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Grand Committee

Tuesday, 4 February 2014.

Arrangement of Business

Announcement

3.30 pm

The Deputy Chairman of Committees (Baroness Harris of Richmond) (LD): My Lords, if there is a Division in the House, the Committee will adjourn for 10 minutes.

Electoral Registration and Administration Act 2013 (Commencement No. 4 and Consequential Provision) Order 2013

Motion to Consider

Moved by Lord Wallace of Saltaire

That the Grand Committee do consider the Electoral Registration and Administration Act 2013 (Commencement No. 4 and Consequential Provision) Order 2013.

Relevant document: 13th Report from the Joint Committee on Statutory Instruments

Lord Wallace of Saltaire (LD): My Lords, as noble Lords will know, there are a great many consequential orders in introducing individual electoral registration, and in changing some of our voting regulations and arrangements. There was a time when I knew almost nothing about this area; I am learning more and more.

There are three instruments for debate today. The Electoral Registration and Administration Act 2013 (Commencement No. 4 and Consequential Provision) Order 2013, brings into force, for parliamentary elections, provisions in the Electoral Registration and Administration Act 2013 concerning the ability of voters to cast a vote at close of poll. The two sets of regulations—the Local Authorities (Mayoral Elections) (England and Wales) (Amendment) Regulations 2014 and the Neighbourhood Planning (Referendums) (Amendment) Regulations 2014—update the rules for the conduct and administration of local mayoral elections in England and Wales and neighbourhood planning referendums in England. They do so by applying or copying provisions, including those on close of poll, in the Electoral Registration and Administration Act 2013 and associated secondary legislation, which made a number of changes to the rules for UK parliamentary elections.

In the main, the changes in all three of these instruments are intended to come into effect for polls held on or after 22 May 2014, which is the date of the European parliamentary elections and scheduled local elections in parts of England. The changes are designed to improve the accessibility and security of the voting process and to implement a number of recommendations which have been made by, amongst others, the Electoral Commission and the Association of Electoral Administrators. The regulations concerning neighbourhood planning referendums contain an additional provision on calculating

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the campaign expenditure limit for campaigners at a neighbourhood planning referendum. We intend that this should come into force on the day after the regulations are made. I will set out this change in more detail shortly. The instruments are part of a comprehensive package of statutory instruments which make various changes to the rules for conducting elections and referendums in the UK. The Government have consulted on the changes with the Electoral Commission and with others such as the Association of Electoral Administrators.

The close of poll order—the first order being considered today—brings into force Section 19 of the Electoral Registration and Administration Act 2013. That section provides for voters queuing at a polling station at close of poll to be issued with ballot papers and to vote, despite the time of close of poll having passed. This provision addresses the concern expressed during the passage through Parliament of the ERA Act about the need for a mechanism to deal with any queues which could, in some circumstances, form at polling stations at close of poll, given the isolated but highly publicised instances of queues at polling stations at the 2010 general election. Counting officers and returning officers will of course still be expected to carry out planning for polls, to the same high standards as now, to ensure that there are sufficient polling stations and adequate staffing levels to manage the volumes of electors likely to vote in person and to avoid such queues forming wherever possible. The order also makes provision for persons queuing at a polling station at close of poll in order to return a postal ballot paper or postal voting statement to return it despite the time of the close of poll having passed. This provision has effect in England, Wales and Scotland only.

I turn now to the provisions in the neighbourhood planning referendum regulations and the mayoral elections regulations. I will first discuss the measures that are specific to the neighbourhood planning referendum regulations before turning to the key measures that are common to both these regulations and to the local mayoral elections regulations. The neighbourhood planning referendum regulations change the basis on which the campaign expenditure limit is calculated at these referendums. The limit is currently calculated by reference to the number of electors on the register published after the annual canvass in the year preceding the referendum. However, under the transition to individual electoral registration, a post-canvass register was not produced in 2013. We are therefore providing that in future the limit will be calculated by reference to the register as it exists at the beginning of the referendum period. This period begins at least 28 working days before a residential poll and at least 56 working days before a business and a residential poll that happen together. We intend that this provision would take effect on the day after the regulations are made and affect any referendum where the referendum period begins on or after that date.

