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I refer the Minister to a letter in the Times today signed by representatives of serious organisations such as the chief executive of Relate, Clare Tyler, and her colleagues. They make very clear the importance of the opportunity before the Government and talk mainly about getting joined-up support for parents. The noble Lord, Lord Skelmersdale, was right to refer to that and we will return to the point in Grand Committee. Academics in other jurisdictions are looking at trying to invest in children the entitlement to pursue what is good for them rather than what is happening above their heads to the relationship between the non-resident parent and the parent with care. I hope that we will bring forward some amendments on that to test the ground. I do not want to try to delay this legislation by standing it on its head and trying to wreck it, but in the fullness of time the policy framework for this area will come round to that way of thinking.
The Bill has to get three things right. The weighting is wrong at the moment. Obviously the instructions given to parliamentary counsel seek to put a bias towards trying to filter people out of the system and into voluntary arrangements. I understand that; it is what Henshaw talked about and I make no complaint about it. But as the Bill is framed, the weighting is wrong: other priorities should be included in Section 2, right at the heart of the instructions we are giving to this new body. They are simple and straightforward, and most of them were referred to by the noble Lord, Lord Skelmersdale.
They include getting the best guidance for the client, not for the organisation. We should not show people the door, saying to them, “Walk through here and enter the rosy hinterland of a voluntary agreement because it is in our interests to get rid of 400,000 cases”. We need a cross-departmental support system that is more than a call centre and an offer of a face-to-face interview with a website. I do not think that that measures up to anything like what we need to do this job properly. Getting that right is the core of making this legislation work—but we also need to get the calculations right first time. They need to be accurate and we need to get the computer system fit for that. That is a priority. Another priority is the efficient collection and payment of maintenance and getting the flow of money. At the moment, there are still problems with getting the money out when it has been brought in.
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Finally, there is the question of recouping historic debt. I did not quite catch some of the suggested amendments that the Minister discussed in his helpful speech, but we will get a chance to study them when he tables them. Expanding the types of accounts that you can attack is an obvious solution. People will think that we are stupid if we say that all that we can get to is a simple current account when someone can make a telephone call and make it a joint account with their granny, protecting it from attack from the Child Maintenance and Enforcement Commission. That makes us look stupid. I understand that there are differences in legislation on joint accounts between north and south of the border, but Stephen Geraghty says in his annual report that there is £1.5 million of debt that he believes is still collectable. That is another priority for the organisation. There is a danger that getting on to the new system and getting people organised properly will put that £1.5 million of debt on the back burner. As the House knows, nearly double that amount is listed as debt, but that £1.5 million of collectable debt needs to be seriously attacked by the new organisation.
All this will be dependent on resources. We know that the staff head count will fall to 9,000 before too long. We need reassurances that if this change gets a bit more pesky than the Minister suggested it might, that head count must be retained until we get the new system operating smoothly. That is essential. I know that the department has a very tight departmental expenditure limit and that there are no blank cheques in government, but we need to look at the Gershon proposals and the resources available and ensure that for the third time this does not fail because the staff are not sufficient to do the job. We need to recognise, as the noble Lord, Lord Skelmersdale, did, that motivation of the staff is important. The Crown agency development is very welcome, because it means that people can transfer confidently between the Civil Service and other departments. I think that that is good; I do not know why it is restricted to three years, but it is a really positive outcome.
Lastly, there is a very great deal still to know about what we should expect from this new body being set up in the Bill. One suggestion that I should like to make is that the Social Security Advisory Committee may not be capable of having formal references for these regulations that will eventually apply to CMEC. I do not know whether that is true but, if it is possible, I should like to see the SSAC’s remit stretched so that any future regulations that deal with CMEC in this important area of policy are scrutinised publicly in the accepted way by the SSAC. However, I do get boring on that subject because I am always looking for ways of mentioning it.
This is an important Bill. A lot of the problems are operational—there are not a lot of politics in it—but it is important for those whom it seeks to serve and it is important that we get it right. This will be third time lucky, I hope. We are all sentenced to doing a lot of Christmas reading of House of Commons Committee sittings on the Bill. I look forward to that and to taking part in our Grand Committee sittings—and I wish the new organisation, whoever it consists of, the best of luck.
