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I regret the exaggerated statements that were made on all sides. I very much welcomed the abolition of the 10p rate and the creation of a simple lower basic rate of 20 per cent at the time and I welcome it now. But I regret that it was done in this way in response to a Back-Bencher in another place who had a reputation for being a brilliant young man when, with respect, it should be recognised that he did not know a damned thing about taxation or anything else to do with these matters. However, for the noble Lord, Lord Strathclyde, to refer to higher food and oil prices as if they were all the fault of this or any other Government in this country or anywhere else is nonsense, and he must know it.

Can my noble friend say whether those who are still not benefiting to the full are largely low-paid single people who had just gone into jobs and who will soon be moving out of those jobs and benefiting from the 20p basic rate? Is that the sort of figure we are talking about?

Lord Davies of Oldham: My Lords, I am grateful to my noble friend. I share with him the two positions that he adopted with regard to the noble Lord, Lord Strathclyde; namely our affection for the noble Lord and, at the same time, our recognition of his ability to be a political opportunist when it suits, as I think he was in his comments today. As for my noble friend’s more specific comments, I shall not go over the virtues of colleagues in the other place.

Those whom it is difficult to compensate accurately are exactly those who may not be in employment on a continual basis. But they may have great hopes of landing jobs, and when they do on a permanent basis then they will fit within the category of those we are able to compensate. As the House will appreciate, part of the difficulty in dealing with several of these groups is that they are very hard to identify. The only way of doing it comprehensively is the way that the noble Lord, Lord Newby, identified. That is a massive task and it would not meet the requirements of early action that the Government have deemed necessary.

Lord Forsyth of Drumlean: My Lords, surely the Minister recognises that it is not the only way. The Government were right to cut the basic rate of tax to 20p and to abolish the 10p band which the Chancellor, now the Prime Minister, introduced. This Statement is welcome in so far as it is raising the threshold. However,

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the right thing to do was to raise the threshold to the level at which the 10p band operated. The effect of this change means that people on quite low incomes of £8,000 a year will pay twice as much in tax as they were paying before. Their marginal rate of tax has doubled. The Minister blithely says that it deals with 80 per cent, but what about the 20 per cent on low incomes? Why did the Government not raise the threshold to the level at which the 10p band bit, as my noble and learned friend said he did in his Budget more than 20 years ago?

Lord Davies of Oldham: My Lords, because the Government have prudent regard to the public finances, as I am sure the noble Lord would enjoin us to do. As he recognised, the sums involved in producing this solution are significant and the Government have a limit on the resources they can provide. However, the Government do not rely only on the tax system to achieve fairness for the less well-off; we have other forms of benefits and allowances to ensure that we tackle the deep-rooted levels of poverty that we inherited. The previous Government must stand arraigned for the fact that it has taken us a decade of committed hard work and substantial sacrifice by the nation to tackle the formidable levels of poverty for which they were responsible.

Lord Elystan-Morgan: My Lords, I accept that the Government have genuinely attempted to recompense 80 per cent of those who have suffered disadvantage from the changes that were announced last year. I also accept, as I trust the Minister does, that it is very difficult to forecast exactly what the effect of fiscal policies will be. Will the Government therefore keep an open mind and look at the situation in 12 months’ time to see whether there is any identifiable group of persons that clearly remains to be compensated and, indeed, to bring about such a scheme?

Lord Davies of Oldham: My Lords, I agree with those sentiments. As I think the noble Lord will recognise, we think that we have gone as far as we can by fully compensating four-fifths of the losers and compensating all losers on average to at least a half of the losses they sustained. Of course we will look in the maturity of time at the development of the next Budget to address precisely that issue. We recognise the unfairness of it and the groups that have been identified. The problem is that it is easier to define the groups as a broad category but much more difficult to target the resources that must be directed to them. In fact, the tax system could scarcely do that. That is why the solution produced by the noble Lord, Lord Newby, is made in heaven rather than in the United Kingdom.

