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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