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Child Support, Pensions and Social Security Bill

7.11 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Child Support, Pensions and Social Security Bill, has

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consented to place her prerogative and interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Bill read a third time.

Clause 25 [Regulations]:

Baroness Hollis of Heigham moved Amendment No. 1:

    Page 23, line 7, leave out ("10") and insert ("10(1)").

The noble Baroness said: I shall speak also to Amendments Nos. 45, 46, 62 and 64. The amendments place a cap on the amount of child maintenance payable. The opposition amendments would limit the amount of maintenance that a non-resident parent can be asked to pay for his children to £200 a week for each qualifying child.

In our previous discussions on the subject, I have always acknowledged that the arguments for and against a maximum level of liability are finely balanced. I accepted your Lordships' point that the financial arrangements for very wealthy families on divorce or separation can be substantially more complex than for other families. In particular, the courts could have difficulties in shadowing the CSA rates if the parents are wealthy and have complicated financial arrangements. It was put to us that if child maintenance figures are high, it could be regarded as spouse maintenance rather than child maintenance. I therefore undertook to consider the matter further and report back to your Lordships today.

The government amendments are different from the opposition amendments, although they are similar in effect. The opposition amendments would cap the amount per child--£200 for one, £400 for two, £600 for three or more. We propose a cap on the amount of net weekly income taken into account for the purposes of making a maintenance calculation. That cap will be set at a net weekly income of £2,000, as calculated under Schedule 1 and regulations. That means, effectively, £300 for the first child, £400 for the second and £500 for the third. When there are two children, our method aligns with the opposition amendment, but it is also compatible with the rest of the CSA assessments.

The liability of a non-resident parent with a net weekly income of more than £2,000 who has one child to support and no children in his second family will be capped at £300 a week. If he has two children to support, it will be £400 a week, or £200 per child. If he has three or more children to support, the figure will be £500 per week, or £167 per child if there are three qualifying children.

We propose to take account of any children in the second family against the capped income. If there is one child in the second family, the £2,000 net income will be reduced by 15 per cent before the maintenance for the first family is calculated.

We believe that a cap based on an upper limit of net weekly income rather than an amount in respect of any one child is simpler to administer, simpler for parents to understand and consistent with the rest of the scheme. We recognise that the decision on the upper

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figure is inevitably somewhat arbitrary, but we believe that £2,000 is justifiable, reasonable and pragmatic. A net income limit of £2,000 is broadly equivalent to an annual salary of just under £170,000 gross. That is 10 times higher than the £200 cut-off for low earners and five times the national average wage. That is sufficiently high to ensure that all children benefit from a reasonable level of maintenance, while providing that only those who are likely to have more complicated financial arrangements are affected. We have provided powers to ensure that the upper limit can be amended by regulation, subject to the affirmative procedure, should that prove necessary in the light of experience or future changes in society.

The amendments also provide for the courts to make a top-up maintenance order, in the same way as is currently provided for in Section 8(6) of the 1991 Act. That is another measure that your Lordships pressed for at earlier stages and I gave assurances that I would consider it.

We remain convinced that court-based agreements should, in the main, be settled in line with CSA rates, as that will avoid fluctuations in the level of maintenance when the parent with care moves on or off benefit. That is why, under the reformed child support scheme, we propose to open up access to the CSA for private, non-benefit cases when parents are unhappy and a new court order has been in place for at least a year.

Allowing the courts to make a top-up maintenance order is an important safeguard to ensure that children continue to share in the living standards of non-resident parents, even when the non-resident parent is liable for the maximum amount of child support. Separating parents and their lawyers will need to bear in mind during negotiations on a divorce settlement that a non-resident parent's liability for child maintenance will not necessarily stop because his net income exceeds £2,000 a week.

Very few parents will be exempted. Those who are will have extremely complicated financial arrangements and it will be more appropriate for them to be dealt with by the courts. They will know what level of maintenance they will be taking into the settlement.

I should also make it clear for the record that if the non-resident parent applies to the CSA for a variation of his assessment because, for example, of the cost of staying in contact with the children, the variation will be applied to the full amount of net income rather than the capped income being reduced by a further variation. The income that we are not taking into account in setting maintenance liability will be available to meet other expenses.

I hope that the amendments will alleviate the concerns that were raised previously by the Opposition and others outside your Lordships' House about the effects of the new scheme on the court-based financial arrangements made on separation by a few wealthy parents. The amendments will allow the courts, in establishing financial arrangements for very wealthy parents, to work from a fixed maximum child support

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liability. That should make it easier to establish the other aspects of the financial package and--this is what matters to me--produce stability in the financial arrangements surrounding the well-being of the child.

I hope that noble Lords will not move their amendments and will be content that ours will have the effect that we were pressed to accept on Report. I beg to move.

Earl Russell: My Lords, before the Minister sits down, will she estimate how many are the very few non-resident parents who will be affected?

Baroness Hollis of Heigham: My Lords, we have a case load basis of about 1.2 million parents--both parents with care and non-resident parents. We estimate that between 50 and 100 may be affected.

Lord Higgins: My Lords, this is an important amendment, although, as the noble Earl, Lord Russell, has just pointed out, the number of individuals affected is not very great. None the less, there is a point of principle involved. On Second Reading, back on 17th April--it seems a long time ago--I said:

    "Another aspect which causes us concern is that there is no upper limit on the amount which, under the new simplified formula, will be taken from the absent parent. There are important issues here which we can no doubt pursue in Committee--for example, where someone is immensely rich but an absent parent, the extent to which that income should be transferred back to the children of an original marriage".--[Official Report, 17/4/00; col. 469.]

This part of the Bill is--if I may use the expression--the child of the noble Baroness, Lady Hollis. She has done an immense amount of work on it in preparation and behind the scenes. She appreciated our concerns and said at earlier stages of the Bill that she would give them careful consideration.

As the Minister has pointed out, there are two sets of amendments. Our Amendments Nos. 41 and 42 would prescribe a maximum amount for each child, whereas the government amendments refer to a total income. They are broadly similar in intent, but they are not precisely the same. I am sure that whichever one is selected we shall find that one group of wealthy parents with one child will say they like it one way, and another with three children will say they like it another. Nonetheless, on the whole, that is something which we shall be able to tolerate. In particular, the noble Baroness has pointed out the complications which ensue as far as the second, third, or fourth families of a particular individual are concerned.

I have always been strongly of the view in debating such matters that, if the Government are clearly making a concession, which is undoubtedly the case on this occasion, it is wrong to perpetuate the debate more than necessary. I would simply say that we appreciate the care which the Minister has given to it. We welcome the amendment proposed. The matter is very finely balanced, but, rather than call a Division which

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we might lose, I think on balance it is better to accept the noble Baroness's amendment, and we on this side of the House do that with some enthusiasm.

On Question, amendment agreed to.

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