Lord Radice: My Lords, does my noble friend agree that the Government have made a mistake, that they have very properly responded to pressure from their own Back Benches and from the voters, and that they have come forward with a solution which, it seems to me, having listened to the debate, has pretty universal acceptance?

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Lord Davies of Oldham: My Lords, I am grateful to my noble friend, because he can express in a few words that which I find rather lengthy.

Lord Higgins: My Lords, is it not important to put this in perspective? It is a cost of £2.7 billion. How does that compare to the overall cost of Northern Rock? None the less, £2.7 billion is a lot of money, which is to be financed by borrowing. Will the noble Lord confirm that the borrowing will, sooner or later, be a burden on taxpayers and that the Chancellor is merely burdening some taxpayers to compensate others?

Lord Davies of Oldham: My Lords, certainly the resources that are available to government largely come from taxation; that goes without saying. The noble Lord is right to identify the £2.7 billion. He will also appreciate that there is no indication—nor do the Government ever intend—that Northern Rock will be costly. It is not to be a burden on taxpayers. The other side has gone rather quiet about the recent developments with Northern Rock. That may well be because the strategy that it is pursuing is putting it fully within the framework of eventually reaching the target of being able to repay to the Bank of England that which it owes. The £2.7 billion is a significant sum; no one underestimates that factor. Of course, if we are about redistributing resources and dealing with those more deserving sections of the population, costs are involved. The noble Lord will recognise that the Government have at the same time reduced the basic rate of taxation from 22p to 20p. He must recognise that on the other side of the ledger.

Lord Clinton-Davis: My Lords, does my noble friend agree that what we have heard from the Conservative Benches today is absolutely nonsense? They are speaking with a forked tongue. In another place, they behaved in a completely contradictory way, did they not? To pretend now that they are the friends of the very poor is grotesque. If nothing was done, they would be the first to complain. When the Government react in a totally sensible way, as they have done, they will say that it is out of panic. Is it not palpably clear from the episodes that we have witnessed that the Opposition have absolutely nothing constructive to contribute to this very important issue?

Lord Davies of Oldham: My Lords, I am grateful to my noble friend for his objective analysis of the Opposition’s position. The Opposition will recognise in due course that it will not do just to criticise. At some stage, they have to produce alternative strategies for problems. Did anyone hear an alternative position from the Opposition on the 10p issue? I certainly did not.

Lord Christopher: My Lords, I thought that the real spectacular in tax of modern times was the poll tax, but perhaps that is not something to talk about. I have one question. My noble friend the Minister has indicated that the Government will look again at the possible position of the 20 per cent. I wonder, from what little I know of the department, how that might be done. Yesterday’s Financial Times listed it as the second worst performing department of Government and I

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do not see how this 20 per cent will be recognised by anybody outside the department. I do not think that the Revenue will establish any tests unless it is required to do so. How will these people be identified? I see a great difficulty.

Lord Davies of Oldham: My Lords, it is difficult—that is why it is not part of the general solution. I say, of that category, that we have succeeded in halving the loss that it will sustain. My noble friend is right to say that dealing with the totality of the position requires an enormous amount of work, which would have prevented any action before the end of the year. However, it is very much in the interests of everyone in the country, particularly those on low pay, that we solve the problem to the extent that we have in this Statement.

With regard to the poll tax, that was nearly universal in its impact. We must recognise that the issue of the 10p rate was significant—5.3 million of our fellow citizens suffered. However, their losses were a fraction of the general shambles for which the poll tax is remembered.

Child Maintenance and Other Payments Bill

4.30 pm

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord McKenzie of Luton): My Lords, I beg to move that the Bill be now further considered on Report.

Moved accordingly, and, on Question, Motion agreed to.

Clause 15 [Repeal of sections 6 and 46]:

Lord Kirkwood of Kirkhope moved Amendment No. 13:

The noble Lord said: My Lords, Amendment No. 13 stands in my name and in the name of my noble friend Lord Addington. Amendment No. 14 is also in the group. Taken together, they are an attempt by myself and my noble friend to ask the House to consider what might happen if the hope and expectation that has been driving the policy changes in the Bill do not come to fruition and the situation does not improve.

