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I do not believe, though, that if we finish our debates on the right and fair use of sanctions—some of which, as later amendments show, are in contention—we should delay the commencement of the Bill any longer than strictly necessary, having regard to the parliamentary timetable. We know already that the staff are due to be transferred from the CSA to CMEC, but I cannot at this moment see that the Bill will require any more or any fewer of them. “Will the staff level complement go up or down?” is a rough, rapid translation of what I have just said. Were we to end up with more tribunals, for example, that would probably mean extra staff. However, I anticipate that they would be extra-curricular with regard to CMEC, so would not fit into the amendment.
Some activities, such as debt collection and the advisory service, are to be outsourced to private sector firms such as Ventura. I am grateful to the Minister for advising me of that latter arrangement. It makes sense, but it has not been explained exactly what Ventura is to do. It would not be fair to ask exactly what is in the contract, but I hope that by the time we finish Committee we will know at least what the intentions are of using Ventura. I hope that how to maintain the tripartite relationship between separated parents and children will be part of its remit. Indeed, I have an amendment later on to that effect.
Amendment No. 14 is in this group. We know already that staff are due to be transferred wholesale from the CSA to CMEC, but I cannot at this moment see that the Bill will require—I apologise, that is a repetition of what I just said. The Minister has been generous in stopping after explaining his group of amendments before going on to comment on those of the noble Lord, Lord Kirkwood, so I must not outstay my welcome. I would be grateful to receive as many answers to my questions as he feels he can usefully give me at the moment.
Lord McKenzie of Luton: I have spoken to the government amendments and indicated previously that we would oppose the amendments tabled by the noble Lord, Lord Kirkwood. His Amendment No. 2 would see the commission operating as an executive agency under the control of the Secretary of State. Effectively, that would mean the continuation of the Child Support Agency. We believe that a more fundamental change is needed. There have already been several attempts to reform the CSA, which have failed. We believe that the move to a new organisation, operating under a new governance structure, will help provide a break with the past and build a platform for the future.
The change in governance is facilitated by the break with the benefit system. The child maintenance system will no longer be a guardian of benefit expenditure and so there is no need to keep the organisation close to central government. The
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As an NDPB, the commission will have its own legal status, distinct from its sponsor department, and be led by an independent board. The board will be focused entirely on delivering a successful child maintenance system and will have the operational autonomy to make the changes it thinks appropriate. Within an executive agency there is not as great an opportunity for that single-minded focus. The most senior leaders of an executive agency are part of the leadership team of the entire department. They cannot always be focused on one key area of delivery, such as child maintenance.
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Amendment No. 4 proposes that we do not move to the new governance structure until the Child Support Agency’s operational improvement plan has met its targets and objectives. I agree that the successful delivery of the plan is crucial to the success of our reforms, providing a stable platform on which the commission can build. I understand why it may seem beneficial to wait until the plan—in particular, the forthcoming IT changes—has been fully delivered before handing responsibility for the child maintenance system to the new commission. However, we believe that that would not be the right approach.
I shall answer the point made by the noble Lord, Lord Skelmersdale, about the IT system. I think that the discussion we had was about the delivery of a major upgrade to the system called PR1. As I understand it, that is still on track to be put in place towards the end of March. That is quite key to helping the business model under which the CSA and, at least initially, CMEC will operate. It is still being tested extensively.
It is important to recognise that the operational improvement plan was designed prior to the comprehensive reforms that will be brought in by the Bill. Although the benefits that the plan will bring remain relevant, it does not incorporate the key building blocks of the new child maintenance system, such as the removal of compulsion, new enforcement powers and, ultimately, the new approach to assessment. If we were to delay a handover to the commission, we would risk delaying those changes.
We believe that it is right to establish the commission and to give it responsibility for the remainder of the plan as soon as possible. That will allow for the development of an integrated change programme that includes the new measures enabled by the Bill. We believe that will facilitate the fundamental reforms we want and will help us maximise the number of effective arrangements as quickly as possible.
Amendment No. 5 proposes that the Child Support Agency continues to manage cases under the existing schemes and to have responsibility for outstanding debt. The amendment suggests that that
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We have two principal concerns, however. First, we do not believe that that approach would be the best use of resources. Instead of the new organisation building on the existing Child Support Agency, it would have to start from scratch. That would no doubt lead to significant duplication: a strong leadership team, for example, would be needed in both organisations. We would also be in the difficult position of having two organisations, with potentially different goals, competing for the same limited finances, and we could not flexibly deploy resources according to overall need, resulting in staff, IT and contracts in two chimneys.
Secondly, we want to introduce changes to the child maintenance system as quickly as possible, and our reforms will do that. By the end of the next financial year, for example, we will have removed compulsion, extended the maintenance disregard and introduced new enforcement powers, and those changes are all powers of the existing schemes. If a residuary body were managing the existing schemes, the new organisation would have no part in the implementation of those crucial reforms, and we did not think that that would be right. Linked to that, we were concerned that two organisations would lead to an incoherent experience for clients. The interplay between the different child maintenance schemes is complicated enough without adding organisational barriers.
