Select Committee on Work and Pensions Minutes of Evidence

Examination of Witnesses (Questions 40-59)


17 JANUARY 2007

  Q40  John Penrose: I wanted to ask about the variation and the 25% envelope and the on-going reassessments of the assessment under the new process. I think Ms McLean, you were saying that you viewed this relationship as closer to a taxation relationship, an on-going need to be updated. Do you think that the 25% variation figure before a reassessment gets triggered is right, is too high? Should it be improved? Are you happy with it?

  Ms Maclean: I think it is on the high side. I was quite surprised, I would have expected 20 rather than 25, but I have no strong objections. I certainly have not done any maths to support my view.

  Q41  John Penrose: Any other thoughts from either of the other two?

  Professor McKay: I think the White Paper makes the assertion that these incomes are quite stable. In the experience of tax credits, where all we have is people ducking and diving out of jobs, it is probably hard to call that stable on a year to year basis. It would be nice to see some evidence on how much variability there actually is. I have also got a slight concern that we work with this complex tax system, NRPs may well be on tax credits, and all these kinds of reassessments looking forwards and backwards really being rather more complex than the current sales, and tax credits have a kind of financial disregard upwards (20,000, or up a percentage), so I can see it being a lot more complex than it would appear to have been. I think people do not tend to save from their income. If you have of good year, which means you then have a higher chance for assessment probably 18 months to two years later, you will not have made any savings from that and people will then be facing cash flow issues and, for that reason, I think 25% is quite high.

  Q42  John Penrose: That is also an argument, not just for 25% being potentially too high, that is also an argument about frequency of review and whether or not it should be annual or quarterly. What you are saying there is that with all the problems of tax credits, and, goodness knows, I suspect every single one of us around this table has a stream of people at our surgeries complaining about tax credits, that is due to come and hit us as well?

  Professor McKay: Yes. There is certainly a danger that all those kinds of things that applied to tax credits will apply exactly the same to this kind of approach to calculating child support. You could obviously also have people who are receiving child support and receiving child tax credits as well, so all these kinds of complexities as to what their actual financial situation is, and predictability, although I have not done the maths as yet, you could still be having tax credit style problems for 2008-09 onwards.

  Ms Kazimirski: I do not have anything to add to that.

  Q43  John Penrose: A final question here about whether or not the Chancellor should adjust liability in the case of shared care. We sort of sidled up to that issue with an earlier question. In the past, as I understand it, shared care has resulted in some sort of impact on the assessments that have happened and that, I think, has probably directly contradicted the principle that you enunciate, Ms McLean, about whether people should effectively pay for access to children. That was the way it ended up being pursued. What is your view on that going forward in the new system?

  Ms Maclean: I worry about it, for a number of reasons. Not because I do not wish to see parents sharing the care of their children. Of course that is everybody's aim. I worry about it because it has added to the complexity of the scheme and I think that our attempts to simplify it are important and worthwhile. I worry about it because evidence from Australia shows that shared care arrangements tend to break down rather more frequently and rather sooner than anyone had expected, and I worry because there may be an impact on contact disputes, it may stir up difficulties over contact, and that would be very unfortunate.

  Q44  John Penrose: Based on, I think, most of your earlier comments, you would like to mentally separate care, shared or not, from contact, and I think you were, all of you, saying that you thought the CSA's role should not be to deal with contact as part of an overall package of parenting, but that package does not include the CSA's role, if I can put it that way, or the CSA is only part of that. Is that a correct summary of where you have got to?

  Professor McKay: It is, but every English-speaking country with a child support system makes some allowance for sharing of care. They do it very differently, some have low thresholds, some have high thresholds, but New Zealand, Australia, Canada, most US states make some kind of child support adjustment where care is shared, where the child is with typically the father for a period of nights, on average. What is proposed in the White Paper would seek no adjustment made for any kind of sharing of care, and I think that that has potentially large implications, potentially big effects, on the kind of maintenance assessments that people have at the moment, and I think, although we try and keep these things legally separate, these are kind of equated. In the debate John Hutton did talk about the importance that child support things are both enforced, and he talks about in some senses it being a problem that they should be enforced, so I do worry that it is a step into an area where every other jurisdiction in the world has some kind of allowance made and that we will not.

  Q45  John Penrose: So how would you ensure that it does not knock on into contact arrangements?

  Professor McKay: It is a difficult one.

  Q46  John Penrose: That is the crucial question, is it not?

  Professor McKay: I think when the Government talks about this, it tends to down-play the amount of shared care that there is, because it bases it upon current clients of the CSA, and the number of current clients of the CSA who have to put up significant overnight stays is quite small, whereas if you were to generalise this to the wider population, then there is more sharing of care among the rest of the population than there is for the CSA group. I think there is good evidence that, where people do have some kind of shared care, they are more likely to pay child support, they are more likely to take an interest, so there is a kind of incentive argument for having some kind of production. No doubt people end up having extra costs for looking after the kids. Are we really saying we do not care about the fact he has got extra costs looking after the kids, we are only going to look at one person's costs? That is one thing that actually is a big change. I have mixed views about it, good and bad, but I certainly think it will arouse controversy and dispute.