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12.19 pm
Baroness Hollis of Heigham: My Lords, I am delighted about so much in this Bill. Real additional money will go to the poorest children—and I congratulate my noble friend on achieving that. CSA1 was very much about saving the taxpayer money and offered nothing additional to families. Not surprisingly, he did not pay and she did not try to make him pay as there was nothing in it for her, except possibly revenge. CSA2, the 2003 scheme, allowed a £10 disregard for the 50 per cent of families on benefit, which was useful but limited. Now all existing families in the system will keep £10 and, under the new settlements in the Bill, not £10 but up to £20 in 2008, going up to £40. First, that should attack child poverty. We have seen figures slipping, because by definition if poverty is relative, benefit must be increased faster than earnings to narrow the gap. Paid as an addition to the benefit bill, not only is that hugely costly but it has implications for work incentives. Coming through child maintenance, however, this is like an additional form of privatised tax credit and could therefore make a substantial contribution to addressing the problem of child poverty.
Secondly, the proposals are more likely to keep fathers as players in their children’s lives. If he pays and sees money going to the child, and the parent with care is in turn sufficiently appreciative to facilitate contact and access, it is a win-win situation, especially for the child. We know that the best predictor of the daughter of a lone parent doing well is the lone-parent mother in work. The best predictor of the son of a lone parent is contact with and support by his natural father, even though the parents may be living apart.
Thirdly, I suspect that the extra money coming through CSA payments will raise, not dampen, aspirations to do part-time work—the mini-jobs that are the best stepping stone into full-time work. I hope that the Government will follow through on that. At the moment, if you think about it, we have a completely absurd benefit system. If you are a lone parent, you keep payment for the first two to three hours of your work. You then lose the next 10 or 12 hours and are allowed to keep the lot after 16. That then gets topped up by tax credits. Talk about manmade stupidity. You should be able to keep a proportion of each additional hour that you work until at some point you can rely on full-time work, together with tax credits. We should have dials and not dichotomies. I hope that this will be the basis of a ladder of income and therefore a ladder of opportunity, and not the foolish polarities of the existing benefit scheme, which assumes that you are either in work or not in work, when all the evidence suggests that lone parents in particular inhabit a huge grey area between the two.
Fourthly, over and beyond child poverty, father involvement and support for part-time work, I am pleased that the automatic deductions from earnings, which were not allowed under the old system, and the tougher responses to NRPs who are wilfully absent and who fail to support their own children in the hope that other fathers—called taxpayers—will do so have been ratcheted up, and that CMEC will be the default
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I go on to describe some worries in the context of my very real pleasure that more money could go to poor children. If the Bill can deliver that, most of us will cheer it along. My worries are twofold, and were touched on in the very thoughtful speeches of the noble Lords, Lord Skelmersdale and Lord Kirkwood. First, for new cases, he and she will in essence operate in a voluntary system—free bargaining. For that to be fair, there must be equity of bargaining power and knowledge. She may know what percentage of his income she may expect—15 per cent net, 12 per cent gross—but not what that income is. Obviously, if the parents have been married or she has done the books for his small business in the past, she will have a good idea. But where the child is from a more casual arrangement or relationship where the father changes jobs freely, may or may not do overtime or work on the side, or may be on to the second or third girlfriend since, how can she know? She has to have information about his income, otherwise a voluntary system is weighted far too much towards him. That is without assuming that he will bully or threaten, possibly saying, “Settle for £15 and I might manage it; go for £30 and I will see you don’t get a penny”.
The mother must have a statutory right to know his income. If she cannot see directly any of his tax return—I understand those problems—she would be wise not just to consult the support system. The noble Lord, Lord Kirkwood, was right to emphasise the need for that. She should abandon the voluntary system altogether and for at least the first year come into the statutory CMEC system, CSA3, to find out what he should pay and to make it stick. Therefore, the hope to slide people off to the voluntary system is fool’s gold.
I share some of the concerns of the noble Lord, Lord Skelmersdale, about the 25 per cent tolerance rule, but perhaps we can explore that more fully in Committee. I should just like to add that the men who are assessed to pay most are usually the best payers, because they are the men who have come out of a divorce, are attached to their children, are the higher earners and want to pay. The problem is much more the somewhat feckless fathers of casual relationships, especially the 28 per cent of those men who are on benefits themselves who would prefer to walk away if they could, or the 7 per cent of the self-employed who I always estimated were responsible for about 25 per cent of the problems in the CSA. They could not manage their own books, let alone move payments across to children.
