Select Committee on Work and Pensions Minutes of Evidence


Examination of Witnesses (Questions 260-279)

RT HON ALAN JOHNSON AND MR DOUG SMITH

17 NOVEMBER 2004

  Q260 Mrs Humble: Yes, the Australians are working very hard to encourage private payment systems. Their CSA does the calculation, then they impose a private payment system. They also have a very interesting intensive case management for the first eight or nine months when somebody makes contact with the CSA. The parent with care, indeed, both parents, know who the individual is who is looking after their case, they can talk to that individual, and the member of staff develops a relationship with them and monitors their case. They also have an excellent telephony system which routes in phone calls. Once the case number is given, the reference number, it routes the call in to their case-worker. It is not like the system that we have here. We have our constituents coming to us regularly saying, "I speak to a different person every time." Your whole-service approach was supposed to pick up on that. Have you looked at having an intensive system which ensures hugely improved compliance rates? If you get it right at the beginning, it stays right. If the Agency develops a more amicable relationship with both parents, they get it right. Can you pick that up from Australia as well, please?

  Mr Smith: In a sense, we did pick that up from Australia. We looked at the way the Australians operate their system. I too have visited Australia and been fortunate enough to see the Australian system in perspective, and the original design of the new arrangements pulled in best practice from Australia in terms of having case ownership embedded partly in the individual but recognising the fact that the individual is not always available, but within a small group of people in a team. The telephony system is structured to deliver the call direct to the case worker responsible for the actions on that case.

  Q261 Mrs Humble: Why is it working over there but not working over here?

  Mr Smith: We did not in the first phase intend to move on directly to the concept of holding a case for intensive care for seven or eight months. Our intention was to hold a case at the front end until we had achieved the first payment and then move it on. In retrospect, learning from Australia, it would probably be sensible to do exactly as you suggest and hold a case at the front part of the operation for a period of months, and we have that logged as a potential future improvement. The second element of the Australian arrangements around the front end that we really were impressed by and want to take on board at some stage is their informal risk scoring, so that you identify relatively early in the process the want-to-pay/will-pay cases, and early in the process the not-willing-to-provide-information and not-willing-to-pay, high-risk cases, and afford them different levels of treatment from the start of the process.

  Q262 Mrs Humble: That is very reassuring. Can I move on to the Secretary of State to ask a question about child maintenance premium. Chris Pond made a remark in response to a recent PQ just the other week that you were looking afresh at ensuring that those entitled to the premium receive it. You will recall that there has been a lot of concern that, as people have not been transferred on to the new system, there are mothers on Income Support who are losing out on the £10 premium. What did your colleague mean when he said that?

  Alan Johnson: He meant that I was looking very carefully at whether . . . The real problem for people who are on the old scheme is not the computer system or anything else. It is the fact that they cannot get the £10 disregard. I was very interested to see whether there was a way in which we could provide the £10 disregard, quite aside from trying to sort out the computer problems, which will take some time. We are still looking at that. It looks pretty difficult, in the sense that the time, the effort and the organisation, not to mention some statutory problems that it would take to do it, would mean that while you are spending time on that, you could be putting more effort into getting the computer system running properly and getting migration operating properly. There is also the case, of course, that the people on the old system, the parents with care under the old system, do qualify for this £5 that is ticking up. If they get a maintenance payment of £5 or more, that ticks up, so that when or if they go in to work, they get that paid to them up to £1,000. So there is a system there for some money in the old system, but nevertheless, it would be good to find a way to see if we could tackle this. I am looking at it. Chris Pond was absolutely right. We are looking at it very seriously. We are finding the kind of problems that mean I do not want to give you any indication that that is going to be easy or any false hope that we can do that.

  Q263 Mrs Humble: When you are looking at it, can I also point out to you that sometimes the non-resident parent is reluctant to pay and uses as an excuse the fact that the money is going into the Treasury rather than going to their children. If you can introduce any sort of system to make sure that a premium is paid to the parent with care, and indeed look at raising the amount of money, it may improve compliance rates for the non-resident parent. I leave that with you, and move on to a question about Working Tax Credit. As I understand it, the compliance rates for a parent with care who is claiming Working Tax Credit are much higher than where the parent with care is on Income Support, 81% compared with 59%. Again, that seems to reinforce the message that if the money is going to the parent with care, then the non-resident parent seems to be more willing to pay it. Have you looked at that issue? Have you looked at the relationship of the parent with care who is on Income Support and the parent with care who is on Working Tax Credit?