After careful consideration, therefore, we decided to give responsibility for all aspects of the child maintenance system to the Child Maintenance and Enforcement Commission. The commission will work to a single set of objectives, allowing the process of change to be as seamless as possible for clients and enabling existing skills, knowledge and experience to be utilised to best effect.
Amendment No. 14 proposes that the commission must ensure that an appropriate level of staff is maintained to fulfil its functions. I recognise the underlying concern behind the amendment. Appropriate staffing levels are crucial to the delivery of an effective service, and decisions on headcount should be taken only on the basis of the strongest possible evidence and the most rigorous business planning. The Bill already requires the Commission to act in that way. Clause 3 requires the commission to exercise its functions in a way that is both efficient and effective. The commission could not exercise its functions effectively with insufficient staff and would be failing in its duty if it did not secure the resources necessary to maintain appropriate staffing levels.
I shall try to pick up on some of the points that have been raised. If I do not cover them all, I will happily have another go. Both noble Lords were eagerly awaiting the QSS. I am sure there will be a chance to debate the consequences of what those statistics contain later in our deliberations.
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The noble Lord, Lord Kirkwood, asked about Vertex and how that was all going. He will be aware that the contract with Vertex was to cover clerical cases, which were driven by failures in the IT systems of cases that could not readily migrate from one system to another. One of the consequences of the changes to the IT systems currently proposed is that the impact of those situations should be reduced, and therefore reliance on some clerical cases being contracted out should diminish.
The noble Lord asked about the new operating model. That is down to the commission to develop; it will start with an operating model, but we want the commission’s expertise in developing that model. That touches on the point made by the noble Lord, Lord Skelmersdale, about staffing levels. Where those levels end up will depend very much on what that model is, particularly what happens on commissioning. Again, it is for the commission to develop those proposals through transition and at the end of transition.
Both noble Lords raised the point of why the new arrangements are different, and I have touched on that in part. They are genuinely different for a number of reasons. The first is that they uncouple the arrangements from the benefits system. People will no longer be compelled to use a statutory system. As part of that, parents will be encouraged to enter into voluntary arrangements but to be aware of, have access to and be supported in accessing the statutory system if they do not. That is a significant change. There are major changes around enforcement powers, and we have an information and support service, which we will debate and discuss later on, that is simply not in place at the moment. We have arm’s-length governance arrangements, which is a change; that allows the expertise of a separate board to develop the business model and to address the challenges and objectives that we are imposing upon it.
The noble Lord, Lord Skelmersdale, said that the system will be dealing with significant sums of money and commitments in an important policy area but will be entirely free from government. As the Bill identifies and the noble Lord, Lord Kirkwood, said, there are opportunities for guidance and directions to be given by the Secretary of State to the commission. We consider that directions would be few and far between; they are not necessarily the nuclear option, but they would not be a routine occurrence. We have provided in the Bill that directions would be subject to commercial confidentiality and would be tabled in Parliament. Guidance could cover a range of operational issues, small and large.
At the end of the day, the commission will secure its funding from the department and therefore the normal sort of arrangements will be in place: there will be a framework, a business plan will need to be developed and targets will be imposed on the commission so that there is a link and accountability to the Secretary of State and to Parliament. Again, we are discussing the issues of the report that has to be made in due course.
I hope that that has convinced the Committee that there is a distinction. This is a new start, although there is a prolonged transition to achieve it because
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Lord Skelmersdale: The Minister gave us three distinct differences between the operations of CMEC and those of the CSA, and I readily understand them. The first of them, though, appeared to be—if I may paraphrase—that the lack of compulsion will encourage parents to use the new system. I find that very difficult to believe. I wonder what evidence he has of that.
Lord McKenzie of Luton: I said that it was one of the key differences. I cited three. There are others that one could cite, particularly around the commissioning arrangements of the commission. Issues around compulsion are to do with not forcing parents with care on benefit to use the statutory system so that they will have the same choices as everyone else and be encouraged, if it is appropriate for their circumstances, to enter into voluntary arrangements. It is part of the dialogue to encourage parental responsibility. That is a significant change in approach and marks a difference with the past.
Lord Skelmersdale: Yes. I obviously did not explain myself very well. Of course it marks a change from the past. What evidence does the Minister have that the fact that people do not have to use the new organisation will make it any more acceptable? There will still be a vast number of people who use it—and, if he is right, who choose to use it. That has to happen fairly and with a level of acceptance. The fact that people do not have to use it makes no difference to those who are using it, and indeed who have been using the CSA until now and will be carried on through the system.
Lord McKenzie of Luton: The noble Lord is quite right; I accept that point. I suggest, however, that what would make the system more acceptable for those who use it would be better assessment arrangements that did not rely upon income details from people who did not want to engage with the commission and sought to avoid their responsibilities—so reliance on HMRC data will help the assessment process. The ability to update those assessments on an annual basis is a change that people will recognise makes assessments more current.
The increase in the benefit disregard, where both non-residents and parents with care will readily recognise the opportunity for more money being available to children without the state clawing it back, is another strengthened enforcement power so that, when an assessment is in place, parents with care can have the confidence that it will be properly enforced and collected. It is the collection arrangements that I think will build confidence in the new system. That sits alongside the encouragement for people to enter voluntary arrangements, underpinned by an information and support service.
