Select Committee on Social Security Minutes of Evidence

Examination of witnesses (Questions 480 - 499)



  480. Has the Department done its own calculations in that way?
  (Baroness Hollis of Heigham) We have done very elaborate modelling on losers, gainers and so on. We have also done some basic work on the interaction with WFTC and the minimum wage, which was not mentioned this morning rather to my surprise as that applies to two-thirds of beneficiaries, and of course some of the other changes that will be coming through. I think I said a couple of days ago that the attack on child poverty is about getting parents, with their consent, into work when they are ready. Children are disadvantaged if they are in workless families but also if they are in fractured families where the father does not support them. This is obviously part of that whole strategy. I was very heartened by what was being said today. Clearly some of the stats were flaky because they were not quite sure whether they were about cash compliance or case compliance. There are actually well established figures in the records in the CSA as to the difference between those two.

  481. Can you clarify what the 80 per cent target means?
  (Baroness Hollis of Heigham) At the moment we have—correct me if I am wrong, Faith—something like 66 per cent cash compliance and we have something like 35 per cent plus of fathers paying fully and about 30 per cent of fathers paying erratically. It is not that fathers are paying £20 or £30, it is that they pay for a few weeks and then they stop, it is that pattern of erratic quality.
  (Mrs Boardman) The most recent figures for the August month are that 45 per cent of fathers are paying fully and 25 per cent are paying partially, that usually means they have some arrears but are paying currently, and 30 per cent are not paying.
  (Baroness Hollis of Heigham) When we talk about compliance—cash compliance is usually higher than case compliance by definition—we are talking about we are hoping to get 80 per cent case and 85 per cent cash compliance, those are the sorts of figures we are looking for. We have hopes that we will exceed that.

Mr Leigh

  482. Baroness Hollis, when you came to see us the day before yesterday you very helpfully gave an undertaking that if the new IT systems were not ready on time in 2001 you would not bring in this new scheme. When the Public and Commercial Services Union came to see us yesterday evening, and they of course represent the staff, the long suffering staff, of the Child Support Agency, they seemed to indicate to us that there were rumours or they understood that there was some possibility or talk within the Agency of the scheme being introduced with the old computers. Can you give us a commitment that that will not happen?
  (Baroness Hollis of Heigham) No, I will not give a commitment either way. What I am very happy to do is to repeat what I said previously, and please press me on it and I am sure you will. As Ministers we will not go ahead unless we are confident that the IT system is robust enough to sustain the new policies. I am expecting that to be, and I really mean hard expecting that to be, a new IT system. Clearly with any shift, and I think this happened with the JSA for example, there are always contingency plans of belt and braces to have the existing system continuing and overlapping for a few months to make sure. There is belt and braces, there always has to be, of a contingent sort. I am expecting there to be a new computer. If there is not and if it is not clear that the consistent system upgraded is robust enough then obviously we will have to think about that. I am expecting it to be a new computer. The crucial assurance, if I can put it this way, is that we will not go ahead unless we are as confident as we can be at ministerial level that the system will cope otherwise all the advantages of simplicity will go down the plughole.

  483. You will appreciate our concern about this.
  (Baroness Hollis of Heigham) Absolutely.

  484. We have seen the disasters that have occurred in other Government agencies, recently with the Passport Agency. We really have to be reassured. One of the phrases used, I think it was by the union yesterday, was that one of the major problems with the CSA at the start was that the Treasury insisted on buying in second hand IT equipment and look at the disasters that have happened. We really have to get an assurance from you that you will only proceed if the system is robust enough. I was not aware before that it is possible that we may now be using the belt and braces approach of the old IT system.
  (Baroness Hollis of Heigham) It is unlikely.

  485. Unlikely?
  (Baroness Hollis of Heigham) Extremely unlikely.

  486. I would like your assurance that the belt is strong enough.
  (Mrs Boardman) I think I would want that assurance as well because I am going to be responsible ultimately for this working in a very direct way. I can assure you that I certainly will not recommend anything that I do not think will work. I think it is sensible that we look at the whole range of options. It is perfectly normal in my experience of doing this sort of thing successfully elsewhere that one should. I think it is also important to remember that we need to look at the current system not just in terms of the new formula and the new legislative system but also in terms of how far we can improve it in the interim and get some early benefits for both efficiency and customers and how we handle the issue, which is going to be a large one, of moving the large amounts of data that we have on the current system, what by then will be over one million cases, across to any new system. It is quite right and proper that we and our potential suppliers should be fully cognisant and take a very close look at the current system not least with those sorts of factors in mind. I will not accept anything and I will not recommend anything that I do not feel will do the job for our staff.

