 House of Commons |
Session 2006 - 07 Publications on the internet General Committee Debates childmain |
Child Maintenance and Other Payments Bill |
The Committee consisted of the following Members:Hannah
Weston, Committee
Clerk †
attended the Committee Public Bill CommitteeTuesday 9 October 2007(Afternoon)[Mr. Christopher Chope in the Chair]Child Maintenance and Other Payments BillSchedule 4Changes
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: 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. At the same
time as introducing these new rates of calculation, we also propose to
increase the maximum weekly outcome to be taken into account from
£2,000 to £3,000, ensuring that higher earning
non-resident
parents do not unfairly benefit from the shift to calculations based on
gross income from net. We want to ensure that parents do not end up
paying far more than under the current scheme, that parents with care
do not receive far less, and that the movement of existing cases to the
new calculation rules is as supportive and seamless as possible. If
there were to be dramatic cash differences, it would inevitably cause
friction in those transfers, which is not what we want to see. We want
to ensure that there is relative equality in the cash amounts that
parents with care and non-resident parents are paying as the system
transfers from one formula to the other.
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 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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