Select Committee on Social Security Minutes of Evidence

Examination of witnesses (Questions 468 - 479)




  468. Can I welcome again Baroness Hollis and Faith Boardman and Mike Street for our second session. We are particularly grateful that you have agreed to appear. We have not tried this before, this is the first time that we have done this all in one piece. It has been particularly useful because as the evidence we have had has unfolded we have been able to tuck away ideas for clarification knowing that you were coming. It really does make the whole process a lot more meaningful. I know that there is never enough time in ministerial diaries so we are indebted to you for that. Can I just perhaps set the scene a bit from the Committee's point of view. Certainly when I first read the White Paper in its entirety and studied the series of events from the Green Paper I think I put it down thinking "that is most of it sorted" but I have to say over the last couple of days I am beginning to ask myself "and yet is it sorted?" The first question I really want to put to you is, having listened to the very good and powerful evidence we have had, are you really satisfied that you have taken this opportunity, this last chance? There was 1991 legislation, 1995 legislation, this is going to be the last piece of legislation that we are going to have to allow Parliament to really fix some of the things that everybody agrees need to be attended to. Are you really confident that you have taken the opportunity to stand back and look at the other options? It seems to me that the White Paper is very plausible, well argued, there are some very good things in it that starts from where we are and tries incrementally to make progress and you may say that is all you were attempting to do. Did you really take the opportunity to talk to the Lord Chancellor's Department, to look at the possibilities of using the court system? Again I confess to you that it was a bit disconcerting to have the Liberal Democrat spokesman quoted back at me approvingly, this is not something that happens to me very often. Personally I have been very sceptical about the role of the courts but we have had some quite powerful evidence that perhaps the courts do have a role in some aspects. I wonder are you yourself satisfied that the force of momentum just to start from where we are and incrementally improve it to try to address some of the short-term problems has really given you a chance to take a step back and look at the wider picture in the longer term?
  (Baroness Hollis of Heigham) I think that is entirely fair. When I was asked to do this job some two years ago I actually came with an open mind. I was perfectly willing to go back to the courts if that seemed the right way forward. I had an instinctive preference for incremental change because I knew the costs of major change. What I first did was actually read some of the research evidence that had informed the previous Government's thinking on which they had set up the Agency. That persuaded me that to go back to the courts was not viable, it was that evidence. For example, the evidence that was in the Government's original evidence showed that on the same income of £140 a week a quarter of non-resident parents with three children were assessed for £15, a quarter were assessed for £40. Identical income, identical circumstances and the lottery of which judge, which lawyer, what day, etc., etc. Firstly, the courts seemed to me to be a lottery and this seemed to come up in the previous research. Secondly, it did not collect the money. From only 22 per cent of those on income support were they collecting any money, they were only collecting £126 million in 1988 compared with what we are doing now. Thirdly, and I think this is a point Andrew Dismore made when cross-examining Nicholas Mostyn, if that is the right word, if one were to go back to the courts now something like 30 per cent of all lone parents have come out of divorce; and most lone parents are single never married or single ex-cohabitation. Of those who have gone through a divorce only a proportion have significant property. To extend the court system across the board to all those would mean something like one million cases extra coming into the courts. There are usually something like two to three changes in circumstance in the first year, so you would be asking the courts to cope with something like three million visits. At the moment ten per cent of all non-resident fathers seek a change of circumstance every month although I have to say 65 to 70 per cent of those still fail to pay. Given that, the fact that it was a lottery, the fact that it did not collect money and the fact that it would put huge pressure on the system, that meant that I agreed with the position of the previous Government. If I can just take you to how we got there. We then spent the first year when we came into Government through to the publication of the Green Paper having an inter-departmental committee on which sat Lord Chancellor's Department, Treasury, Inland Revenue, the Home Office I believe and certainly senior staff of the DSS, which I chaired. We must have had something like three to five feet of research papers on a regular basis, on a fortnightly or monthly basis, on which we explored issue after issue after issue. Then by about December/January it was clear that we were beginning to feel comfortable. We had looked at the court system and rejected it. We had looked at the way in which the Inland Revenue handle it and rejected that. We looked at the Australian system, the New Zealand system, the Canada system, the Wisconsin system, we went through that. We had the advantage of having experience of annual conferences with the chief executives of all those agencies on a regular basis. We fed in all of the research that we read, some of which is in the papers.[9] We therefore had a shape of where we thought we should go by about January 1998. I then started having informal discussions with some of the organisations like NACAB and NACOPF and so on to see whether they felt that we were on the right tracks. The result of that was we then published the Green Paper some 12 months ago. Following the Green Paper we then had an extensive consultation exercise, we had 1,500 replies, and I had the benefit of a lot of help from MPs, many of whom sent me very detailed reports from their constituency cases when they sent the Green Paper out, had done a summary of replies and so on. In the meanwhile I was talking to colleagues in Lord Chancellor's Department, including my political colleagues as well as at official level, colleagues in the Inland Revenue as well as at official level, colleagues in the Treasury as well as at official level and, of course, the Welfare Reform Committee. Following all of that we then went for publication of the White Paper. So we spent the first year building up a fairly deep research background, both modelling and testing foreign examples, all current research. We then published the Green Paper which we then put out to consultation, 1,500 people replied, I met some 40 organisations around the table and MPs. Following that we published the White Paper. I hope people do not think that this was knee-jerk policy thinking.