  Alan Johnson: Yes, there is a point about Working Tax Credit that I am looking at. One of the things that strikes me, delving into this, is the extraordinary lengths that some non-resident parents will go to. They might use these kinds of excuses, but they go to extraordinary lengths to get round the CSA. You must have come across this. It is not just a matter of as soon as we get the money deducted from their pay, they change employers; sometimes they make themselves unemployed. Having said that, I am sure there would be an issue on compliance once we are absolutely sure that the money is going to the parent with care.

  Q264 Mrs Humble: I have written to Patricia Hollis on exactly that issue, because I have been informed by constituents that there is a website that advises non-resident parents on how to get around their financial obligations, and I have had two or three recent cases of men who have arranged different sorts of payments from their employers, so they get paid in dividends, they set themselves up as companies so that they receive only a very small salary and the rest of it is not seen as earned income in Inland Revenue terms. Can I have an assurance from you that you are looking at these different ways that some non-resident parents are trying to use to get out of making payments? These are people who often have very affluent lifestyles, and the parent with care sees the affluent lifestyle, and then she gets a letter from Mr Smith's members of staff, who says this non-resident parent is going to pay tuppence-halfpenny, and she sees him driving a big car because he has got out of his obligations.

  Alan Johnson: I will look at that particular website. This is why 100% compliance is not going to be possible. It is not happening in Australia. It is not happening anywhere. The compliance rates we can achieve will be the best we can achieve. They will never be 100%.

  Mrs Humble: I will put in writing a note for you to look at about guaranteeing maintenance payments, because that has also been raised with us.

  Q265 Ms Buck: We have talked about some technical lessons in terms of compliance, but the lesson from Australia was a philosophical one, and it is about disregard, it is about a system that is not based purely on recovering money for the state, and is much more likely to have success. Going back to the non-introduction of the £10 disregard to Income Support clients, I wondered if anyone has calculated what those parents have lost as a consequence of the failure to move on to the system. I would guess that we are talking in the region of £400 million. I wonder if that calculation has been done, and I wonder if it is possible to comment on what implications that would have for the Government's child poverty target.

  Alan Johnson: I have not done the calculation but, of course, the two schemes operate under separate legislation, and there was no indication given whatsoever at any stage that people under the old scheme would be entitled to the disregard. Yes, we want to migrate them across very quickly. There is this point about the £5. This £1,000 is often forgotten, because people have to apply for it, so it is very important to get that message across. When you go into a job, you get up to £1,000 under the old system, a £5 disregard, if you like, paid as a lump sum when you go into a job. It is important to remember that. The reason why we changed the system—and why it had all-party support, as I remember—was first of all, to make this dreadfully complex system much simpler and much more easily accessible, and all the feedback is that people do find it simpler. That is part of the problem; they can assess very easily what they should be paying under the new system. Secondly, it was because of the child poverty target. The £10 disregard is very much a part of our child poverty target. That puts an added impetus, and that is one of the reasons why I was keen to see whether we could tackle that ahead of tackling the big issues with the computer system.

  Chairman: For the avoidance of doubt, it is my judgment that we are not going to complete the work in front of us by 11.30, so I give notice to colleagues that I am going to run the Committee until 11.45. I hope that is OK for the witnesses. I will draw the proceedings to an end at 11.45 to give us a chance to cover all the areas that the Committee would like, if that is agreeable. That is not a dispensation to be long-winded.

  Q266 Rob Marris: Does the CSA need more powers of investigation? I ask, because we commonly receive complaints from constituents who are the parents with care that they need to be their own detective because your agency does not do much detection.

  Mr Smith: We do keep under review the effectiveness of the powers that we have. My judgment has always been that the key thing is to use the powers we have more effectively before we go seeking additional powers. My judgment is that our powers of investigation are sufficient to do the job when used effectively.

  Q267 Rob Marris: What about powers of data-sharing with other government agencies, bodies and departments, etc?

  Mr Smith: We have arrangements in place, as you know, primarily with Inland Revenue and the Driver and Vehicle Licensing Agency, which permit us to exchange information in the right circumstances.

