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Earl Russell: My Lords, the basic case for the amendment is one which the noble Baroness and I both made in response to the regulations of February 1994. The case is a strong one. The Government's response to it in Clause 24 of the Bill, though better than nothing, is definitely not adequate. The amendment will make it a good deal better. We are happy to support it. I shall not gild the lily because the noble Baroness put practically all the arguments in favour of the amendment.

However, I ask the Minister one crucial question. Is it the purpose of the 1991 Act that the parent with care should benefit? If the answer is yes, then the Minister must accept the amendment. If the answer is no, then it would be a strong argument in favour of the repeal of the 1991 Act.

4.45 p.m.

Lord Mackay of Ardbrecknish: My Lords, these two amendments are both concerned with the way in which child maintenance is taken into account in awards of family credit. Amendment No. 3 is concerned with the fixed award period of 26 weeks. This is a very important feature of the family credit scheme because it ensures that the working family has a stable source of income for the 26 weeks. It works to the advantage of most families because increases in earnings during that period are not eroded by reductions in the benefit. The amendment would breach that fundamental feature of the scheme by providing for the family credit to be reassessed when the maintenance is reduced. But, of course, maintenance can go up or down. If the amendment were accepted, it would not be reasonable to take account only of reductions in maintenance without also taking account of increases of maintenance or where maintenance is awarded for the first time.

At present, persons with care gain the full advantage of new awards of maintenance or increases of maintenance until their family credit becomes due for renewal. There is no reason why maintenance should be treated any differently from any other income taken into account in the family credit assessment. It could be argued that any other income would be likely to increase or decrease. Changes in maintenance are part of the usual pattern of income which can increase or decrease throughout the award and do not warrant special provision.

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Furthermore, it is difficult to see quite how the amendment would work. Because compliance is not 100 per cent., family credit needs to be based on actual maintenance being paid rather than on the maintenance assessment itself. If the maintenance assessment reduces, it is likely to be several weeks before a clear pattern of compliance emerges. It would not therefore be feasible to provide for an immediate reassessment of the family credit.

Taking account of changes in circumstances turns a simple scheme, the family credit scheme, providing a guaranteed source of income, into a much more complicated scheme with the inherent problems of delays and mistakes. We have recognised that there is a particular problem when maintenance is reduced because of a change in the child support legislation. That is why we have included in Clause 24 of the Bill provision for compensation to be paid to parents with care in this situation. In fact, we have already, in advance of the Bill, paid compensation to parents with care whose maintenance assessment was reduced as a result of the changes in child support regulations which came into force in April.

Amendment No. 46 builds on a long-standing arrangement whereby a single payment is made to people on income support which represents the total of their maintenance and their income support. It seeks to extend that arrangement to family credit and disability working allowance. The amendment is complemented by Amendment No. 3 which provides for the review of an award of family credit or disability working allowance when maintenance is reduced.

This payment arrangement is entirely suitable for income support, and for income-based jobseeker's allowance when it is introduced, because income support is calculated according to the amount of income received each week and takes maintenance fully into account. If the amount of maintenance due to be paid in any week is not received, the benefit recipient is entitled to receive an equivalent extra amount of benefit. Making one payment for the total of maintenance and income support avoids the problems for both the claimant and the Benefits Agency which would arise from the need for a revised assessment to be made each time maintenance was not received.

But the basis on which family credit and disability working allowance are paid is completely different. Both benefits are awarded for fixed periods of 26 weeks and take account of the amount of income being received immediately before the claim rather than the amount received week by week. The benefits take no account of fluctuations in any income during the 26 weeks of the award period. Non-receipt of the amount of maintenance taken into account in calculating the award does not result in extra benefit being due, as it does in income support. We should be getting away from the basic principles of these benefits if we treated maintenance within family credit and disability working allowance in the same way as it is treated in income support. An important further difficulty arises from the fact that—

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Baroness Hollis of Heigham: My Lords, I thank the noble Lord for giving way. Can he explain his reasoning further? He said that we should not treat maintenance within family credit in the same way as we would treat it within income support. I believe that that was the sense of it. Can he say why not?