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Baroness Hollis of Heigham: I understand the philosophy of the voluntary system. I am not sure that I entirely share it, but that is a debate for another day. Given that most, or many, non-resident parents who have not lived in cohabitation with their children—in other words, they have a more casual relationship with them—have an unrealistically low estimate of what it costs to bring up a child, as all the research says they do, how confident is the Minister that by going for a voluntary arrangement one will increase the degree of responsibility between parents to come to mutually satisfactory arrangements for their children that do not translate into the non-resident parent paying far too little for what the child realistically needs?
Lord McKenzie of Luton: My noble friend raises an extremely important point. Maintenance arrangements come into play in a variety of circumstances. People may have divorced or separated after living together for a long time and therefore would have a greater understanding of the resources of both partners. But with a casual relationship, I accept entirely that it would be much more difficult for the parent with care to make an assessment. A calculator or a ready reckoner will be part of the information and support service. But, in circumstances where it is clear that the parent with care has no idea of the income of the non-resident parent, an obvious choice would be to use the statutory system. An assessment would be undertaken and the arrangements that the commission would have to access HMRC data would kick in. It is a real issue and it is important that we build the information and support service on a robust basis and ensure that there is good information for parents with care around these issues.
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Lord Kirkwood of Kirkhope: We are all grateful to the Minister; he is generous and helps us in every way he can. However, he has not persuaded me that this is a clean break. I do not think he has convinced any of the people I have talked to who work within the professional staffing agency that this is a clean break. The test of that will be whether there is a big rebranding relaunch. If we are so confident that what we have got adds up to a fresh start, when is the launch party? Who will run it? What will be said? What is new that is going to make all the difference? It is not credible.
That is not to say that there are not improved policy positions. The Minister has mentioned some and if he could get a full disregard out of the Treasury there might be a case for having a party and being confident of making a difference. But from where we are now, if he thinks there is going to be a moment when suddenly the penny drops, the scales fall from people’s eyes and they think, “Oh, this is a new organisation”, he is not being realistic. I can think of other ways of expressing it, but I will not.
I do not think that the contract for the computer has finished development yet; it was recast in 2005 under the transformation of EDS scheme and is still going on. The contract ends in two years but I do not think they have finished developing it yet. PR1 is at
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Lord McKenzie of Luton: It is clear under the operational improvement plan that the end of March 2008 was the time frame within which PR1 was to be delivered, and the agency is on track to do that.
Lord Kirkwood of Kirkhope: It was supposed to be introduced last autumn actually. However, I agree that what the Minister says is technically accurate; it was to be delivered within this financial year. I hope and pray that it will be.
But another question flows from that. April 2008 sees the finish of the CSCS contract, so who is going to run and be responsible for handling the computer platform for old cases after that? There may be a roll-on contract but it is very difficult to find out because people hide behind commercial confidentiality all the time. Perhaps the Minister can help clear up that worry.
I am sorry to be so obstinate about this, but perhaps the Minister can explain the reason for the three-year Crown NDPB. Why three years? The Minister makes a good case at first by saying this is the right format for the staff and so on, but suddenly that changes into the wrong format after three years. My spies, who are everywhere, tell me that this involves £140 million of VAT. The Minister may be right, these may be internal transactions within government, but I understand that somebody cocked up the budget. I am perfectly prepared to accept that that is not the case, if he says so, but I would expect him also to tell the truth and say whether that is a factor in financing this organisation. He is an accountant, so he should know. Is that the case? Is there a problem here? Is it why we are having a Crown NDPB only for three years?
Lord McKenzie of Luton: I have already made it clear that there were a number of issues, including staffing, and, yes, VAT was one of them. That is on the record, given what I said earlier. Is that sufficient for the noble Lord? What else does he want to know?
Lord Kirkwood of Kirkhope: The Minister is being generous and I hear myself shouting at him when I do not mean to. I am told that the key reason for the change from where we were previously—an NDPB in which everyone did the calculations and the policy arrangements on the basis of that; and then suddenly, without any explanation, it changed—was the fact that someone had forgotten to pay the VAT. I understand the technicalities of VAT; the Minister will know better than I do that it is dealt with by internal government transfer, so it does not add up to a big row of beans. But if the status of this body changed at this late stage for that reason, it demonstrates incompetence.
Lord McKenzie of Luton: Just to make it absolutely clear, as I tried to before: it was one of the issues that caused the change of view. The noble Lord has visited
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Lord Kirkwood of Kirkhope: A net nil. I concede, although I want to study what the Minister said. I am pleased that he has taken the trouble to try to explain the issue. I do not understand why it has changed after three years; if it is that good, it should be a policy proposal and stand the test of time. I am told that a Crown NDPB is somehow more expensive and can operate only for three years until the matter is sorted out. I agree that the staff are a key consideration in all this and I hope that their interests are being looked after. I am happy not to press these amendments; we will have a chance to return to some of the technology questions later. I am sure that we will all benefit from studying what the Minister said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 3 to 5 not moved.]
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