  487. Let us hope those are not dangerous words. I will now move on to shared care. Obviously we have had conflicting evidence from Fathers Need Fathers and the National Council for One Parent Families as you might expect but the evidence given by Families Need Fathers was quite persuasive it seemed to me. In their short summary they say: "A one-seventh deduction per night of shared care is necessary because the parent with care does not have care of the child and is therefore not entitled to child support. In addition, however, the parent with care must be assessed at 15 per cent of her income to contribute to the costs the non-resident parent has when the child is with him. This ensures that child support follows the child and is applied equally whichever parent is providing care for the child". I will not go into all of the evidence but they seem to suggest that if their proposal is accepted, which has been carefully costed by the Institute for Fiscal Studies, it would have beneficial effects and for reasons which are not entirely clear to me because I am not a statistician the parent with care would not suffer. You may not be able to give an immediate answer, Baroness Hollis, but are you prepared to at least look at their ideas carefully?
  (Baroness Hollis of Heigham) I have lots of times. Could I just take on the position of FNF which is not so much about the shared care of one night so much as equal care. There are four points really. First, I simply do not accept much of their policy position because I do believe that the lone parent is contributing to the support of her child because the child lives with that person for most of the time and that is the contribution of lifestyle. What they seem to be suggesting is that if he abates his maintenance by 15 per cent because the child spends one night with him, she in turn should contribute the same proportion, one-seventh of 15 per cent of her income, to him. If you think about what that means, and we are talking about 25 per cent of families, it means that for almost the entire constituency, because you do not know where shared care is going to come up, you are going to have to estimate the parent with care's income as well as his and you double the complexity immediately. Secondly, if you are doing that, you are then going to have to ask yourself, "Are you going to take into account any abatement for biological or stepchildren in the second family?" If you are, as the new formula proposes, you have then got to take into account the income of the father's new partner, if there are stepchildren, you have to ask yourself, "Is the partner's former partner also contributing to their maintenance?" By the time you have finished, you have reinvented the complexity of the existing system, so I think in terms of complexity, you end up with a French la ronde system and you just go round and round. Three or four people would have to have their income assessed, and not just one. Frankly, it is not worth it. Something like 96 per cent of all lone parents have incomes of less than £100 a week and there is nothing there to take from them. Only 6,000 have incomes of £200 a week and only 200, on our base, have substantial incomes, ie, of £500 a week, and they are the ones where there will be any worthwhile transferred maintenance. Therefore, it seems to me not sensible in policy terms, it seems to me daft in terms of administrative complexity to reinvent it, it seems to me not worth it in terms of the numbers affected and finally, given the complexity, and the financial penalty I think it would increase the reluctance of parents with care to establish access and contact in that form. We want to encourage it, not subvert it, so I have to say on all of those points that I actually think the FNF's scheme is a non-starter.

  488. It looks as if it is a non-starter, does it not? The next point I want to put to you is that I thought Professor Bradshaw from the University of York gave some very useful evidence. He, in paragraph 28[10] of his paper to us, says, "The results of this research", and I am sure you would acknowledge that he is one of the leading experts in his field—
  (Baroness Hollis of Heigham) Absolutely.