Lord Mackay of Ardbrecknish: My Lords, I have explained that. I am surprised that the noble Baroness asks why. She knows that if income support is calculated at, to take an example, £50 a week it may represent income support of £30 and £20 maintenance. But that person in receipt of income support is still due £50 whether or not he or she is in receipt of maintenance. If the income support or the maintenance goes down, the person will still receive the £50.

The point of family credit is that it contains a £15 disregard. I shall come to why there is a significant difference between the two. As I tried to explain to the noble Baroness, with income support, maintenance is taken into account pound for pound against the benefit. But in family credit, the first £15 and at least 30 per cent. of the balance is disregarded. As a result, only the remaining balance can be provided for in any payment which represents the total maintenance taken into account, and indeed the benefit itself. For example, out of a maintenance payment of £20 a week, no more than £3.50 would be taken into account in the assessment and so be provided for in the benefit payment. If the payment is £20, a £15 disregard leaves £5; 70 per cent. of that is £3.50. It would simply not be possible to provide for the full payment of maintenance. To do so would mean the benefits system covering expenditure that was greater than the benefit entitlement. In comparing a person in receipt of family credit who has no maintenance with a person who receives maintenance, the noble Baroness asks us to take a road that could mean that if the maintenance were not paid the taxpayer would end up paying through family credit more than the person was entitled to, and more than was received by the next-door neighbour in the same circumstances except as regards maintenance.

Revising awards of family credit each—

Earl Russell: My Lords, it becomes important to ask the Minister whether he intends to answer my question: was it the purpose of the 1991 Act that the parent with care should benefit? If I do not receive an answer, I may find the Minister's silence eloquent.

Lord Mackay of Ardbrecknish: My Lords, I believe that the noble Earl, with his clever question, knows jolly well that the answer is that it is to benefit the parent with care. Earlier, I pointed out how family credit works. The parent with care, already on family credit and beginning to receive maintenance income during the—

Earl Russell: My Lords, I beg the Minister's pardon. He said just before my intervention that it was wrong for a woman receiving maintenance to be worse off than a woman not receiving maintenance. If the purpose of the maintenance payment is to benefit the woman, why?

Lord Mackay of Ardbrecknish: My Lords, either the noble Earl misheard me or I did not make my point about the neighbour carefully enough. I attempted to

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draw a comparison between two people living side by side, one of whom had no cause to receive maintenance but whose circumstance of work and family was the same apart from not being in a position to receive maintenance—perhaps, for instance, because her husband was dead—and in receipt of family credit, and a woman living next door, for example, doing the same job, in receipt of the same income and the same family credit but also in receipt of maintenance. I was trying to explain that the amendment could result in a situation in which, if the absent parent ceased to pay maintenance, one woman would receive a family credit payment of something like £66.50 in the example I am using, whereas the other woman would receive only £50. That was the comparison I was trying to make; it was not a comparison between one parent with care receiving maintenance and another not receiving maintenance. I know that this is a complicated issue. I hope I have made my point clear.

The important point is that, looking at family credit as a help for all people on low incomes who take low-income jobs and have family responsibilities—taking the whole field and not just the narrow field of people receiving maintenance—the great merit, the principle, of family credit is that it runs for 26 weeks. If we start to break it down only on the plus side, as the noble Baroness wants to do, and one section is eligible for family credit, it becomes very difficult to argue against the woman whose income goes down at work during the 26 weeks; and it then becomes very difficult to argue against recalculating family credit if the maintenance goes up, or indeed, as I mentioned in my speech, if the maintenance starts during the 26-week period. There is huge merit in the 26-week period being fixed. Leaving aside all the problems that I mentioned in relation to the arithmetic of family credit, I do not believe that it would be sensible and wise to go down either road that I am invited down by the amendments. I am afraid that I cannot accept either.

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