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General Committee Debates

Child Maintenance and Other Payments Bill

The Committee consisted of the following Members:

Chairmen: Mr. Christopher Chope, David Taylor
Alexander, Danny (Inverness, Nairn, Badenoch and Strathspey) (LD)
Boswell, Mr. Tim (Daventry) (Con)
Clapham, Mr. Michael (Barnsley, West and Penistone) (Lab)
David, Mr. Wayne (Caerphilly) (Lab)
Dorries, Mrs. Nadine (Mid-Bedfordshire) (Con)
Engel, Natascha (North-East Derbyshire) (Lab)
Griffith, Nia (Llanelli) (Lab)
Harper, Mr. Mark (Forest of Dean) (Con)
Hesford, Stephen (Wirral, West) (Lab)
Jackson, Mr. Stewart (Peterborough) (Con)
James, Mrs. Siân C. (Swansea, East) (Lab)
McCarthy-Fry, Sarah (Portsmouth, North) (Lab/Co-op)
McGuire, Mrs. Anne (Parliamentary Under-Secretary of State for Work and Pensions)
Owen, Albert (Ynys Môn) (Lab)
Penrose, John (Weston-super-Mare) (Con)
Plaskitt, Mr. James (Parliamentary Under-Secretary of State for Work and Pensions)
Rowen, Paul (Rochdale) (LD)
Selous, Andrew (South-West Bedfordshire) (Con)
Touhig, Mr. Don (Islwyn) (Lab/Co-op)
Turner, Dr. Desmond (Brighton, Kemptown) (Lab)
Weir, Mr. Mike (Angus) (SNP)
Hannah Weston, Committee Clerk
† attended the Committee

Public Bill Committee

Tuesday 9 October 2007


[Mr. Christopher Chope in the Chair]