  489.—"show that the child support scheme has a very limited prospect of success unless it is based on negotiation between the parents, which is recognised as fair and the perception of fairness on the father's part depends more than anything else on their ability (and the former partner's willingness) to have shared parental responsibility of their children. What is needed is a service which enables these fathers and mothers to work out arrangements for child support, contact and other matters that concern them". Now, the long and short of his evidence, and that of some others who came to see us, is that notwithstanding what you say about the difficulty of referring these matters to the courts in every case, given what we are trying to achieve or were trying to achieve with the family reforms in terms of not granting divorce until these matters had been fully worked out, is there not scope or some room for compromise which will result in more, not less, cases actually being worked out on the basis of negotiation by the courts?
  (Baroness Hollis of Heigham) Firstly, I accept Jonathan Bradshaw's views about the need to increase negotiation and conciliation and decent relationships for the sake of the kids. The last thing we want is an adversarial high noon where the father says, "I don't want to pay much", and the kid getting the signal that the father does not value the child and wants to cut maintenance, so in that sense and given that approach I think his philosophy is entirely right. There are, however, a couple of points. Firstly, I do not think it is sensible to say that we should, therefore, go back to the courts to allow that to be the forum for negotiation because, as I was trying to say earlier, only 30 per cent of people are coming out of divorces and only a proportion of those are actually going through the courts because of property and the pressure on the court system or even a newly-invented court system, and we did look at this very extensively, would be huge. The system could not cope. However, it is right, I think, that we should try to encourage negotiation and so on through other means and that is precisely why we are putting so much emphasis in the White Paper on local offices, local service, face-to-face contact. What we are hoping is that where a non-resident father feels aggrieved, either that the income that it has been based on is too high, it is artificially inflated by a Christmas bonus or whatever or, alternatively, he is getting into financial problems and he would like some help and debt counselling or, alternatively, she is being reluctant to give him access and he wants advice on how to ensure that he gets access through the courts, our local staff will be able to help, I think, in that approach. The third point is that as a result of WFTC with all of what used to be benefit cases becoming private cases, it does mean that in the future only those on income support, 45 per cent of the current caseload, will need to use the CSA. For the rest, they can make private arrangements at whatever level they wish and it is entirely up to them. They can negotiate. They will want to come to the CSA either because the CSA is so efficient that they can rely on the money flowing or because relationships are so hostile that they cannot agree and, therefore, they need a formula imposed on them. I think it is accepted that at the moment the CSA stands as the lightning conductor for all of the emotional anger and pain associated with break-up, but we are seeking, and you are right, we must do this, we are seeking to make sure that the CSA does not add to that conflict and pain, that we reduce it so far as possible, and the customers, all of those on the WFTC in the future will be private clients, they can choose whether to come to us or not, and that will be our test of whether we are doing a good job or not.

  490. Now I want to move on to Nicholas Mostyn QC's evidence who was very critical of some of your proposals. He mentioned Australia where they have a simple system, but compliance is less effective than it is here and he said in paragraph 9.4[11] of his paper, "Research in the USA has shown that the rate of compliance is much more reactive to the robustness of the enforcement procedures, and that where imprisonment, removal of driving licences and publicity in the local media are deployed against defaulters the rate of delinquency falls dramatically". The weight of evidence seems to suggest that you should be concentrating on enforcement.
  (Baroness Hollis of Heigham) Yes, but what we are saying, and we have tried to say, emphasising compliance, is that enforcement kicks in when compliance fails. You are absolutely right, that the whole point of moving to a simple system is not because the simple system per se will make more voluntary compliance, but it is that it will free up staff time from spending 90 per cent of their time doing the assessments to being able to spend as much as possible on actually achieving compliance by telephoning, by tracking, by ensuring that the money flows. If that voluntary compliance fails, despite the best efforts of our staff, then yes, we will kick in with enforcement and a whole array of possible measures have been suggested, but enforcement comes in when compliance has failed. We are hoping to make compliance successful.

  491. Can you comment on his very strong criticism of your proposals in what he calls in paragraph 10.1[12] of his paper "the utter and self-evident injustice of what was being proposed, namely that a father (say) would pay the same whether his former partner was on benefit or was earning a massive City salary"? He was very strong on this and he said that the Australians have devised a perfectly simple system to deal with the problem, which has also been referred to by other witnesses which apparently you are not prepared to consider.
  (Baroness Hollis of Heigham) Of course we have considered it, but we just do not agree with him and that is the problem, I think. It goes back to the point basically of whether the parent with care's income should be taken into account and, I repeat, the sort of people that Nicholas Mostyn, I suspect, deals with represent 200 people out of our caseload of over one million and that is those on incomes of £500 a week or City types, and we do not think we should devise a system for that very tiny minority. They do not have to come to the CSA. Anybody who is not on income support has a choice. If they have civilised relationships with their ex-partner, they can make whatever arrangements they like and we are not involved at all and, therefore, I do think that a lot of his critique was simply misplaced. People only will come to the CSA if they are private cases if either we seem to be more efficient and useful as an alternative to a standing order or something like that or, alternatively, because there is hostility and they cannot agree and in that case presumably the law has already failed. I do think he has misjudged and for him to suggest that we should have an elaborate assessment of the parent with care's income when, as I say, only 4 per cent of parents with care have an income of over £100 a week and only 200 of over a million have an income of over £500 a week seems to me folly actually, administrative folly.