  469. So any allegations that the discussions surrounding the development of the policy have been research-free zones are not justified?
  (Baroness Hollis of Heigham) I was mortally wounded by that—mortally. The point was we were putting out a policy document which we were trying to put in accessible language to be read not just by MPs and by academics. It was not a research document for academics, it was a document for MPs to be able to pass to their constituents and get their comments back and, therefore, we stripped out the footnotes. It hurt me deeply to strip out the footnotes but we stripped out the footnotes and tried to keep it direct and accessible. To be criticised for not producing a document which was not the document we had intended to produce anyway, ie a research document as though we were some extra members of a research institute, seemed to me to be deeply unfair. It was supposed to be a policy document setting out what we believed to be the appropriate skeleton, if you like, for proposed legislation but accessible so that people could come back in and say "we are uncomfortable about this, what should we do about that?"

  470. So if I put the charge to you that in the process of that comprehensive approach—it is very useful to have all that on the record—you have lost some of the child centredness some of our witnesses were looking for in pursuit of administrative simplicity, what would be your comment?
  (Baroness Hollis of Heigham) I think in the Green Paper there was much more purple prose about the need to ensure the wellbeing of children, that it is best to ensure a happy, secure family life and so on and children need fathers in their lives. Whether their fathers remain associated with their mothers is another matter but children need them. We put a lot of that into the Green Paper but when it came on to the White Paper I was guided by officials that with a White Paper you change the language, it becomes a more authoritative statement of legislative intent as opposed to a consultation discussion document. So there was less philosophising, if you like, in the White Paper and rather more of it in the Green Paper but that was deliberate—we were closing down the issues we had raised in the Green Paper—we were trying to move the discussion on.

  471. In the process of the simplification, the courts' rough justice approach, are you satisfied that the kind of families, some of whom might have on paper quite big incomes, but have got commitments that match them, the kind of families in a situation where they want to pay but cannot without disrupting their housing arrangements, do you think that the rough justice is properly taken into account, the financial pressure that we may be placing some of them under who in good faith want to pay, but cannot?
  (Baroness Hollis of Heigham) I think one has to stand back and say, "Where do the responsibilities for your child rank in your order of priorities?"