Amendments Nos. 13 and 14 would make conditional the abolition of Section 6 of the Child Support Act 1991, which requires all parents with care who are claiming benefit to claim child support at the same time. The lifting of the Section 6 requirement would be subjected to a review after three years, in 2011. That review would be laid before Parliament and would have to establish, in respect of parents with care on benefit, whether their position in relation to the adequacy of the child maintenance they were receiving had improved, deteriorated or remained the same. If their position had demonstrably deteriorated after a three-year period, the obligation to use the statutory maintenance system as a condition of receiving income support or income-related jobseeker’s allowance would be reinstated.

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The Minister is aware of the provenance of the amendment. Some of us following the proceedings of the Bill have become increasingly worried about how the abolition of Section 6 will work. The amendment is set against the background of a department that rightly will concentrate over the next few years on child poverty. One of the two indicators by which the department will measure progress is the number of children benefiting from child maintenance. This is a key factor in the Government’s policy, as well as a concern to Members of this House.

I start by shading in some numbers that we are talking about. I refer the House to the Child Support Agency Quarterly Summary Statistics: March 2008. Table 13.1 deals with the percentage of cases where the parents with care on income support or jobseeker’s allowance have a positive maintenance income. The figures are revealing. The overall agency figures for the latest date available, May 2007, show that there were 441,000 assessed cases, of which only 156,000, or 36 per cent, had a positive maintenance outcome and received benefit. Footnote 2 on that table is instructive. The first sentence states:

I repeat,

That table, produced in March 2008, indicates that in May 2007 that figure was 36 per cent. There is a long way to go.

Obviously, some of the changes that the Government are making will help, such as the proposal to increase the disregard for maintenance to £40 per week in 2010. I hope that that helps. The Government are bringing in a new information and support service for parents with care and I hope that that helps, too—I am sure that it will. However, there is a risk—I put it no higher than that—that the maintenance available to parents with care on benefit after Section 6 is abolished might actually get worse.

We also need to look at the numbers of people who are eligible to receive child maintenance in Britain. We know from the Government’s own figures published by the department in December 2006, A New System of Child Maintenance, Cm 6979, that around 2.5 million parents were eligible to receive child maintenance in the UK. We know that 49 per cent have no child maintenance arrangements at all, 19 per cent use the Child Support Agency and 23 per cent have private arrangements. That is the current breakdown as assessed by the Government.

The department carried out some research on those not using the Child Support Agency. The recently published study by Kazimirski and Ireland, Survey of Relationship Breakdown and Child Maintenance, interim DWP report No. 468, interestingly shows that of those eligible parents not using the Child Support Agency around a fifth, 22 per cent, said they preferred not to receive any child maintenance. More than a quarter, 29 per cent, said that they did not know where the non-resident parent was and a third said that, as far as they were concerned, the non-resident parent either

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could not afford to pay or would not pay any maintenance. These are difficult statistics and a lot of work has to be done. The information and support service that the Government are bringing forward has a huge job to do in trying to turn some of these figures around.

On the other side of that issue, we know from departmental research that a third of parents with care on benefit have said that they feel confident or very confident that voluntary arrangements will work for them. That is good news and we hope that that figure will increase, but it is very important that the Government keep an eye on private maintenance arrangements made by those on benefit and monitor how satisfactory they are—not just in terms of the amount but the frequency and adequacy of the help that is provided to the children that the arrangements are designed to support.

This amendment proposes that a report should be laid before Parliament in 2011. By that time the new commission will have had a chance to put its house in order and get some idea of how effective its new powers are. The amendment also seeks to establish the amounts being paid and with what regularity in order to enable the House, in three years’ time, to make a comparison with how the voluntary system that we are going into can be compared and contrasted with the statutory system that we are coming out of. In the event that fewer parents with care on benefit are receiving child maintenance compared with the position now, or that the average amount of child maintenance received per child is not increased over the next three years, there is arguably a case for reinstating the automatic use of the statutory maintenance system where parents with care claim income-related benefits.