  492. Are you equally dismissive of his criticism of you on the capping point? He effectively accuses you of social engineering?
  (Baroness Hollis of Heigham) God forbid!

  493. Well, New Labour of course, God forbid, you would not want social engineering!
  (Baroness Hollis of Heigham) Put it that way, but I think this is a question on which we thought long and hard and I think there are good, strong arguments on both sides. There is a one argument saying that you should cap it because it is child maintenance and if it goes all the way up the income scale, it becomes spousal maintenance, and the other argument is that if that family were intact, the child would enjoy the living standard of that father whatever his income, whether he was earning £200 a week or £2,000 a week, and at the end of the day in response after listening to the consultation exercise and talking with people and meeting the 40 groups and organisations, we came out on the side of saying that we should not have a cap, but obviously it is the sort of the issue that Parliament will want to explore and take a view on.

  494. Thank you very much for your answers. One last question. There is a very hard-hitting series on Channel 4 at the moment about the Child Support Agency and the programme note says, "The series concludes with the disheartening fact that in the ten years since the Child Support Agency was first envisaged, two-thirds of absent parents still fail to contribute towards the costs of raising their own children. The Agency not only failed to make fathers pay, but failed to change the attitudes and behaviour of society." Will you succeed where others failed?
  (Baroness Hollis of Heigham) I hope so. We do not have the issue of retrospectivity which was a problem in 1993 which overrode court cases and people thought they had made a clean break and then found their lives turned upside down. Secondly, we are introducing maintenance disregard which was argued for but lost at the time. Thirdly, we are going for simplicity of system which means the staff can learn how to do it and do it quickly, efficiently and free resources up for compliance. I hope very much we have learnt from the experience of the last 10 years.


  495. Can I, in passing, ask Mrs Boardman what difference Deloittes has made in the debt collection process? We brought Deloittes into the process recently, are there any early results from that? Have they brought in added value to the debt collection process?
  (Mrs Boardman) The result we have so far is essentially we understand the issues a lot better. We have only had them working alongside us since July and you will appreciate they need to understand our business and bring their external expertise to bear on it. So we are at the stage where they are presenting us with their own findings and recommendations and I think those will result particularly in some improvements in areas such as tracing, in areas such as our debt management systems, both the IT systems and the training of the staff concerned with debt management and enforcement. Those will be quite early deliverables which we will ask them, over the next few months, to go on and put into practice for us.

Mr Dismore

  496. Could I briefly pick up on the calculation issue where we were at cross purposes; the slight preference for the first as opposed to the second families? What you were saying perhaps was of the two alternatives in the Green Paper the one that you chose had that effect, but what I was saying was that within the options chosen the preference still goes to the second family in that in the working example in the Green Paper the second family will get £45 and the first family £38.
  (Baroness Hollis of Heigham) Yes, and I am sorry if we were at cross-purposes. At the end of the day given the two options we put in the Green Paper we have gone for the option which favours the first family because in the second family we have included step-children among the number of children. We thought it was decent not to have first and second class children in second families and that was the offset. We looked at various other possibilities and arrangements, we looked at what happened in Australia and New Zealand, and Australia goes for the one package and New Zealand the other, and we went for the one we did. What we are really saying is that we are allowing that as a form of pre-slice before we go and do a deduction. I suppose we could say we allowed less for it—he may only have that income for his second family, she will have benefit income and maybe the income of another partner as well. In our judgment this seemed to be the fairest balance. I cannot go much beyond that, but press me if you want.