  Ms Kazimirski: Either way, you will still get problems. For example, the way that it has worked in the past where an overnight stay reduces the payment, some parents with care will say, "It should not because I actually still feed the child before they go to the non-resident parent." You will get this. As we said earlier, trying to be completely fair and accurate and really reflect people's circumstances is very difficult to achieve.

  Q47  Natascha Engel: I want to ask a bit about benefits, disregard and the balancing of the child poverty aspect with the disincentive to work. We have had a bit of expert evidence on what the consequences would be on each of those aspects. I was just wondering what your opinion was with regard to a full disregard on the parent with care claiming income support and Jobseeker's Allowance?

  Ms Maclean: I would love to see full disregard, as you might guess. I think the arguments for disregard are, again, making the scheme clearer and simpler. I think research is planned to look at this more closely, but I do think in the past the job-seeking behaviour of lone parents has not been well enough understood, and I think the impact of a small amount of money is not as powerful as people might think. The main difficulty, again, drawing on the one-parent families helpline information (and I am a trustee, so I am quite familiar with their client group), there is very much a desire to work, not full-time necessarily but in a suitable, part-time, flexible way. The disincentives to work are to do with child care, they are not to do with £10 or 20 a week, and I think that it is very important and is not given enough consideration.

  Q48  Natascha Engel: What about the others?

  Professor McKay: It looks as if there is a full disregard within the tax credit system, but in a sense there is a big unfairness between those who are out of work and those who are in work, because for those who are in work it does not affect their tax credits, which is one of the reasons to go for a big disregard for income support. I suspect, once the disregard got to about £40 a week, the number actually getting more money would be relatively small. So I think, as long as it goes up substantially, whether it goes up to £40 or is a complete pass through is not going to make a huge amount of difference. Hence, you do not want someone with £200 a week maintenance being able to qualify for income support, which seems to be his view, and I think that might well command attention, but, again, the number of people that affects is relatively small. So, I think a much larger disregard is operationally very similar to a complete disregard.

  Ms Kazimirski: There might be some other associated benefits as well in terms of communication between parents. I can think of quite a few situations where the parents are on benefit, therefore the CSA get involved. From the NRP's point of view, quite often he does not realise that is what happens and he thinks the parent with care has taken him to the CSA and that he is paying all this money and "She must be rich with everything I am giving her", and does not actually realise that the money is not being passed on. So there could be some benefits to the relationships between parents, which then affects the relationship with the children too.

  Q49  Natascha Engel: If you all agree to a full disregard, do you have any evidence that there would be a positive impact on child poverty rates?

  Ms Kazimirski: Not from my perspective, but from other research that is definitely the case, yes.

  Ms Maclean: There is clear evidence that small amounts of money in that context do have a powerful impact.

  Professor McKay: There are two issues there. One is will it incentivise work or not. If you can get people into work, it obviously has a big impact on poverty. Whether it will take someone on income support from below the poverty line to above it, I do not think it would because it would bring them a lot closer to it than they would be at the moment. On the disregard question, I think there is no reason why this should not happen pretty soon. I do not see the reason why it needs to be delayed. It needs to be increased; it needs to happen soon. You can argue about the amount of it, but I think there is no reason why it should not be doubled, tripled and done very quickly, and I think most people would support that.

  Q50  Natascha Engel: Do you think that a high level of full disregard would be an incentive for the parent with care to apply to the Child Maintenance and Enforcement Commission rather than going through to do private arrangements?

  Professor McKay: Obviously there is an issue here. When it is done by the CSA the Department knows about the amount that is being paid, and the suspicion has always been that there are these private arrangements out there that are happening at the moment, so I suspect there is really an incentive to bring those private arrangements out of the shadows into the light. The anecdotal evidence is that people are saying good cause, but they are actually receiving some maintenance. It would be a good way of, hopefully, taking those out of the darkness into the light really. I think that would be quite valuable news. Whether there is a £10 disregard or no disregard, for most people at the moment the incentive is to make a private arrangement and not declare it, and that is not very good for the integrity of the system.

  Ms Kazimirski: It is hard to say what the break-down will be, but I think there will probably be some parents with care who have the CSA involved and the £10 did make a difference to them. If the CSA is no longer involved automatically they may actually end up making a financial sacrifice in order to maintain good relations, because then it would definitely be clear to the non-resident parent that she is taking him to the CSA and, therefore, he can blame her for it. I think there will be parents in that situation as well.