I turn to the measures that are common to both the neighbourhood planning referendum regulations and the local mayoral elections regulations. Where any variations exist, I will point these out. Provisions on these matters were included in amendments previously made to the European parliamentary election regulations and debated by Parliament, in order to apply the

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provisions to the European parliamentary elections this May. Both sets of regulations update the forms used by voters, such as poll cards and postal voting statements, that are intended to make the voting process more accessible. The changes continue the work carried out to modernise the appearance of forms used by voters at newly created polls, such as the police and crime commissioner elections and the 2011 referendum on the parliamentary voting system. The revised material has been produced following a programme of public user testing and consultation with the Electoral Commission, the Association of Electoral Administrators, Scope, SOLACE and territorial offices and following discussion with electoral services suppliers. The regulations also provide for police community support officers to enter polling stations and counting venues under the same conditions as police constables. This will allow police forces additional flexibility in deploying their resources on polling day, and will allow them to provide a greater visible reassurance to the public.

The regulations additionally make the same provisions as those to which the close of poll order relates—that is, they provide that voters waiting in a queue at the close of poll, at 10 pm on polling day, for the purpose of voting may be issued with ballot papers to enable them to vote or may return postal voting statements or postal ballot papers despite the close of poll. Members of the Committee may wish to note that relevant provisions in the Representation of the People (England and Wales) Regulations 2001 apply to mayoral elections and residential neighbourhood planning regulations, so amendments recently made to those regulations will also apply to these polls. These recent amendments include: a requirement for 100% of postal votes indicators to be checked, rather than the current minimum of 20%; the extension of emergency proxy provisions to those absent on grounds of business or military service; and the removal of the restriction on postal votes being despatched earlier than the 11th working day before the day of the poll. Where relevant and appropriate, the neighbourhood planning referendums regulations make similar changes for the purpose of business referendums.

Overall, these provisions make sensible and relevant changes for the conduct and administration of mayoral elections and neighbourhood planning referendums, in line with those that have been made already for UK parliamentary elections. They are designed to increase voter participation, further improve the integrity of our electoral system and ensure that the processes underpinning our elections are both more robust and more relevant to the needs of voters. I commend these instruments to the Committee.

Lord Kennedy of Southwark: My Lords, I shall deal with each of these regulations in turn. I intend to be fairly brief. The Electoral Registration and Administration Act 2013 (Commencement No. 4 and Consequential Provision) Order 2013 is welcome. It seeks to deal with the, frankly, appalling situation of voters turning up at polling stations and being denied a ballot paper. None of us will forget the scenes at the most recent general election of angry voters being denied their right to vote. That was wrong and reflected badly on us as a nation and as a mature democracy.

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I note that the Electoral Commission has raised some concerns. As a former member of the Electoral Commission, though, I say that the Government are absolutely right on this. The concerns are slim and are a near impossible eventuality. It will, however, be important to get the guidance right across the piece. Unfortunately, when you are dealing with hundreds of returning officers, thousands of electoral staff and thousands of presiding officers on polling day, there is a risk of someone getting the application of the regulations wrong. I very much hope that the commission and the Government will seek the expertise to be found at the AEA, SOLACE and the political parties on getting the guidance right. It needs to be crisp, clear, straightforward and useful to implementing these regulations.

We also have to ensure that police officers or PCSOs are available as we get to the close of poll. I do not want to see disputes outside polling stations about who arrived at what time and who did not arrive on time. I am aware that we have already passed a previous SI in respect of the European elections, and these SIs refer to the UK parliamentary and local mayoral polls as well as neighbourhood planning referendums. Can the noble Lord confirm that we will pass SIs in respect of local authority and parish council elections in time for this year’s local election on 22 May? Can he also tell the Grand Committee when the SIs will be laid for the local mayoral referendums, council tax referendums and PCC elections?

It is important that all these rules that relate to elections are kept under review. I was first involved in fighting elections 35 years ago—which I am sure noble Lords will find it hard to believe—and the changes that I have seen in that time have been enormous. The Government have a duty to ensure that the law keeps pace with the changes we see all around us. I have responded to a number of these statutory instruments in this House, during my time as a member of the Electoral Commission and as an official of the Labour Party for over 20 years. If there was ever an area of the law that needed consolidating and bringing together under one Act of Parliament, it surely must be the law in respect of elections and electoral registration. There are so many different aspects of the law in force in numerous Acts of Parliament, going back to who knows when, frankly, that it is confusing for everyone involved, in particular for members of the public, let alone practitioners.

I noticed in the amendment regulations that there are no numbers for the people standing in mayoral elections. I understand that that has been in force for some time—it is not new—but it had completely passed me by. Can the noble Lord tell the Grand Committee how taking away the numbers from the candidates helps people understand which candidate they are voting for? Normally you would vote for Gardiner number 1, Kennedy number 2, or Wallace number 3, but you now cannot do that because the numbers are not there. I hope that that will not be a trend in further SIs for other elections, particularly in local elections and where there are multiple candidates, as it would cause complete confusion.