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My first doubt is about the equity of knowledge without first going through CMEC, which therefore undermines the whole thrust of this Bill; namely, to achieve a voluntary system. The second area where I have doubts follows from that. It is about layering a voluntary system, which was again mentioned by the noble Lord, Lord Kirkwood, on top of not one but two preceding statutory systems. For some separating couples, voluntary arrangements may work. I hope that they will. Let us consider a brand new case where the baby is the first for the mother and the father, and they have equity of knowledge, a tolerable amount of good will, a steady income and steady circumstances. Perhaps all will be well. She will know what he should pay. He will pay it and the child will flourish.
That of course will not necessarily be widespread. A high proportion of cases that come to CMEC will be linked to other cases in CSA1 and CSA2. Those linked will, on average, be linked to three previous cases in the old system. I saw a chart with 29 linked cases, most of which had to have their income and payments reassessed. Folklore has it that—I think that my noble friend Lord McKenzie may have seen such a case—there was a case with 70 or 90 connections at one stage. Many—probably most—of those cases do not have financial implications and do not need to come into play in the future, but a significant minority will.
Let me explain: a man has a baby with a new partner who he then leaves. The new PWC, under CMEC, seeks a voluntary arrangement with him. Whether known to his partner or not, he is already supporting a child in the previous scheme for whom he is paying the statutory net 15 per cent, gross 12 per cent. What child support can the voluntary-arrangement PWC get from him? In theory, he should now pay 20 per cent net, 16 per cent gross; that is, 8 per cent gross to each of the two PWCs—one in the statutory system and one in the voluntary system. The old case would have to be closed down and brought into the new system. The maintenance of the existing first PWC would have to be reduced, the payments recalculated and new payment arrangements made. Of course, that would all be done by computer—except that from my experience of the computer, like that of the noble Lord, Lord Kirkwood, it may not.
If there was a single reason for failure of CSA2 over and beyond the culture of non-compliance of NRPs and, to some degree, the culture of non-compliance of HMRC, it was a failure of the computer system to cope with linked cases, requiring a recalculation of existing payment, a review and update of the man’s income, and new payments to be made with which the system could not cope. Too often, the calculation had to go off for manual processing and got stockpiled. The concept of annual reviews of income of course went by the by. Therefore, in trying to make a new recalculation, there were years of dirty data underlying, which first had to be cleaned before the new calculation could be made. This mattered less when those on CSA1 got nothing whether or not he paid, and those on CSA2 got only £10. In other words, missing moneys were relatively modest. But now, the money available—this
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I hope that the system will be more robust because new cases will be voluntary and the system will be increasingly complex. If the PWC and CSA2 is getting her 12 per cent gross, how are we going to ensure that PWC2 under CMEC will get a voluntary satisfactory arrangement of the 8 per cent to which she would be due under the statutory system? Either the NRP pays the 12 per cent to PWC1 plus a voluntary payment of 8 per cent to PWC2, in which case he may pay too much, although I think that is extremely unlikely; or the position of the second PWC will be less financially fair than that of the first and she has to accept too little for her child; or, because payments for both have to be readjusted, payments will falter all round.
Now let me complicate it a little more. He has a child in CSA1 and also in CSA2, and a third child in CMEC, all with different systems. Harder still, he may live with a new lady, a lone parent, who has her own children by a previous partner who is not paying maintenance—he is missing, is on benefit, or is abroad—so the new NRP is assumed to be helping to support them. Perhaps he is; he may be doing the right thing. All the children—the two that came with his new lady and the one biological child of his own—are added together and the first PWC, instead of getting 15 per cent net, 12 per cent gross, gets less than half that. All he has to do to substantially reduce his child support arrangements for his own biological children is to move in with another lone parent, as very many do.
Let me complicate it with a further twist. Both the PWC and the NRP are sharing care, although the degree to which they do so changes over time and each time the calculation has to be remade; or he may care for one child, she another, and, because their finances are unequal, payments still have to be made from him to her. Not only do any previous arrangements have to be reviewed with other PWCs but the voluntary arrangement must know about them, take account of them, and then with full knowledge negotiate a contribution for the new baby and adjust that for any shared care. It may happen.
