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Child Support (Miscellaneous Amendments) Regulations 2003

7.37 p.m.

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham) rose to move, That the draft regulations laid before the House on 9th January be approved [6th Report from the Joint Committee].

The noble Baroness said: My Lords, as my right honourable friend the Secretary of State for Work and Pensions announced in the other place on 27th January, the new child support scheme will be launched on 3rd March. This means that parents whose child maintenance liability starts on or after 3rd March will have it calculated under the new rules, as will some existing cases which will convert to the new scheme early—a point on which I can elaborate fully if your Lordships are at all interested. The commencement order giving that effect has now been made. I am sure that your Lordships will join me in welcoming this development in the Government's plans to provide a simpler and more effective child support system.

I turn to the business before us today. We have before us amendments to eight sets of regulations which relate to the operation of the current and the new child support schemes. We also have some amendments to the transitional regulations which govern the conversion of cases from the current scheme to the new scheme. I apologise for the somewhat obscure language which makes sense only if one sees them as amendments to regulations amending existing regulations amending existing layers of legislation. They are necessary to update provisions for the new scheme as the world has moved on since we originally made the regulations. Examples of this are the amendments which relate to the new tax credits. Many of the amendments made by regulations relate to the introduction of new tax credits from April 2003. The treatment of working tax credit and child tax credit for income purposes in child support is covered in Regulations 6 and 8. Those provisions for working tax credit largely carry forward the existing rules for the working families' and disabled person's tax credits.

For the child tax credit the rules are slightly different, because it is support paid to the main carer throughout periods of work and non-work. In the current scheme, it is ignored when assessing either parent's "assessable income". However, in the assessment of the non-resident parent's "protected income", any award of child tax credit counts fully. In the new scheme, payment of child tax credit to the non-resident parent or his new partner will count towards his income. That is our best effort at a direct read-across, and I think that it is a pretty tight fit. It ensures

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that the personal choice of a couple as to who should receive the child tax credit for the family will make no difference to child support liability.

Regulation 2 makes a straightforward amendment to update the collection and enforcement regulations which relate to the current and new child support schemes. It carries forward the provisions in existence for working families' tax credit. It ensures that when a deduction from earnings order is in force, payment of child support maintenance is taken from the earnings, rather than any working tax credit paid to the employee through their wage. That policy is entirely a practical measure. The protected income calculation takes into account the circumstances of the household. It is right therefore that working tax credit is fully taken into account.

In the "assessable income calculation", working tax credit is taken into account only where the non-resident parent is the main earner.

Lord Higgins: My Lords, as always on such highly complex matters, the noble Baroness is tending to read from a prepared script. Very often we find that if she expresses matters in her own words, they are more comprehensible. So far as Regulation 2 is concerned, what exactly will happen?

Baroness Hollis of Heigham: My Lords, Regulation 2 means that working tax credit is not treated as earnings for the deduction of direct earnings orders. Say that Brian gets a wage of 150 a week and gets a top-up, for whatever reason, of working tax credit of a further 50. He is due to pay 30 child support. That is taken from his earnings, not from his tax credit. That is what Regulation 2 achieves. It is an entirely practical measure.

The two measures taken together are intended to help to strike the right balance between the important work incentive of getting regular maintenance to parents with care and ensuring that non-resident parents can afford their maintenance liability. It would be exceedingly rare that the maintenance liability due to be deducted from the wage packet would not be wholly covered by the earnings in payment. That is the point that I was making. The amendment that Regulation 2 effects ensures that there can be no confusion on that point.

One could just conceive, for example, that someone might work for 16 hours a week, in which case their tax credits might be higher than their earnings. There could be such rare cases in relation to earnings and maintenance, but they are quite hard to envisage. Someone with a war pension, for example, for a condition that did not prevent them from working might be in that situation, or someone with fairly high tax credits because of the number of children in a second family.

Noble Lords will notice that Regulations 5 and 7 amend the regulations that cover the current and new child support schemes. We are continuing to make explicit the rules that protect the interests of disabled children. Recognising the particular vulnerability of

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families who care for disabled children, the amendments update the existing provisions. They specify that, as now, no reduction of benefit may be made when a parent with care refuses to co-operate with the CSA without satisfying the good cause test if he or she is in receipt of the disabled child element in child tax credit.

To take account of parents with special circumstances, a system of departures from the standard maintenance formula exists in the current scheme. It is being replaced by a system of variations in the new scheme. Both schemes are broadly similar in effect, as the award of a departure or variation alters a non-resident parent's maintenance liability either up or down, but some of the grounds on which they are awarded are different. For example, with regard to the "special expenses", the new variations scheme focuses only on those costs related to the child.