  Q268 Rob Marris: There is unanimity from the evidence we have taken, including the Standards Committee report as well, that your enforcement is poor. I wanted to ask Alan whether in fact the Child Support Agency needs additional enforcement powers, and if so, what would you have in mind?

  Alan Johnson: First of all, I do not know. I have not made a decision on that. Secondly, the Agency has enforcement powers of removing a driving licence and a possible prison sentence. It has been suggested we could withdraw passports. That is quite complex because passports are not provided under legislation; they are provided under "Her Royal Majesty requests and requires. . ." It is a Home Office allocation. We need to have a look at that, particularly in light of what has happened with football hooligans having their passports withdrawn. The whole basis of the approach in the UK so far has been that it is the threat of the punishment that has been used to actually force compliance. That is the idea. Once you go to the punishment, there is absolutely no chance of getting extra money for the child at the centre of this. It makes it more difficult. Driving licence removal, perhaps, but putting people in prison is not going to help. As Doug mentioned, I think, we have pursued more cases to that level over the last year. I need to have a look to see whether we have got the balance right. We need to draw on the experience of other countries where they put the punishment aspect of this further up the agenda before deciding whether we need to move into new areas.

  Q269 Rob Marris: Is enforcement going to move up the agenda before the computer problems, which we have heard eloquently and at length about this morning, are going to be sorted out, or is it going to wait until migration and conversion, etc, until more is done on enforcement and a greater proportion of the CSA budget is spent on enforcement?

  Alan Johnson: It has moved up the agenda. First of all, we have appointed an Enforcement Director, a guy called Gerry Rooney. That is a new post. He has taken responsibility also for the agency's debt strategy, so he needs to get a feel for how far we should go down some of the routes you mentioned before. Secondly, there has been a 36% increase in the staff on enforcement since 2003. Thirdly, the debt reduction target Doug mentioned was wending its way towards me, and these are all signs that we are putting a lot more effort into enforcement. I think it is fair to say—and Doug would not disagree with this—the culture of the organisation from the start has put enforcement further down the pecking order and now it has come up the agenda.

  Q270 Mrs Humble: Can I come in on this matter of the parent with care being the investigator? I had a constituent whose former husband was a taxi driver, and the information that the CSA got from the Inland Revenue, all they get is the bottom line of his declared earnings. He was declaring earnings that were minuscule, and she knew it from the time that she had lived with him. She could not prove that, so at the end of the day she got a job working at weekends in Blackpool as a taxi driver, working for a similar company to her husband, and she proved to them how much she was earning just at the weekend, and said, "This isn't right." She came to me and we had to go through all the rigmarole of asking the Inland Revenue to do a fraud investigation on this individual to re-assess his income in order for them to give the CSA a revised income figure for them to determine his liability. When I raise this with people working in the Australian system, they said that their CSA would do that investigation. The parent with care would not have to do what my constituent had done. They actually look at the lifestyle of an individual to see if it is commensurate with the declared income and the data that they share with accountants, with Inland Revenue, is much more detailed. Can you be more proactive in the way we were told the Australian CSA is?

  Mr Smith: There are two points there. As I understand it the Australian Child Support Agency does not have an investigative capacity in the same way as we have a Criminal Compliance Unit. When they were across last year, they were very interested in our approach to criminal compliance and the prosecution policy we were taking for making false statements and for failing to provide information. That is not a power that is open to them. What they do have is a separate unit that focuses on what we would call variations, and I think they call variations, where the lifestyle is significantly out of line with the income that is being declared, or where there is a clause in the Australian legislation that permits the Child Support Agency to intervene where there is clear evidence that an individual has transferred income from a source that would count for Child Support Agency purposes and transferred it into a source that may not count. They have the ability to counter that sort of determined avoidance action. So they do have the units that focus on variations where lifestyle is out of sync that we have but they do not have the direct criminal investigation units that we do, and which we enforce quite successfully.

  Q271 Mrs Humble: I do not want us to get hidebound on the word "criminal". They were proactively investigating, so the parent with care simply had to ring up the person who she often knew, got through straight away and outlined the case, and then they would take that up and they would do the investigation for her. Whether at the end of it there was an element of criminal investigation, clearly, it would be up to the Australian police to look at that, but we were told that the CSA was proactive in a way that our CSA is not, and I think we need clarification on this issue.