These child support calculations will be as complicated to assess and deliver as tax credits. They will not go to as many families, obviously, and they will usually be worth far less, but their complexity—because of the interaction with linked cases and issues of shared care, of stepchildren and the like—will be far greater. After all, most tax credits go to intact families whose income may fluctuate but whose structure remains broadly stable. Child support calculations have to reflect not only fluctuating income but, by definition, fluctuating family forms as well.
I hope I am wrong; I really do. If I was going to give my noble friend a single wish for Christmas it is that the computer delivers and that, as a result, children will get the money they need. If it does not, CMEC will fail. My noble friend may instead be hoping that most parents will go for voluntary arrangements, but if NRPs were willing to pay
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Can we reduce the risk somewhat? Given that we have this newfound accord with HMRC, I think we could. Perhaps two-thirds—my figures may be a little out of date here—of non-resident parents are either on benefit, on JSA or in receipt of tax credits. Someone from Mars would find it very odd that one department of government—indeed, that one division of the same department, the DWP—is paying out cash while another department or division is seeking to reclaim cash from those self-same families. Why do we not extract the money at source and pay it net, rather than seeking to churn it through the system and fail to do so?
The fear, of course, is the fragility of the tax credits system and that you should not take money away from a second family to pay to a first. I do not agree. Essentially what happens is that first families lose out financially because a man forms or, more likely, joins a second family where the ex-NRP in that family is failing to support it. I believe we need to be more even-handed between them.
Where there is good will between parents, voluntary arrangements may work. Where they come to an arrangement within the shadow of the CMEC formula, it may work, but if it does not it will not. Where there is not good will I fear for the outcome. The man is far more likely to do well out of it than the woman because he has the knowledge and the bargaining power and she is likely to be the parent caring for children. Whether or not she returns to CMEC, I hope she gets more regular payments.
As a final word, I pay tribute to the staff who are doing one of the most difficult jobs in government. They are not only trying to ensure a flow of money to children, but doing so when placed between two warring parents who seek to take their anger out on the CSA for failing to meet their completely conflictual needs. Most of those staff, I know, have been working under huge stress over many years. They have handled it robustly, professionally and courteously because they are determined—as we all are—to lift children out of poverty. If, under the Bill, what will be CMEC stops being an inefficient debt collection agency and can, for the first time, properly and thoroughly deliver money to children, I am sure we shall all rejoice.
12.36 pm
The Lord Bishop of Southwell and Nottingham: My Lords, I wish to make only a modest contribution to the Bill on Second Reading, and I do so hesitatingly in the light of the vast knowledge and experience of the previous speakers.
It is to be regretted that so many children are affected by the separation of their parents. I pay particular tribute to the organisations, professionals, courts and individuals that work to support families around this traumatic transition, many of whom are
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As organisations such as One Parent Families/Gingerbread and National Family Mediation have reminded us on many occasions, only one-third—one in three—of one-parent families receives any support from the non-resident parent. The Government have reaffirmed their commitment to ending child poverty by 2020, and yet receipt of maintenance has a significant impact on children’s chances of growing up poor. To achieve the Government’s targets on child poverty, it is vital that this issue of maintenance is sorted out properly, particularly for the most vulnerable in our communities. Children are a gift, but creating a child also creates positive responsibilities towards that child. I sincerely hope that the Bill creates a commission that will play its part in helping parents to live up to their responsibilities, with enforcement as a last resort.
As I am sure other noble Lords will agree, it would be good if the Bill marked a new era for parents who seek help from an agency to gain their maintenance. As has been said, it is often the parents with the most care responsibilities who tend to be financially worst off after separation or divorce and who find themselves in great personal distress and financial hardship. They need the best available advice and support to work out with their ex-partners how best to provide for the children. Although the Bill only outlines the duties of the commission and does not go into specific details, I hope that the information and services which the new commission gives will be of the highest order and quality. Now that applying for maintenance through the commission will be voluntary, it is important that there are incentives to apply for those parents with care who are unable to get an agreement with the non-resident partner.
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