I also note that the noble Lord made no mention of political parties. In parties, you have to have practitioners to understand elections—that is how processes work.

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The Government should consult all parties on these issues, not just leave it to the Electoral Commission, the AEA and SOLACE, great bodies though they are. There are also important views to be had from practitioners on the other side of the fence. I hope that the noble Lord can respond to those points in his reply.

Lord Wallace of Saltaire: I thank the noble Lord for those helpful comments. As he was talking about his long experience in local elections, I calculated that my first election campaign was a mere 52 years ago. I say that with particular enthusiasm because, when I said during Questions this afternoon that I recalled debating the question of an English Parliament in 1968, the noble Baroness, Lady Warsi, was kind enough to turn to me and say, “You couldn’t have been old enough”. However, I was. The second election campaign I took part in was the Orpington by-election, which returned Eric Lubbock, now the noble Lord, Lord Avebury, to the British Parliament, which was a short while ago. So we have all struggled with election regulations and their proper consideration for some time.

I can recall as a young man talking to someone who had stood in a by-election during the Second World War, who told me just how many regulations had not been observed under those conditions and the efforts which some locals took to ensure that some votes were not counted. Nowadays we have some highly effective and dedicated EROs and others at local level with whom we have to co-operate in close partnership. The noble Lord is quite correct to say that perfection is not possible in every single polling station throughout Great Britain, but efforts are taken to make sure that, as far as is humanly possible, the same regulations are obeyed in the same way throughout the country.

3.45pm

On the removal of numbers, the research has suggested that this would decrease confusion, particularly in those mayoral elections where that peculiar Jack Straw innovation—the supplementary vote—is used. The noble Lord will recall that Mr Straw was willing to move 20% of the way towards the alternative vote but not to move very far, so people were allowed to put down “1” and “2” but not “3”. I recall from when I was a candidate in Manchester that a number of people of Irish extraction would vote in our “X” system by putting down “1”, “2” and “3” because that was the way in which they had voted in Ireland. We used to have great arguments as to whether those votes could be included, because it was quite clear what the intention was even though they had not voted in the right way. The conclusion from some detailed research is that not having the numbers makes the ballot paper rather clearer to those who are voting, whether or not the supplementary vote is being used.

The noble Lord also asked about regulations for other polls, including parish polls. I am delighted to be able to tell him that further regulations will be brought forward for me, him and others to discuss in due course in time for local elections in May. I hope that that answers all the noble Lord’s questions.

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Lord Kennedy of Southwark: The Minister may be correct about the effect of removing the numbers from the mayoral election ballot papers, but one of the big problems that such ballot papers cause is that many people go to vote and put a cross or mark by the second column and not the first, and are then disqualified. A huge number of people do that. It may make the ballot papers clearer to remove the numbers—I am not sure by how much—but the amount of votes discarded is a real problem. Can the Minister confirm that there is no intention to remove the numbers from ballot papers for local elections? As he will know, in the local elections in May, particularly in London but also elsewhere, there will be a number of candidates.

Lord Wallace of Saltaire: On that, I must write to the noble Lord. I am conscious that some extensive research has been done on the best design of all the papers used. What is coming back to us is information on what is felt to be most friendly and easy to understand for the local voter.

I can now tell the noble Lord, through the miraculous device of having officials behind me, that the Government recognise the concerns that have been raised by parties and electoral administrators about the proposal to remove numbers on ballot papers at local and parish elections and the impact that it would have in contests in multimember wards where the voter is electing more than one candidate. We will carefully consider the concerns that have been raised before we finalise the form of the ballot paper at these elections. I therefore look forward to further conversations off and on the Floor with the noble Lord and others on this question.

Motion agreed.

Local Authorities (Mayoral Elections) (England and Wales) (Amendment) Regulations 2014

Motion to Consider

3.48 pm

Moved by Lord Wallace of Saltaire

That the Grand Committee do consider the Local Authorities (Mayoral Elections) (England and Wales) (Amendment) Regulations 2014.

Relevant document: 17th Report from the Joint Committee on Statutory Instruments.

Motion agreed.

Neighbourhood Planning (Referendums) (Amendment) Regulations 2014

Motion to Consider

Moved by Lord Wallace of Saltaire

That the Grand Committee do consider the Neighbourhood Planning (Referendums) (Amendment) Regulations 2014.

Relevant document: 17th Report from the Joint Committee on Statutory Instruments.

Motion agreed.

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Legislative Reform (Overseas Registration of Births and Deaths) Order 2014

Motion to Consider

3.49 pm

Moved by Lord Wallace of Saltaire

That the Grand Committee do consider the Legislative Reform (Overseas Registration of Births and Deaths) Order 2014.

