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Baroness Buscombe moved Amendment No. 25:

("(6) The regulations shall make provision for the calculation of the difference between the amount of child support maintenance paid by the non-resident parent pursuant to any default or interim maintenance decision and the amount of child support maintenance which would have been payable by the non-resident parent had the Secretary of State completed a maintenance calculation at the time of that default or interim maintenance decision."").

The noble Baroness said: My Lords, this amendment relates to default and interim maintenance decisions under Clause 4. As drafted, the Bill lays down a penalty while proposing that where a non-resident parent has been overpaying, that payment should not be returned. The Explanatory Notes state that this is necessary because it will encourage people to fill in the forms expediently. On the face of it that might seem a good idea. However, is it fair? Is it reasonable?

Perhaps I may use an analogy. If one overpays one's taxes, for whatever reason, that overpayment is returned--eventually and without interest! We are concerned that the approach in Clause 4 is too draconian and will not help in the Government's real efforts to build the credibility and esteem of the Child Support Agency. I beg to move.

Baroness Hollis of Heigham: My Lords, currently we have a system of punitive interim maintenance assessments which are imposed where full information cannot be obtained or the non-resident parent fails to co-operate with the Child Support Agency. However, this scheme does work. Assessments are generally very high (averaging nearly £90 a week) and the vast majority of non-resident parents due to pay an interim maintenance assessment pay nothing at all (almost 90 per cent). This allows large arrears to build up, making enforcement difficult. This is a particular problem where the non-resident parent is self-employed. It was a scheme introduced by the previous administration in the hope of being punitive and therefore encouraging people to apply. But it had the reverse consequence of arranging such high levels of maintenance that none of it could ever be collected. As a result, arrears mounted.

We believe that the key factor in the low level of compliance is that non-resident parents know that they will often have to pay substantially less when a full maintenance assessment is completed. That is because, when the required information is finally provided, the interim maintenance assessment is replaced by a back-dated full assessment--usually at a substantially lower rate. So the incentive effect of the interim maintenance

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assessment is lost and those irresponsible parents who wish to delay meeting their responsibilities to their children are free to do so at no cost to themselves. It is a mess.

The new, simpler scheme will mean that in most cases we shall be able to make decisions about maintenance in a matter of days. Where a non-resident parent refuses to provide information about his income, we shall be able to obtain it either direct from his employer or, in self-employed cases, via the Inland Revenue. Parents who refuse to provide information can face fines of up to £1,000.

It is important to get maintenance flowing quickly, so where a final decision on liability cannot be reached straightaway, and where the non-resident parent refuses to provide enough information to allow his earnings to be estimated, we are introducing a simple system of default rates to get maintenance flowing.

Default rates of maintenance will allow the CSA, as a last resort, to get maintenance flowing at a "safe rate". Rates will be set at a level broadly reflecting the average income of the non-resident parent, with rates of £30, £40 or £50 a week according to whether one, two, three or more children are to be maintained. This will prevent large amounts of arrears building up and, because default rates will be put in place quickly, they will be easier to enforce.

If I understand its purpose correctly, Amendment No. 25 would provide that, when a final assessment is made following a default or interim maintenance decision, and the assessment is lower, the non-resident parent would be able to recover the overpayment. Where the final assessment is higher, and there is an underpayment, the parent with care would be able to recover the underpayment. We do not believe that it is appropriate to provide this retrospective supersession of all decisions made under Section 12 of the Act.

In the case of default decisions, we intend that when full information is available the full liability will be put in place from the date when the information was obtained. Maintenance liability for the past period will be recalculated only if the full assessment is higher than the default rate. We have adopted this approach because we want parents to provide information quickly and to pay the default rate in the meantime, but also not to gain any advantage by delaying the process. As I said earlier, this is the key reason why, currently, most interim maintenance assessments fail to result in any maintenance payment at all.

So, if someone has a default rate of £30, and it turns out that the full assessment should have been £50, we shall collect arrears for the past period. However, if the full amount turns out to be £20, we shall put that assessment in place only from the date when the full information becomes available.

The CSA will impose default rates only as a last resort--in those cases where the non-resident parent refuses to co-operate. If a non-resident parent genuinely does not know his level of income, and co-operates with the agency, we shall be able to use estimated earnings to arrive at a full calculation of

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liability. That is why the analogy is not exact with the system applied by the tax authorities. In proposing the amendment, the noble Baroness basically assumes that a default rate is somehow neutral, and the underpayments and overpayments should be treated in the same way as in the tax system. No, the default rate, which we expect to be a rarity, is still a rate that is set because the non-resident parent is defaulting. It is meant to focus his attention on paying his maintenance. It is not meant to be punitive; it is meant to be realistic.

Earl Russell: My Lords, does the Minister have information to hand as to what proportion of the alleged defaults result from the inefficiency of the CSA?

5.45 p.m.

Baroness Hollis of Heigham: My Lords, under the new system we are expecting the assessment to be made, on average, in six days and the money to be flowing in six weeks. I realise that all the noble Earl's amendments would so complicate the formulae that we should not have a hope in hell of meeting those timetables. But the rest of us believe that, providing the Government hold to their clear, simple, clean, decent, transparent and right approach, we shall have the money flowing, there will not be the errors that the noble Earl anticipates, and, as a result, questions of default will arise only where the non-resident parent wilfully fails to co-operate. If he co-operates but does not have exact information, as I say, we shall do a rough assessment of his estimated earnings.

So the default rate is a rate that is set because he is defaulting. It is not meant to be punitive. It is realistic, but it is meant to discourage what could be described colloquially as "messing the agency around". If he has paid more than he would have done had he responded promptly, that is a consequence of his delay and his failure to co-operate. If he has paid less, we shall chase up the shortfall so that he is not rewarded for delaying his maintenance payments and so that we see the children getting the money. As I say, this approach is not punitive. It is based on average earnings or average income of non-resident parents, unlike the scheme introduced by the previous administration. But there must be an incentive for non-resident parents to supply information quickly and to co-operate. Although I am sure that it is not the noble Baroness's intention, Amendment No. 25 would remove that incentive and might actually encourage the non-resident parent to play the system. I am sure that she does not want to see that happen. Given that explanation, I hope that the noble Baroness will withdraw her amendment.

Baroness Buscombe: My Lords, I thank the Minister for that response. Perhaps I may make it clear that there is no question of our wanting anyone to be rewarded for delay or default. However, we have already spoken about balance. I remain concerned that there is a question of balance here. I am very excited about the proposed timetable for the future. I hope that we shall soon know when that will become

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a reality. Obviously, it will make a big difference to the number of cases which might be termed cases of default. I shall read the Minister's response carefully in Hansard. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 [Departure from usual rules for calculating maintenance]:

Baroness Buscombe moved Amendment No. 26:

    Page 5, leave out lines 17 to 21 and insert ("shall make the application in writing").

The noble Baroness said: My Lords, this amendment is concerned with applications for the variation of the usual rules for calculating maintenance. Under the Bill as presently drafted, a person who applies for a variation,

    "need not make the application in writing unless the Secretary of State directs in any case that he must".

Why not? While not wishing to be bureaucratic for the sake of it, variations are important matters; they can have long-term consequences. We believe that there should be a permanent record in the form of a signature as opposed to an informal telephone conversation or meeting, where details may be misinterpreted or simply forgotten. I beg to move.

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