This is not a perfect solution. There are a lot of ways—this is the only one I could think of—of trying to put in some kind of review process, some kind of sunset clause, some sort of compulsion on the Government to ensure that they are watching very carefully what is happening under the new system so that it is not the poorer families who suffer most should things not go according to plan. I beg to move.

Baroness Hollis of Heigham: My Lords, first, I apologise to the House. I have an unavoidable commitment which means I have to leave at 5 pm. My timing has been slightly thrown by the Statement. I wanted to speak to this amendment because there is much that is good in this Bill. My noble friend in particular, and officials more generally, are entirely right to congratulate themselves—I certainly wish to do so—on delivering from Her Majesty’s Treasury what my noble friend’s predecessors singularly failed to do; a decent maintenance disregard for new cases and a smaller but still welcome version for existing cases. All of that is terrific. If it works, more money will go to poorer children. That is what we are concerned about and we come to this issue with good will.

The good effects of this on child poverty will be undermined by the new voluntarism, which remains unsafe. Why do we think that because many non-resident parents resist paying when it is a statutory duty, they are more likely to pay when it is voluntary—and to that extent, discretionary, and to that extent, optional?

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Let me put it bluntly. I fear that the wish of the commission to reduce its caseload will collude with the wish of NRPs to pay less—if at all—and the wish of parents with children to avoid hassle with their ex-partner and to take what is on offer. It is a win-win for everybody except for the one group that matters, which is children. Essentially, the Government are relying on the greater generosity of the disregard to encourage lone parents into pressing for maintenance within a voluntary system. I am not sure whether, in policy or psychological terms, that is sound.

We had similar arguments many years ago about good cause. I was then urged by voluntary organisations to have generous exemptions for good causes such as violence. I now think, on reflection, that those voluntary organisations were wrong and I was wrong. All that did was promote bullying by some NRPs and threats of violence encouraged by some dreadful father’s groups—I will not call them fathers’ groups; they were men’s groups—to avoid the parents with children naming them and the Child Support Agency pursuing them.

Of course, the best option is for the full sum to be paid reliably and voluntarily. If one can remove Section 6 and ensure nonetheless that that happens, that would be wonderful. I do not think that that will be the case. New fathers, particularly new fathers who are coming out of casual relationships where the parent with care tends to be on benefit, as opposed to divorced fathers who tend to have a long-standing commitment to their children, have to be educated into their financial responsibilities. For many of them it will be a grudging process. In fact their own mothers, the paternal grandmothers, may be the key to all of this. We seem to be so concerned to overcome the distinction between families on benefit and the families that are not and to establish a form of level playing field that we lose sight of what really matters, which is to ensure that mothers with care on benefit who have the greatest difficulty getting the maintenance that they are due will actually get it in future.

My noble friend is relying on the information and advice service, but I hope that he is right to do so. I congratulate him on making it as robust as it seems to be but I fear that, over the years and under pressure, it will be one of the things within the DWP to go, in the same way that similar services have unfortunately withered.

I believe that voluntarism should be a reward for steady payment from the NRP, not a risk that we appear to be taking on behalf of poor children. As my noble friend will know, I favour placing everyone on a statutory system and if, after one year, payment flows regularly, as a reward one can move on to voluntarism. That would mean that the lone parent would know what she was entitled to; there would be a year of experience in the pattern of payments; the direct debits and so on would be established; there would be an expectation of receiving the payment and taking it for granted; and the NRP would be likely to be co-operative in the hope of getting and retaining voluntary status. The lone parent would know that she could freely return to a statutory scheme when she was psychologically willing to do so. In other words, we would have conditional voluntarism.

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Ultimately, despite all the very good—indeed, wonderful—things that the Bill does for children, I am not persuaded that we have sufficiently built out the risk of going for pure voluntarism. I am not enthusiastic about the amendment because I do not think that it goes far enough, but it is better than nothing at all in the sense that it seeks to track whether money is flowing to children and whether the fears expressed today are warranted as regards the future. I hope that our fears are not validated, but how will we know?

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