To put it in my words, the new scheme does not allow any consideration of, for example, housing costs or travel-to-work costs to come into effect. Again, if noble Lords wished, I could seek to develop the distinction between departures and variations in the new scheme. Clearly, what we are trying to do is narrow it as tightly as possible, so that only in exceptional circumstances associated with a child will there be any alteration in the maintenance liability.

The amendments made by Regulation 4 to the departure regulations and Regulation 10 to the variation regulations—the first is the current scheme, the second the new scheme—replace references to the existing tax credits with the new tax credits from the date on which they are introduced.

I shall move on to the amendments that are not related to the new tax credits. They are mostly technical. In Regulation 6, we are making provision for the new "Supporting People" payments, which were previously part of the housing benefit scheme, to be disregarded. The amendments also allow us to change the name of the invalid care allowance to carers' allowance, which has already been welcomed by noble Lords.

Regulation 3 makes changes to new scheme regulations relating to effective dates for supersessions. In that context, the effective date means the date from which liability is changed. "Supersession" is the term used when one decision is replaced by another. Regulation 3 adds two new supersession provisions. The first provides for cases where a qualifying child leaves the parent with care's household but other qualifying children remain. They may have grown up or moved in with the NRP. The second covers cases where the parent with care has another qualifying child with the same non-resident parent, usually under circumstances in which there has been a temporary reconciliation. To my surprise, there are rather more of those than I had previously thought practically possible.

Regulation 7 makes changes to the maintenance calculation procedure regulations, some of which are consequential on the introduction of new tax credits to which I referred earlier. It also makes a number of

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clarifying changes to the regulations that provide for cases arising in the period immediately before and after the launch of the new scheme. I shall not go over them in detail, although I am happy to have a go if noble Lords wish, but I shall simply mention a couple of the more important changes.

Regulation 7(7)(a) adds two new paragraphs, paragraphs (1B) and (1C), to Regulation 31 of the maintenance calculation procedure regulations, with which I am sure that noble Lords are familiar. The paragraphs make transitional arrangements for cases where there is more than one application for child support and the applications straddle the date on which the new scheme is introduced. Paragraph (1B) provides for the circumstances in which the new Schedule 3 to the maintenance calculation procedure regulations will apply. The schedule determines with which of the applications we should proceed—in other words, which has priority. Paragraph (1C) has the effect that if the "effective date" of the application is before 3rd March, the case will proceed as an application for the current scheme. If it is on or after 3rd March, the case will proceed as a new scheme maintenance calculation.

In Regulation 9, we are making some further amendments to the transitional regulations. The changes are to ensure that the provisions work as we intend. For example, they clarify the regulations to ensure that existing cases linked to new scheme applications for maintenance will immediately convert to the new scheme. It is vital that the old-scheme case converts to the new scheme to prevent the non-resident parent being faced with a maintenance liability that he could never afford to pay.

I think that that is rather important, so it may be worth adding a gloss to it. There may be a case of an NRP, a parent with care and one child in that relationship. As a current case, they stay in the system until all existing cases go over to the new scheme. After 3rd March, let us suppose that the parent with care has a new relationship with someone else and has a new child. That means that there will be an assessment for the new child under the new scheme, simultaneous with an assessment under the old scheme for the existing child. Put the two together and someone might well be asked to pay far more than they are able to afford or than they should pay. Therefore, that becomes a linked case. The existing case goes over the borderline. The existing parent with care's maintenance is recalculated as though it were a new case, so that the NRP pays one maintenance for the two separate children. If necessary, phasing will take place to ensure that the existing parent with care does not find too much of a financial change in her circumstances.

Noble Lords may not think that that happens all that often, but something like 20 per cent of cases might be linked cases. A family tree for one new case showed that 29 other cases in the current system were affected. In consequence, all came over the line. Noble Lords will see why the provision is in place, but it

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means that there is not the clean, tidy line between existing and new cases that one might otherwise have expected.

The regulations before the House today underpin our commitment to ensuring that child support works for both parents and children. I am satisfied that they are compatible with the European Convention on Human Rights.

To summarise, I suggest that seven of the 10 regulations either incorporate the existing treatment of incomes and bring them forward into the new scheme or replace existing working families' tax credits with new credits. That leaves three regulations which either are not technical or do not involve rewording but have some policy substance to them.

One is Regulation 3, which adds new supersession provisions. If there is a change in family circumstances and a qualifying child leaves the household, that will have implications for the assessment. The second is Regulation 6, whereby the policy changes introduce "supporting people" payments and the renaming of "invalid care allowance" to "carers' allowance".

The third regulation of substance, which again is technically drafted in complex ways, is Regulation 9. It deals with the issue of linked cases, whereby people move from the current to the new scheme by virtue of either partner—the parent with care or the NRP—entering a new relationship. Alternatively, it deals with issues of phasing and changes in circumstances. I give way to the noble Lord.

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