Stephen
Hesford: Is the hon. Gentleman talking about the
commission looking to make a notional calculation of weekly income on
capital or a calculation of actual
income?
Danny
Alexander: The hon. Gentleman has made a good point. As
drafted, the amendment refers to actual income, although he may argue
that the income should be notional. I would be happy to hear that, and
it might be worth debating, if the amendment were accepted. However, as
drafted, the amendment does not make that distinction and thus would
refer only to actual
income. I was talking
about variations. I foresee problems with leaving the variation system
to bear the burden of dealing with cases when such gaps occur. The
Minister might argue that the amendment could lead to a significantly
increased administrative burden on CMEC, because additional income
information would have to be taken into account. At the very least,
that is debatable, because processing variations also imposes an
administrative
burden. Let us bear in
mind that HMRC has much of the information, so it could be part of the
data-sharing arrangements between it and CMEC. If CMEC were to get into
the habit of arranging matters on a regular basis and that was part of
the information that had to be provided at the beginning, the
arrangement that we are proposing to ensure that such income sources
would be included from the beginning could be at least as
administratively efficient. Such arrangements would certainly not
impose any undue extra burden. The cases to which I am drawing
attention are those when substantial income might not have been
disclosed or taken into account in the basic
calculations. There is
also the other problem that sometimes taking income in such forms from
capital can be a way of avoiding a full income being taken into account
in respect of a maintenance assessment. The amendment makes an
important point, and I hope that the Minister will give it fair
consideration. It would improve the
chances significantly of ensuring that the full income of a non-resident
parent is taken into account when a maintenance assessment is
made. Andrew
Selous: I listened with interest to hon. Gentleman. I must
admit that I am in broad agreement with the points that he has made. It
is a curious anomaly that some sources of income are not taken into
account in the calculation. I imagine that that sentiment is shared
fairly broadly on the Government Benches. It is interesting that the
Department’s research report No. 285 of 2005 by Atkinson and
McKay, “Investigating the compliance of Child Support Agency
clients”, found a widespread belief among working non-resident
parents, and particularly those in the civil service, some of whom are
in the Room, and the armed forces, that they were easy targets for the
Child Support
Agency. It was
reported that there was resentment that those with the ability to
control their income find it easier to evade paying child maintenance
at a level that reflects their true income. It has also been reported
that that resentment fuels non-compliance, because people are unhappy
at having to pay when others can get away with it. Those on PAYE who
have a regular job are easy targets, while those who control their own
business or those who have complicated family financial arrangements
and can set up dividends or have money diverted to their partner get
off. That leads to a sense of unfairness and to people not wanting to
comply. It is all part of the culture, which we are right to mention so
often. It is important to make sure that we have a culture in which the
system is perceived as fair and equitable. I shall listen with interest
to the Minister’s response to amendment No. 83—I am
certainly in favour of
it. 6.15
pm New clause 15
should go hand in hand with amendment No. 83. One without the other
would not provide the full toolkit that the Minister will need to make
a success of CMEC. The new clause would give the commission powers to
look at what exactly a non-resident parent is doing to try to deprive
himself or herself of income. Paragraph (b) states
that “the Commission
shall regard the person’s obligation to support his children of
paramount
importance.” That is a
key phrase, which is necessary to direct Her Majesty’s Revenue
and Customs and the commission on how to act in such
cases. When the
Minister responds, I imagine that he will say that the measures are not
necessary, because there are existing powers under the 1991 Act.
Technically, he would be correct, but I think that he would also agree
that the Secretary of State has in the past failed to use those powers
and that, in practice, the grounds on which a departure or variation
can succeed are complex, tightly drawn and, frankly, difficult for
parents with care to
access. New clause 15
would require the Secretary of State to make regulations dealing with
this issue, rather than it being left to their discretion. The
amendment would establish that in determining whether it is reasonable
to
apply this provision, the commission should pay due regard to the
importance attached in public policy terms to the non-resident parent
properly maintaining his children, having regard to his actual ability
to pay. We all know from our case loads that it is the issue of
non-resident parents who are able to be clever—as they would see
it—that causes us and our constituents the greatest concern and
which has led to some of the most severe and, perhaps, justified
criticism of the Child Support Agency. It feeds a culture of resentment
towards the agency that some people are perceived as getting away with
it. The amendment and
the new clause are intended to give the Minister the tools to do the
job properly, to reduce that sense of resentment and unfairness and to
make the system work properly, as far as all parents with care are
concerned.