  472. Above housing costs?
  (Baroness Hollis of Heigham) Yes.

  473. So you move house?
  (Baroness Hollis of Heigham) I am actually saying that, for example, when you come to pay your National Insurance and your taxes, you do not get an exemption or a reduction because you say, "I have got very high housing costs". There may or may not be tax allowances, as there have been in the past for maintenance, but that is an order of priority and what we are saying is that when it comes to responsibilities for your children, you leave your children first and you take on new responsibilities in the light of that. What we are trying to establish is that change in culture. You pay your taxes, you pay your National Insurance, you have your pension deducted and on your net pay the first priority is the support of that first family, and then you take on the rest of your responsibilities in the light of that knowledge. Now, if you are in an in-tact family, that is exactly what you would do. If you were choosing or thinking about having another child, you would say, "Can we afford it? Is the house big enough? Do we need to move? Does this mean my wife will have to stop working?" or whatever. You make that judgment in an in-tact family whether you can afford to have another child, whether you can afford to move house, whether you can afford to increase your housing costs. We see no reason why we should not expect non-resident parents at the point when they are breaking up to know they will have a permanent commitment to that child until that child is an adult. They should bear that in mind when they judge what the rest of their priorities and competencies for spending are. We say they are an adult. We are not saying, "We will allow you so much for your housing and so much for your car, but we will not allow you anything for looking after an elderly parent". We say, "We are reducing the amount we take from you, but we are going to require you to pay it and we are then going to free up more to remain in your pocket to spend as you, non-resident father, see fit. Whether you want to spend it on a larger house, that is up to you. Whether you choose to have more children, that is up to you. Whether you choose to spend it on holidays or cars, that is up to you. We are not going to second-guess you. We will leave more money in your pocket and you, as an adult, will make the decision as to how you spend it, but what you cannot walk away from any more than you walk away from your responsibility to pay taxes is your responsibility for your children".

  474. I cannot resist just the additional comment that if we are really serious about getting the enforcement mechanisms an awful lot more efficient, then some people will end up in jail.
  (Baroness Hollis of Heigham) I hope not. We will have failed if that is the case.

  475. I hope not. In fact it might be a very easy way of extinguishing your arrears; you do 90 days and you are given a clean sheet.
  (Baroness Hollis of Heigham) What we are seeking is compliance. Enforcement kicks in if compliance has failed and everything we do is in terms of lowering the levels of assessment for him, giving it to him quickly, doing the assessment within seven to ten days and sent on to him in a couple of weeks, for we know that unless he starts to pay within six to eight weeks of the break-up, he is unlikely to pay. It is not surprising if he does not get an assessment until 26 weeks or six months on and it is a huge sum and he does not pay. With everything we are doing, there is simplicity; add to that a maintenance disregard in the hope of acquiring her co-operation in tracing him, and the reduction in assessment which means we hope, as a result, he will actually pay it and that she will actually end up getting more for the children. All of these things are about actually getting voluntary compliance as quickly as we can, but if at the end of the day there are a few people who duck and weave, and, as I say, the people who declare a change of circumstances and still do not pay are doing that, then obviously we will get tough on enforcement, but to that extent it is a failure of our compliance system. We do not look at that with any pleasure.

Mr Pond

  476. Can we talk about the precise point, Minister, for a moment on housing costs in relation to shared care because one of the issues that was raised by a number of the witnesses was that there may here be a trade-off between the income that is transferred from the non-resident parent to the child effectively and the time that they can spend with them. The point was made, I think, that in order for shared care arrangements to work properly, then the non-resident parent really does need to have the accommodation necessary to be able to offer proper overnight accommodation, and I think there was a feeling amongst some of the witnesses that there was not really equal treatment between the non-resident parent and the parent with care and that in that admittedly minority of cases where there were real shared care arrangements, then in fact that clear division between the non-resident parent and the parent with care was one which was not appropriate, that for part of the week the parent might be non-resident and for the other part of the week might be the parent with care and perhaps there should be some symmetry between the two in both the treatment of housing costs and also perhaps in the maintenance payments.
  (Baroness Hollis of Heigham) I accept the issue. The language I tend to use, if that is acceptable, is shared care where one night a week may be spent with the father and equal care where it is fifty-fifty because I think there are somewhat different issues involved. On shared care, I think the figures that FNF produced we broadly agree with. We positively hope that we will get figures up to 22 or 25 per cent of children perhaps spending every other weekend with their father and if it goes better than that, that is great because the more contact, the more maintenance will be paid and the more important the father becomes in the child's life. Our problem is, and I put it to you, that it would obviously be very attractive to non-resident fathers, and might encourage them, if they were able to have housing accommodation sustained possibly by housing benefit that was much larger than they apparently needed for six nights of the week because the seventh night of the week they had a child living with them. However, that arrangement might break down after three months or six months, but they are still getting housing benefit. Part of our dilemma is that the Government is also anxious to see housing stock used sensibly and not use housing benefit to supplement or subsidise under-occupation, and that is part of the dilemma. In an ideal world, particularly where he is not on benefit, he would have generous housing space. I have to say that an awful lot of non-resident fathers, at least to start with them, 50 per cent of them obviously are not going into anyone else's home and they tend to be living at home with their own parents and often then there is a place for the child to stay over in the third bedroom in the council house and so on and there it is a question of trying to get the co-operation of his parents, the child's grandparents to make that possible. I do accept that there can be a housing issue. The problem with that is that the solution generates very severe other problems which are about the relationship of the housing benefit system to nominal under-occupation. It would effectively mean that up to a million men could have larger accommodation sustained by, for many of them, housing benefit that was not apparently justified by customary occupation. That is the dilemma, but I recognise the problem.