  Mr Smith: You will be aware that the variation process in the UK, which is the legislation which we operate, requires us to gather information from the parent with care, share it with the non-resident parent, and gain his or her information in response so that a tribunal can deal with that.

  Mrs Humble: It does not work, and it especially does not work with people who—

  Rob Marris: Chair, Members need to be taking evidence, not giving it.

  Q272 Mrs Humble: We do need to know what we are talking about here. It is when people are self-employed. If you ask somebody for information, they give you the same information that they give the Inland Revenue. My concern is how you can best liaise with the Inland Revenue, help the parent with care, and whether you are looking at this in a more proactive way.

  Mr Smith: I think it is right that the Inland Revenue must be the prime investigative authority in relation to earnings, that they do have the lead in establishing the earnings for tax purposes, and it is the earnings for tax purposes that we take account of in making a maintenance calculation. We do liaise closely with the Inland Revenue and we do discuss cases where the evidence in our hands suggests that the evidence available to the Inland Revenue significantly under-states income. It is at the end of the day the Inland Revenue's prerogative to decide whether they wish to investigate or not.

  Q273 David Hamilton: Could I make one observation? As far as the Australian system is concerned, what I took out of the information we received over there was that it was very clear what everybody's responsibilities were. That helps a lot, and that is what is not clear in everything we have been doing here. There is also a lot more joined-up government in Australia. The departments actually deal with other departments, namely the Inland Revenue. There is a legal responsibility in relation to how they deal with it. When the Minister is reviewing all the things that he has to review, maybe he should look at the holistic approach. There will always be individuals trying to avoid their responsibilities. No matter what system we devise, there will always be somebody that tries to beat that system. If we have clarity in how the system works, it helps both parties to come together to try and resolve the issue. It helps the process rather than aggravating it. Coming back to the question I am going to ask, I have to congratulate Doug Smith. I would like to meet him later on. Some of the answers we were given, I began to forget what the questions were. I have watched "Yes, Minister" for about the thirtieth time. Now I know why. I still watch it with great enthusiasm since I have been elected here. I would like to ask two or three questions, and I will ask for written evidence from Alan later on. When Gordon Brown announced the massive reductions to the Civil Service, did he understand how bad the system was within your Department?

  Alan Johnson: Within my Department?

  Q274 David Hamilton: We are talking about a 25% reduction in your staffing in relation to the CSA. Does he understand when he wants that reduction to take place that that is going to create major havoc within the Department at a time when we have already taken evidence from both yourself and Doug that you are going to be talking in terms of years before we can get the system into operation, yet at the same time as that we are talking about 2,719 potential staff being lost between 2003 and 2006. It does not make sense to me, as somebody who has been an employer, and indeed, in this situation, where we are the employer, and we are the people who have to look after the clients, the constituents. At the same time as we are reducing staff, we do not have a system that is working. That does not make sense to me.

  Alan Johnson: On the general point about whether the Chancellor understood the implications of reducing the number of staff net by 30,000 in DWP, he did understand and, as I said in the reasons I gave at the last hearing of this Committee, I think it is a sound policy and it is achievable. I think your question is about how it impacts on the CSA. I said last time that we are actually not in a position in DWP yet, and will not be until the end of this year/beginning of next year, to actually see how those cuts will pan out right across the Department. We have an indicative figure for CSA. If the question is, as I think it is, concentrating on the CSA, given all the problems here, can we still keep to the targets that we set back in a rosier, more optimistic climate of where we would be with the migration, etc, that is a very important point and it is one that I will have to look at very carefully when we decide where we plan to take jobs out across DWP.

  Q275 David Hamilton: You are reducing permanent recruitment at the present time. The child support reform has not been implemented. The new IT system, CS2, continues to operate below satisfactory levels, there are the problems that exist in the telephony system. We have had numerous indications, and every Member, including yourself probably, can tell you of constituents who come in and tell you they talk to umpteen different people and they are held on the line. I have a constituent who has waited two years to get on the system. So it is not working. How can you genuinely sit there as a Minister and tell us that you are going to take a Draconian measure to reduce staff—and it is Draconian—at a time when this part of the Department is not functioning? How can you do that? It does not make sense. As an ex-trade unionist, how can you do that?