Mr.
Plaskitt: I am grateful to the hon. Members for Inverness,
Nairn, Badenoch and Strathspey and for South-West Bedfordshire for
their speeches in support of the amendment. I am also grateful for the
important intervention by my hon. Friend the Member for Wirral, West.
Let me try to reassure them about our
intentions. We agree
that we should consider whether the commission should have a means of
dealing with non-resident parents who intentionally deprive themselves
of income in order to reduce their maintenance liability and those who
have significant sources of income that are not currently taken into
account in the main scheme. However, we must consider the appropriate
place to take account of such complex financial circumstances. Taking
account of deprivation of income, as new clause 15 would enforce,
entails the commission deciding whether any observed reduction in
income is intentional or reasonable, which would potentially cause
significant delays in the processing of such
cases. As has been
pointed out, the Secretary of State has the power to make those
regulations and has done so for the 1993 scheme. However, these powers
were not used for the 2000 scheme precisely to avoid such complex
circumstances. We believe that that is the right approach. To introduce
regulations to tackle the small number of non-resident parents who
successfully deprive themselves of income into the new arrangements
would add unnecessary complication and, therefore, cause additional
delays in finalising maintenance calculations and ensuring the flow of
money to children. If these powers were applied, we would risk creating
considerable additional work for the commission by casting doubt on the
income information supplied by all non-resident parents. Similarly, on
amendment No. 83, it is vital that the definition of income in the new
statutory maintenance scheme reflects operational realities. I know
that hon. Members are well aware of the pitfalls in making maintenance
calculations too complicated. Indeed, they may recall that the
definition of income used for the first scheme was far too broad and
caused the agency, children and parents significant problems, as
evidence often proved difficult, if not impossible, to obtain, made
little difference to the maintenance due and opened the system to abuse
and delay by non-resident parents.
Danny
Alexander: I am grateful to the Minister for making that
point. However, is it not the case that the information on types of
income referred to in amendment No. 83 is routinely collected by Her
Majesty’s Revenue and Customs? Surely some of the proposals in
the Bill reflect the idea that the Minister has advanced about having a
closer relationship with HMRC, which I support and would perhaps go
further on. However, if there is to be a data-sharing arrangement,
surely it would apply to these categories, which would mean that where
the HMRC holds information it can routinely be taken into
account.
Mr.
Plaskitt: I am afraid that the issue is more complicated
than the hon. Gentleman imagines, as is often the case with such
issues. HMRC has some of the information to which he is referring in a
form that is easily attributable to individual taxpayers, but not all
of it is attributable, so the matter is more
difficult. We are
clear that the amendments would not allow a workable definition of
income. If legislation were to require all those items in their
entirety to be taken into account on the initial calculation, the
operational effects of the amendment would be extreme and adverse. If
commission staff were expected to investigate every bank account, every
dividend and every piece of capital where there was the potential to
earn income by a non-resident parent, the calculation process would
become unworkable.
Paul
Rowen: Considering the Minister’s earlier comments
about not all information being owned by HMRC, does he not think it
important that our new clause 6—or something like it—is
included? That would give the commission the power to carry out such
investigations and respond to issues raised by parents with
care.
Mr.
Plaskitt: No, absolutely not. We are not going back to
trying to set up the commission as an investigatory body charged with
the duty of looking into people’s personal finances. We know how
complex that task is, and it is not the purpose of the commission. The
answer to the hon. Gentleman’s point lies in other means, and
the other changes that we are introducing in the Bill come closer to
answering his concern than his suggestion. Basing the assessments on
tax data and having the tie-up between HMRC data and the commission is
important, as are the annual fixed-term assessments, the new sanctions,
which we will come to, and the existing sanctions for not revealing
information. That is where the answer to his point lies, rather than in
trying to invent a new financial investigatory authority, which it is
inappropriate to ask the commission to
do.
