the matter and therefore a court order would override the CSA because it has been looked at fully. The other difference, I think, is that we are saying—and we both accept there is going to be a lot of reviews and appeals—they should be handled by the courts and not by tribunals.

  250. I think I understand where you are coming from. Can I take up the point Edward was making? You have been talking about district judges, why would it not be appropriate to do it through small claims arbitrations without involving lawyers and legal aid at all?
  (Mr Watson-Lee) That would be still going through the district judges. It depends on the sums involved, to some extent. It may be the limits which apply to small claims apply. Under the new small claims procedures if it is less than £5,000 you will not get legal aid because you do not need a lawyer, but in some of these cases, if you are looking at maintenance over a period of years, you are talking about vastly more than £5,000. These are complex issues and I think some members of the public will find them difficult to deal with and will need advice.

  251. Some are complex and some are not. The figure involved is not necessarily a determination of the complexity of the case.
  (Mr Watson-Lee) That decision will rest with the Legal Aid Board who are at the moment tightening up the various tests, who will say, "This one does need legal aid, this one does not."

  252. But you are setting up a whole new bureaucracy through legal aid exercising discretion, saying some should have legal aid or not.
  (Mr Watson-Lee) But it is there already.

  253. Exactly, but you are putting more work into the system.
  (Mr Watson-Lee) Yes.

  254. What would be the advantage of that compared to the social security tribunals dealing with these cases because they will continue to gain experience in determining these issues?
  (Mr Watson-Lee) Because we are looking at one stop really. The structure is there, the courts are there, the judges are there, they will be dealing with a lot of child maintenance matters, you will be getting two sets of rules and two lots of decisions because we will have two different tribunals dealing with similar matters.

  255. How does what you are proposing protect the interests of the taxpayer in terms of income support cases or whatever?
  (Mr Watson-Lee) Because the assessment will be made by the CSA in the initial case before it is reviewed. I accept there is going to be greater expense in the cases going through courts; whether the existing court structure is more expensive than setting up a new tribunal structure, I do not know, it may well not be.

  256. But the interests of taxpayers are not just necessarily in terms of administration, but in making sure the amount which is recovered in terms of maintenance is fair to taxpayers as well as to the parties?
  (Mr Watson-Lee) Yes. The vast number of decisions will still be made by the CSA, only those which are not before the CSA now will not be made by them. The CSA will still be there dealing with the vast majority of matters.

  257. You involve the courts in determining issues at the discretion level or appeal level, so where would the taxpayers' interests be protected in that procedure?
  (Mr Watson-Lee) I am talking about the courts making the decision, the courts will act fairly in what is right.

  258. As between the parties. Is the taxpayer seen as a party in those proceedings?
  (Mr Watson-Lee) It can be referred back to the CSA to make sure it is paid and enforcement and collection is dealt with by the CSA.

  259. On the issue of enforcement, you have taken exception to the suggestion of confiscating driving licences and passports. Would you like to expand on your objections to that?
  (Mr Watson-Lee) We are concerned generally about civil liberties. We do not know what effect that has, whom it will affect. It is not something which is tested and tried. I have to say in fact when we discussed this earlier there were divided views on it, and I heard Mr Mostyn this morning. It is a concern of another area, from the civil liberties point of view, that there has been very little examination of the implications of further criminal sanctions and the effect of them.

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