  Q51  Natascha Engel: We have had some interesting ideas around guaranteed child maintenance and about a time-limited guarantee scheme to ease parents with care through the transition arrangements and into the new arrangements. Do you think such a scheme would be a good idea, a bad idea, or are you indifferent?

  Ms Maclean: Any kind of guaranteed maintenance would be fine by me, as much of it as you can have.

  Professor McKay: I do not have any strong views. As you say, it is about complexity. Guaranteed maintenance has been recommended many times and never seems to get very far; so I do not have any strong views.

  Q52  Natascha Engel: Do you think it is an area that the Government should look at again, or do you think it has been done?

  Professor McKay: The kinds of countries where it works are different kinds of places, very different kinds of governments, and often very different ways of assessing and enforcing and all the rest of it. I do not really see much mileage as a temporary measure. I think people want the system to be worked out—sort out the paying and make sure people do pay. Some of the parents we spoke to said that if maintenance was guaranteed, it would take away the incentive to pay because they know they are going to get the money anyway. I am the kind of person who would rather see higher child benefit for everybody rather than this wedge of guaranteed money for a particular group.

  Ms Maclean: But it is something that we have not tried, and there are all kinds of myths and uncertainties about what in fact we have, so to try it in a temporary way would at least be a good pilot exercise to see if it did all the terrible things or all the wonderful things it was meant to do.

  Ms Kazimirski: It might add complications to the transition, certainly. It would be hard to understand what is happening for parents anyway, so to add that as another factor, I think, would complicate things.

  Q53  Greg Mulholland: I was going to ask a couple of questions about collection and compliance. As you know, the White Paper states that it aims to collect maintenance more efficiently, building on existing successful methods. I think that is part of the White Paper that quite a few of us would question as to whether the methods are particularly successful or not. In terms of collection, do you think that C-MEC should provide a maintenance collection service, and, if so, what kind of service should that be to enable it to actually deliver the collection that needs to happen for the system to work?

  Ms Kazimirski: They should definitely provide a collection service. If the suggestion is that everybody should either be on some sort of maintenance direct type arrangements, I think we have established that there is definitely still a role for C-MEC to be collecting money. I think one of the suggestions has been to perhaps move to deductions from earning and withholding wages as being the standard way of collecting money. This goes back to the point about what C-MEC needs to be. Does it need to be the kind of hard-line extreme cases only: because if it is not, if it is still supposed to respond to parents where it is not actually to do with the non-resident parent not paying but it is to do with the fact that they cannot agree the amount of money, or the parent with care thinks that he can afford more, and so on, if you go straight to deduction from earnings for them you are going to antagonise many fathers, which I think we should care about because it will affect their compliance. Even if reduction from earnings makes it less likely for them to be possible to be non-compliant, it is still an issue and, of course, it affects their relationship with the parent with care and with the children. If you end up going straight for a deduction from earnings, you are not actually tailoring anything to the non-resident parent and you are not taking into account their circumstances or their past payment record at all. It ignores continued relationships and circumstances.

  Professor McKay: I think, when the accounts came out in July, Tony Blair made a speech about you cannot make an agency cost-effective, it has got to assess, collect and enforce. At the time it did seem that people were looking at this idea that the assessment function could be separated from the other two, but that idea, which then had some merit and was being discussed, seems to have vanished. If anything, C-MEC's powers are going to be even wider than the CSA's, if we believe the White Paper, particularly in terms of the enforcement side. I think, because that was never really flagged up, there has not been much discussion about the wisdom of having these things separated. I suspect this is partly how things have vanished, basically, whether assessment and collection takes place within the same building or not, but it is a shame that kind of discussion was never really had in any detail. For that reason, I do not have any particularly strong views about whether it is better to have them together or separate.

  Ms Maclean: If you take the tax analogy, which is my preferred way of seeing this operation, then there is no difficulty in having the three functions together.

  Q54  Greg Mulholland: In terms of private arrangements, of course, there is a strong emphasis on that. What incentives do you think there need to be for resident parents to comply with those and at what stage should C-MEC get involved and how should that process be triggered?

  Ms Kazimirski: I think there probably is a role for deduction from earnings. Again, if there is proof of non-payment in a private arrangement, then the penalty could be that it is straight to deduction from earning orders and there is no sort of in-between and potentially straight to a charge, where there would not be normally, going back to our earlier discussions.

  Professor McKay: People are paying debts typically, so it depends on their ability to pay, so you need to look at things like how their income is changing and, to some extent, their willingness to pay, and I think willingness to pay would be enhanced if they have been subject to a discussion to which they agree. There is a third aspect, which is that people comply if they think, at the end of the day, they will be forced to comply. Some will decide to string it out and go down that route, but people are more likely to comply if they feel that there is some kind of enforcement mechanism that is going to work, because they are going to see it as essentially fruitless to continue that. People need to believe this body has teeth and will use those teeth and be effective. Compared to other areas of life, a very high proportion of people buy a TV licence because they believe that enforcement is effective, even though enforcement probably is not very effective. Fine enforcement has been recently pretty low. Again, that has been transformed over the last few years. People need to believe that they will be made to pay up eventually, which at present many of them do not think they will be.