Child Maintenance and Other Payments Bill

Schedule 4

Changes to the calculation of maintenance
Amendment moved [this day]: No. 65, in schedule 4, page 63, leave out lines 23 to 27 and insert—
‘12% where the non-resident parent has one qualifying child; 16% where the non-resident parent has two qualifying children; 19% where the non-resident parent has three or more qualifying children.’.—[Paul Rowen.]
5 pm
Paul Rowen (Rochdale) (LD): The Bill states that the amount of gross weekly income that will be deducted from non-resident parents is 12 per cent. if the non-resident parent has one qualifying child, 16 per cent. if they have two qualifying children and 19 per cent. if they have three or more qualifying children. If they earn more than £800 a week, however, the amounts that they would be expected to pay above the £800 threshold are reduced to 9 per cent. for one qualifying child, 16 per cent. for two children—
The Parliamentary Under-Secretary of State for Work and Pensions (Mr. James Plaskitt): It is 12 per cent.
Paul Rowen: Sorry, 12 per cent. for two, and 16 per cent.—
Mr. Plaskitt: It is 15 per cent.
Paul Rowen: Yes, and 15 per cent. for three; I thank the Minister for that. We tabled the amendment because we would like him to explain why that reduction is necessary above the £800 threshold. We do not see why the wealth of a high-earning, non-resident parent cannot be shared with his children. In proportional terms, the relevant amounts are small to the non-resident parent, but could make a considerable difference to the welfare of the child.
The Bill is largely about creating a more equitable framework, but the reduced rate for higher earners is likely to be a bone of contention between the parent with care and the non-resident parent, particularly if the parent with care has a considerably lower income than the non-resident parent. I know from personal experience that it is a bone of contention when a mother is struggling and sees that the non-resident parent is quite wealthy but is not sharing that wealth with their children. Will the Minister explain how the figures for the £800 threshold and the reduced percentages were chosen? The rationale behind them certainly is not clear to us.
What will happen if there is a change in the non-resident parent’s circumstances halfway through the year and he starts to earn considerably more? Will there be a reassessment? We are talking about issues of principle, fairness and equity.
Stephen Hesford (Wirral, West) (Lab): Will the hon. Gentleman give us cash figures for the changes that he proposes? What difference would they make?
Paul Rowen: The amendment proposes that there should not be a taper, so the percentage figures that are quoted for the first £800—12 per cent. for the first child, 16 per cent. for two and 19 per cent. for three—would be a flat rate. We do not see why wealthier parents should not share that wealth with their children, and we want to know why the £800 threshold and reduced percentages have been chosen. As far as we are aware, there is no rationale behind them.
Andrew Selous (South-West Bedfordshire) (Con): I am indebted to the hon. Member for Rochdale for tabling the amendment. There has been a change of Government philosophy on this matter. It used always to be the case that, however rich non-resident parents were, their children would share in their increased income going forward. I remember that some Labour Members strongly defended that principle when I served with them on the Select Committee on Work and Pensions in the previous Parliament.
When the hon. Gentleman was speaking, I looked at page 74 of the explanatory notes to see whether was some explanation for the Government’s change of heart in relation to different treatment of the two groups in terms of the percentages that apply according to their income. I did not find much comfort. The point is an important one philosophically and I shall listen to the Minister with interest to see whether there is a valid justification for what he has done. The question has been well put.
Mr. Plaskitt: I hope that I can satisfy the hon. Member for Rochdale. Let me begin by restating our commitment to ensure that all non-resident parents meet their financial responsibilities to their children. The Bill changes the basic rate that applies to all gross weekly income up to £800 a week, so that, as I think he now knows, the rate will be 12 per cent. for one qualifying child, 16 per cent. for two and 19 per cent. for three or more. As he said, it introduces new rates for those whose income is from £800 to £3,000 a week, at which point there is a cap. He now knows that those rates are 9, 12 and 15 per cent. respectively. The rates were chosen with the aim of preventing a substantial change in the cash liability for non-resident parents who move on to the new calculation rules. That is the straightforward answer to his question.
The £800 threshold corresponds to the amount of weekly income at which the 40 per cent. marginal income tax rate starts to apply. There is therefore a greater difference between gross and net income at and beyond those levels—a difference that we must take into account to ensure fairness in the proposed scheme. Without the second tier of rates, a non-resident parent with gross weekly earnings of £2,000 would end up paying £320 a week for two children instead of £282 under the current scheme. My hon. Friend the Member for Wirral, West asked what would be the cash impact of the proposal in the amendment. One way of putting it would be to say that, if the amendment were carried, the increase from current maintenance assessments for non-resident parents whose income takes them into the 40 per cent. band would be £64 a week for one child and £88 a week for two or more children.
The purpose of the two percentage tiers and the £800 threshold, therefore, is to match the new calculations as closely as possible in cash terms with the current assessments, thereby smoothing the transition. No new dispensation and no favours are being introduced for people on higher incomes. Instead, a level playing is being retained in relation to the current maintenance. That has to be done, because of the move from net to gross figures for calculation purposes.
Mr. Tim Boswell (Daventry) (Con): I have two quick questions that follow on from the Minister’s very clear explanation of what is going on. The first is whether he could give the Committee any measure of the distribution of winners and losers under his formula. What are the limits at which somebody to whom the current formula is applied and who transfers to the new formula will or will not be significantly affected, as far as the number or percentage change in the assessment are concerned?
The second question is bound to be in our minds after the Chancellor’s announcement of his pre-Budget report today. Tax rates can, of course, change. Has the Minister made any provision—I do not detect one—for scope to alter the percentages if material circumstances alter? He might say that that is a done deal now—that we are on a gross rate and that so it will be for the future. However, is not such a power at least worth consideration?
Mr. Plaskitt: I thank the hon. Gentleman for those two points. He asked first about a table of winners and losers. As far as I can recall, we published indicative figures on that. I do not have them in front of me, but the cash alteration on the illustrations that we have given is marginal in all cases. There are some slight “ups” and some slight “downs”, which is inevitable if a percentage basis is used.
The hon. Gentleman’s second question was why the percentage figures are expressly in the Bill and what happens if tax rates change. It is not so much a change in marginal tax rates that would have an impact; it is the threshold between the two. There is provision whereby if that were to change—for example, if a Chancellor were substantially to alter the point at which 40 per cent. marginal rates became applicable— regulations could be made to change the threshold point in line with any alteration that had been made in the Budget in respect of the 40 per cent. band. That would keep it consistent and the facility would be there to make the necessary change.
Mr. Mark Harper (Forest of Dean) (Con): Briefly, will the Minister confirm that the current rules that enable a variation in special expenses if a child has special needs will also be available under the new proposals to ensure that disabled children are properly looked after?
Mr. Plaskitt: I think that I am right in saying that those rules carry through to the new scheme. If that is incorrect, I will come back to it.
As I said to the hon. Member for Daventry, we will continue to review the rates of calculation during the course of each Parliament and reclaim the power to amend them by regulation. That enables any changes that are deemed necessary to be made more easily as and when they are required.
I discover that I will not have to write to the hon. Member for Forest of Dean because I have a note saying that I was right.
I urge the hon. Member for Rochdale to withdraw his amendment.
Paul Rowen: I am grateful to the Minister for that explanation. He has answered the concerns that we raised, and I am happy to withdraw the amendment.
Amendment, by leave, withdrawn.
Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD): I beg to move amendment No. 62, in schedule 4, page 63, line 39, leave out paragraph 4.
The Parliamentary Under-Secretary of State for Work and Pensions (Mrs. Anne McGuire): Hello.
Danny Alexander: Good afternoon.
The amendment relates to the
“increase in the flat rate and minimum amounts of liability”
from £5 to £7. It would leave out that section to probe the Government’s thinking as to why they are seeking to increase the minimum amount from £5 to £7. Also, it aims to uncover the justification for the figures. In percentage terms, to go from £5 to £7 is a significant leap. Is that leap because the £5 figure has not risen for some time? If that is the case and Ministers feel that it is important to have a minimum payment going forward that keeps pace with inflationary changes, do they intend to ensure that that figure continues to be increased in future years as circumstances continue to change? What assessment has been made about the impact of such a change? Obviously, the minimum figure applies particularly to people on very low incomes and non-resident parents on very low incomes, such as those taxed on benefit, for example.
Has the Minister made any assessment of the impact that the change will have on poverty, child poverty and poverty of working-age people who may be paying a higher level of reduced rate? If he has not conducted such an assessment, does he intend to ask his officials to do so? This is an open opportunity for him to explain his thinking, to reassure us that there is a consistent and logical basis behind the proposed increase, and to reassure us that the impact that it might have on poverty has been properly thought through.
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Prepared 10 October 2007