Andrew
Selous: I am grateful to the Minister for giving way; he
has been very courteous. I apologise if he has already given this
answer, but I am still not clear why amendment No.83 would cause
problems, if we were to use tax data from the previous year. Why can
the information not be transferred in the same way as income data? Why
would that cause any extra work for CMEC? Frankly, as a matter of tax
evasion, if the information is not there, one would expect HMRC to deal
with the matter anyway. I am still not clear on that point from the
answer that the Minister has given.
Mr.
Plaskitt: That might be because I have not reached the end
of my contribution. As I go on, I hope that that issue will become
clearer. The amendment would even require current accounts with incomes
as low as a few pence a week to be included in the maintenance
calculation. Almost every non-resident parent would have such assets,
and the additional work load for the commission would simply mean that
it would not be able to function
properly. We believe
that the variations scheme is the place to deal with the kinds of
complex financial matters that the amendments seek to address. The
variations scheme already contains grounds for including dividend
income, investment income and income from assets in maintenance
calculations. In addition, we already have the power to introduce
grounds for a variation to cover intentional deprivation of income, and
paragraph 9 of schedule 4 to the Bill will carry forward the powers to
estimate income, where the information relating to a non-resident
parent’s income is believed to be inadequate or unreliable. We
believe that those powers specifically, and the variation scheme more
generally, are the best means of taking account of the difficult
circumstances that the amendments address, without unnecessarily
impacting on the majority of cases to which the circumstances do not
apply. It is a question of a proportionate response to the scale of the
problem. Let me
add—I hope that this will reassure those who have spoken in
support of the amendments—that we are currently meeting
stakeholders, including One Parent Families, to discuss the best way to
deal with those complex issues and to decide the best way to deal with
the circumstances in practice. We are also investigating ways to
strengthen the variations regime to help ensure that non-resident
parents’ liabilities accurately reflect their ability to pay. In
addition, we will be taking advice from the new commission before
introducing the necessary secondary legislation to address the issue.
Depending on the outcome of those discussions, we will implement
strategies to help ensure that non-resident parents are unable
artificially to reduce their maintenance liabilities by depriving
themselves of income or disguising their true ability to pay assessed
maintenances. I hope that those reassurances will enable hon. Members
not to press their
amendments.
Danny
Alexander: I am grateful to the Minister for his response.
He has understandably and rightly said that there will be further
consultation, discussion and debate with stakeholders and
representative organisations. However, I am still not convinced that he
has answered my point about the problem of putting all the burden on
the variations regime, in that it still requires the parent with care
to come forward and apply for variation, which makes assumptions about
the parent with care’s knowledge and their willingness to come
forward for a variation, having gone through what may already have been
a very lengthy, bureaucratic and delayed process to get the assessment
in the first
place. Therefore, it
is not my intention to push the amendment to a vote at this point, but
it is an issue that we need to come back to at a later stage. Although
the Minister’s criticisms of the range of issues contained
within the amendment may have raised an important point, to rely solely
on the variations regime to deal with such cases runs the risk that
non-resident parents with significant income from non-income sources
would be able to avoid paying proper maintenance to their children.
That is a circumstance that I think everyone in Committee wants to
avoid. Andrew
Selous: At the appropriate moment, I would like to press
new clause 15 to a vote. I have listened carefully to the Minister, but
I still do not feel that I have an answer to the extreme frustration
expressed to me by my constituents who know that their ex-husbands or
ex-partners are rearranging their financial affairs in such a way as to
pay a minuscule amount of maintenance. I think that the new clause
would go some way towards addressing that
problem. 6.30
pm
Stephen
Hesford: I am slightly mystified by the hon.
Gentleman’s approach, because I thought that he said that the
new clause would not really work unless in tandem with amendment No.
83, which has just been
withdrawn.
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