  Ms Kazimirski: It will also encourage parents with care to try it out as well.

  Ms Maclean: I agree.

  Q55  Mark Pritchard: Before Christmas there were certain media headlines suggesting that one of the proposals for non-payers might be to tag them and to seize their passport. Given the recent events over the last 48 hours where certain people who were tagged, who have perhaps done something more serious than not paying for their child's maintenance, have been able to abscond and have gone into the ether, I just wondered whether, in principle, you think it would be right to have those sorts of measures and whether you think they would work?

  Ms Maclean: I do not think they work and I do not think they are conducive to human dignity.

  Q56  Mark Pritchard: Given the Government resources, should we take it seriously? The Government, surely, does not make mistakes for the sake of it and would not have made a public statement to the media unless it was something they would seriously consider. So, would you welcome it, or would you go further and say you would condemn it even?

  Ms Maclean: I find it very unappealing and unhelpful.

  Professor McKay: I think the reason in the past the whole thing was slightly more attractive is because one thing parents will say is that they are not paying maintenance and yet they are having a foreign holiday, so that kind of stops that, there cannot be any more foreign holidays. Other than that kind of vengeance point, I do not see how it is supposed to make people pay just because they are going to have to stay in and are not going to travel. That does not have any link to actually paying the money. It punishes them in some way but it does not really give them the incentive to pay. I do like the passport idea to just take away the ritual complaints about them going off on a foreign holiday.

  Ms Kazimirski: I cannot comment on that.

  Q57  Mark Pritchard: Do you think the increased use of enforcement powers should be linked to improvements in accuracy? I think it was the National Audit Office that suggested that 50% of cases were inaccurate and, therefore, trust in the whole system is undermined. Do you think there should be a progression towards more enforcement powers based upon increased levels of accuracy?

  Ms Maclean: I think as you simplify the system it is easier to be more accurate. You are moving in the direction of greater competence, more effective assessments and compliance.

  Professor McKay: The two-thirds figure that were inaccurate related to those cases taken to liability orders in the Magistrates' Court. They took about 50 cases and looked at those that went to the liability order stage and found that two-thirds were either inaccurate or the procedure had gone wrong. I think that raises questions about whether it is right for the CSA not to have to go through that process but to take over those kind of powers. I would like to believe that a simpler system leads to a more accurate system, but there is nothing in the CSA's experience so far. They have got a much simpler system and accuracy is no better. That is partly to do with the way arrears are calculated. If arrears occur it is difficult, under both circumstances, to take a full decision, and the accuracy is no better now than it was before. Certainly if C-MEC is supposed to take over the role, not needing a liability order, we would want to at least see that the level of accuracy was somewhat higher than it was a few years ago.

  Ms Kazimirski: I agree.

  Q58  Mark Pritchard: Do you think, in principle, the same organisation can, on the one hand, give advice to parents and, on the other hand, enforce child maintenance obligations?

  Ms Maclean: I think the word "advice" is the problem. I think C-MEC can give information and guidance rather than advice.

  Ms Kazimirski: On child maintenance issues as well.

  Mark Pritchard: Thank you.

  Q59  Justine Greening: David Henshaw was very clear in his report, suggesting that there needed to be a clean break with the existing organisation administrators, the Child Support Agency, and then a new organisation that would administer new cases going forward. He was pretty adamant about that and he did talk about this clean break, even to the extent that the old organisation would pursue the old debt. However, when the White Paper came out the new C-MEC organisation has to do it all, so it is going to end up looking after the old system, the sort of new system that we have at the moment, and then the new, new approach that will be within C-MEC itself. Do you think that the Government would have been better off following Henshaw or can you see some merit in having it all under one roof?

  Ms Maclean: I think a change of name, clean break, not clean break—all of these issues are relatively unimportant. I think the important issue is taking time to look at the detail, look at how implementation will work, to be less focused on the merit of legislation and more focused on the actual nitty-gritty of how this is going to work; and how it works will depend very much on resourcing, it will depend on having good quality staff, it will depend on having proper IT support and it will depend on having staff who are not stressed and confused by excessive change. Your question is making me think back to the Bristol Royal Infirmary Inquiry, which I sat on, which was very much looking at the impact of rapid change on people working in organisations and how very disruptive and depressing it is and how dysfunctional it makes them. The staff have to feel that they are trusted, properly resourced and equipped to do the job that they are asked to do. What they call the organisation is neither here nor there.

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