  Alan Johnson: As an ex-trade unionist, I could point to about six trade unions that are cutting down on their staffing at the moment for the same reasons, that they have introduced new technology or they have merged, and of course, a large part of what we are doing is based on the fact that we have put the Employment Service together with the Benefits Agency, and we have invested in new technology. We do not have to have that level of backroom clerical work any more. That is the wider issue that I explained at the last meeting. In the CSA it is a very good and valid point that we should look at staffing very carefully in light of the position we are in, not the position we hoped to be in when we did the indicative figures earlier in the year.

  Q276 David Hamilton: Do you think the staff are being paid a lot for what they do? You could put up their wage scales. During the changes that are taking place as regards restructuring in relation to staffing levels and management structures, if that is going to be the case, will there be a change in structure of wages and conditions and so on as that progresses? I think all of that is relevant to how best you achieve the new goals you have got to set.

  Alan Johnson: I will just check with Doug. Doug, the CSA are part of the pay negotiations?

  Mr Smith: They are.

  Alan Johnson: We are seeking a pay deal with the unions at the moment. It is a three-year pay deal. It is aimed at lifting the lowest paid staff up by more than other levels. We are making a lot of progress with that, including settling with that the problem that has existed for a few years about the staff appraisal system. That will apply to the CSA, and it will apply across the Department. I am sure you would agree, David, it is the right way to tackle these issues, in negotiations with the trade unions.

  Q277 David Hamilton: Minister, you have already said that you will give assurances that the quality of service will not be affected by the reductions. How are you going to give that assurance, based on all the questions that have been asked up to now? The quality of service is nowhere near where it should be. How are you going to be able to assure us that there will be an improvement in that service whilst there is a reduction taking place?

  Alan Johnson: This is quality of service in the CSA? I come back to the same point. We need to look at the CSA very carefully, and all the problems it is facing, before deciding from which departments we will reduce headcount.

  Q278 David Hamilton: In the short time you have been in charge, are you convinced that the staff are trained sufficiently in the various areas to be able to deal with the new challenges they have to meet?

  Alan Johnson: No, I am not, but neither am I in a position to say that there has been insufficient training. All of my experience so far suggests that before CS2 came in, there was a right and proper focus on training, on getting ready for this new culture, much more face-to-face contact with the customer. It relied upon a good, reliable IT and telephony system; we did not have a good, reliable IT and telephony system. That has caused most of the problems. Undoubtedly, there will be training issues that will emerge, and that is an issue that needs to be looked at very carefully, but we should not get away from a central issue here, which is the IT.

  Q279 David Hamilton: You indicated in your opening remarks that it is not simply about working the systems as about people and the people at the cutting edge. Many of the staff that we spoke to over a period of time during the investigations you could ask to be a social worker as well as anything else, because they build up a bond, a relationship, and they have to understand what the constituent is like, and in many cases they have a distressed person at the other end of the phone. That sort of level of commitment is extremely difficult when morale is so low within the system because of management inefficiencies which are perceived by the staff, and indeed the uncertainty they face. How are you going to deal with that?

  Alan Johnson: Let me give you an example of why some staff break down in tears and frustration. You are absolutely right in what you say about this delicate job they do, which is why I emphasized that at the beginning. This IT system, one of the reasons why there are so many stuck cases was that it did not have a rollback procedure. What happened, if someone processing a case under the new system made a mistake, put wrong information in, if they realised they had made a mistake and put the wrong information in, they had to go right back and start the case all over again. There was no rollback facility whatsoever. If they did not realise, and they carried on processing, it was a stuck case. It could not be moved. That is just an example of the kind of frustration being caused to the staff, who have a difficult enough job to do anyway for the reasons you have said, being this interlink, piggy in the middle, between two human beings with a child or children whose relationship has ended. There is the frustration of not being able to operate the system. You said to me there are morale problems. It is not just about the IT; it is about morale. I think you are absolutely right, but the morale is linked to a huge degree to the IT. It cannot be a very happy place to work in, despite the tremendous work they do and some of the satisfaction they get from that, to constantly be lambasted because of the frustration of getting the system to work. You have to empathise with them.


 
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