  477. On shared care still for a moment, there were questions raised about this, the derivation of the 15 per cent figure and indeed the other proportions based on the 30 per cent assumption that that was the proportion of net income and, therefore, to share it between two parents, 15 per cent was the appropriate figure.
  (Baroness Hollis of Heigham) There are two things there. The first thing I would want to say is that it is a judgment. I am not saying that it is based on hard-edged research because hard-edged research does not exist. The research that exists has tended to be about the adequacy of benefit for lone parents vis-a-vis, say, couple families on income support and that has been the broad basis of the debate. All the available research is on that hand-out I gave you, and I am familiar with it obviously. What research there is suggests that parents on income support and benefit with incomes of about £90 a week, will spend about £25 to £30 of that on the child, maybe more if they can afford it, or if they have two children, so certainly what academic research there is suggests that this figure is about right. It is also, however, confirmed by the international figures which perhaps I could give to you, and obviously I am very happy to hand this in. In Australia child support payments represented 18, 27, and 32 per cent of gross income after some of the non-resident parent's basic living costs have been deducted, which again is broadly in line. In New Zealand the rates are 18, 24 and 27 of gross income, allowing for some living costs. In Wisconsin, child support payments are based on gross income at 17, 25 and 29, though it has departures. The Netherlands has a complex formula similar to ours while Austria has a simple slice which is 16 per cent which increases as the child grows older. Our figure is pretty close, and we were obviously influenced by this, to the going rate of every scheme that we know. Presumably they too have had that influenced by their local research which seems to support ours. It is a judgment but it is not a figure that is plucked out of the air, it is based on the best information we have and international experience.

  478. On the issue of poverty, which is what we discussed in the first session on Tuesday, the comforting thing is that most of the witnesses asked on this issue agreed that as part of the package of measures this would have a significant impact on child poverty and towards that target of a 20 year elimination. This morning we got some figures from the Institute for Fiscal Studies and the Family Policy Studies Centre which I think confirmed that the changes, certainly combined with the move towards the Working Family Taxes Credit, would have an effect even without behaviourial changes by parents.
  (Baroness Hollis of Heigham) Yes.

  479. But that the main effect, putting aside for a moment those behaviourial changes, was on income support and the effect of the disregard which was widely welcomed. A number of witnesses proposed that level should be £15 rather than £10 which I know means an additional £40 million in expenditure. The evidence we heard this morning suggested that would not have an effect on incentives for lone parents but would have quite a considerable impact in terms of the poverty reduction effect of the changes. When we come to the behaviourial effect that is where the really good news comes in. It does seem that the changes, according to some of the calculations we heard this morning, will mean a significant reduction in the number of lone parents who are non working and quite a significant increase in the proportion who are working mainly part-time, it seems to have little effect on full-time employment. About half of that is due to these reforms and the other half due to the move to the Working Families Tax Credit.
  (Baroness Hollis of Heigham) Yes.

9   See Ev. pp. 201-2. Back

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