  497. No, I just wanted to get it clear where we were.
  (Baroness Hollis of Heigham) You are quite right, I was referring to the two options in the Green Paper.

  498. Can I pick up on the courts issue? I was not particularly persuaded by the evidence we should turn the whole thing over to the courts, I was more interested in what James Pirrie of the Solicitors Family Law Association and the Law Society were saying, which is that since the CSA came in that has affected the way courts have approached cases before them, that the inconsistency which you identified for other reasons with the CSA in the first place has gone in that the courts are now very much informed by the CSA calculations and their kick-off points in the horse-trading which goes on. He suggests that really the State should only have a role where there is a state financial interest—Income Support or Working Families Tax Credit—and the other cases should simply be dealt with by the courts without this option of coming back to the CSA three months later. If that were adopted, it seems to me that some of the other difficult issues which have arisen in the Paper, for example the issue of substantial earnings of the parent with care, the issue of a maximum cap or the issue of investment income, would probably all disappear because those sort of cases it would be much more likely to be in that category rather than the bog-standard CSA type case. I wondered if you had looked at that approach as drawing a line which would result in a much simpler system than the one you propose?
  (Baroness Hollis of Heigham) We did. We had long discussions not just with the Law Society and with James Pirrie on several occasions but also with senior judges, family law judges, who came in and we had at least two meeting with them and Lord Chancellor's Department representatives, and we discussed all of this. We came up with the policy we did, which is that anybody on WFTC is a private case, they may or may not be going to the courts, they may or may not register minutes of agreement which is the Scottish system, but equally by saying that after 12 months with two months' notice either party can come to the CSA, what we are doing is the equivalent of a minimum wage. We are putting a floor in, as you rightly said, so that when lawyers negotiate over what would be the child maintenance in a private case, say where there is property involved, they will know that if either party's views should change either party can go to the CSA. So in practice we are hoping that the courts will fix their child maintenance in the shadow of the CSA, very deliberately. The reason for that is that even now when family credit cases are benefit cases and there might be thought to be a clean line between benefit and working cases, every year there is between 10 and 15 per cent of movement across the line. With WFTC becoming private cases, there will be even more movement between WFTC and benefit. If you have one system which the courts have fixed an agreement and you have a different system under CSA, there may be movement perhaps after nine months, perhaps over the summer holidays, between those lines, then we are going to have very uneven and unreliable collection and compliance. So what we are trying to do is to encourage our legal system to go for a setting of child maintenance which is as close as possible to the CSA figure unless both parties agree that it is sensible and reasonable they should depart from it, perhaps because of school fees. But, and this was the final answer we gave to James Pirrie, nonetheless when the lawyers do their settlement for the private cases coming through for divorce with property, they are looking at property, they are looking at child maintenance, they are looking at spousal maintenance and in about a year's time they will be looking at the pension pot. If the child maintenance element is relatively fixed, in the sense they are operating in the shadow of the CSA, there is no reason at all why James Pirrie and his colleagues cannot ask for spousal maintenance, or any of the other elements in that equation, subject to the judge agreeing, to take the strain off any tailoring they need to do given that particular family's circumstances. So there is plenty of elasticity in the system for adjustments to be made to reflect the individual's circumstances of the family, particularly where she is a high earner. We thought the price of allowing no underpinning was that everybody can cross that line—and we expect a lot of people to cross the line to and from WFTC—which would mean that people's financial arrangements were subject to upheaval, she would lose her maintenance monies, the arrangement would have to be readjusted, that would be a disincentive to work, he would not know where he stood, and there would be a lot of administrative difficulties.

  499. In short, you are not expecting many cases dealt with by the courts to come back?
  (Baroness Hollis of Heigham) I would be surprised. The only cases which would come to the CSA which were dealt with by the courts are where there is a dissatisfied partner after 12 months; this should not be a knee-jerk thing, and I suggested they gave two months' notice, they have to notify the other side, so it was a new opportunity for negotiation and conciliation. We are not seeking their cases at all but we wanted the CSA in as a failsafe.

10   See Ev. p. 136. Back

11   See Ev. p. 63. Back

12   See Ev. p. 63. Back

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