Relevant document: 18th Report from the Delegated Powers and Regulatory Reform Committee

Lord Wallace of Saltaire (LD): My Lords, this legislative reform order concerns a minor amendment to legislation that would allow the Foreign and Commonwealth Office to centralise and modernise one of the consular functions it offers to British nationals overseas. It would allow a minor change to Section 41 of the British Nationality Act 1981, which would in turn allow the FCO to amend its own regulations in order to centralise in the UK the registration of births and deaths of British nationals which occur abroad.

Consular birth and death registration is not a legal requirement. It is an optional service available to those born overseas who could have an entitlement to British nationality at birth and to British nationals who die overseas. There is no UK legal requirement for a consular birth or death registration. Consular birth or death registration does not confer British nationality.

To go into greater detail, Section 41 of the British Nationality Act limits the regulation-making power in such a way that, in nearly all cases, the registration must be done overseas. Once both the British Nationality Act and the FCO’s regulations have been amended, the FCO will be able to establish a central consular birth and death registration unit in the UK, responsible for registering all consular births and deaths for British nationals overseas.

The draft legislative reform order was laid on 5 December 2013 by the FCO. It is proposed to be made under Sections 1 and 2 of the Legislative and Regulatory Reform Act 2006. This allows a Minister to make provision by order for removing or reducing any burden resulting directly or indirectly from legislation, and for improving the delivery of a service.

The FCO conducted a 12-week public consultation, from July to October 2013, which was sent directly to 18 expatriate organisations around the world and was promoted both on the gov.uk website and on the FCO’s travel advice Twitter account, which has more than 47,000 followers. There were seven responses to the consultation; only three of these completed the survey’s online questionnaire, all responding that they supported the proposed centralisation of the service. Some respondents did ask practical questions about how the new system would operate. The low response rate reflects the fact that this is a relatively low-volume and non-essential service. Following the consultation,

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the FCO decided to proceed with its plans. It concluded that, although the change may mean that a few expatriates may incur slightly greater costs in the short term because of the need to post original documents to the UK, the majority will benefit from not having to travel to an embassy or a high commission to submit an application.

The FCO intends to reduce fees for this service once the new central unit is up and running. The unit will provide a more consistent customer service, be more effective in determining complicated nationality decisions and provide a more modern online application and payment system, in line with the Government’s digital by default strategy. Another determining factor is that centralisation will free up consular staff in the FCO’s overseas network, allowing them to focus more on their primary purpose of assisting British nationals in distress overseas, particularly the most vulnerable. This is completely in line with the FCO’s new consular strategy, which was launched in April 2013.

Following the laying of the LRO in December, the Delegated Powers and Regulatory Reform Committee confirmed its satisfaction that the order meets the tests set out in the 2006 Act. The committee was satisfied that the legislative reform order procedure is an appropriate way to amend the British Nationality Act 1981 and that the affirmative procedure is appropriate for the change proposed. The LRO is required to amend the British Nationality Act 1981 to allow the FCO to register in the UK births and deaths that occur overseas.

The current method of registration is inconvenient for many customers and inefficient for the FCO. This is partly because FCO staff are losing their nationality decision-making expertise overseas since the overseas passport service was transferred to Her Majesty’s Passport Office and centralised in the UK. The FCO plans to centralise this service into a new single-purpose unit by the end of 2014. Centralisation will allow the FCO to make efficiencies, pass on savings to customers through reducing fees once the service is up and running, reduce the risk of making wrong nationality determinations and give greater focus to its primary consular function of assisting vulnerable British nationals in distress overseas.

Consular birth and death registration is not, I repeat, a legal requirement. It is an optional service taken advantage of by a small number of people, but it is available to those born overseas who could have an entitlement to British nationality at birth and to British nationals who die overseas. Consular birth registration is a separate service from passports and immigration. It does not confer nationality and does not necessarily lead to the issuing of a British passport. It is solely an optional means of recording a local birth overseas with an official English-language document. To manage customer expectations of the value of a consular birth certificate, the FCO will include a disclaimer to explain that the registration is not a UK birth certificate, does not replace the original birth certificate issued by the

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authorities in the country where the birth took place, is not a certificate of identity and that the holder does not acquire British nationality through the registration.

Moving to an online system, with a common online application and payment procedure, will provide a more efficient and convenient procedure for customers. The IT will be ready and tested ahead of rolling-out centralisation from April. It will be a simple upgrade to the FCO’s existing Compass system, which has been in use for many years. The FCO aims to be fully centralised by the end of 2014. If a customer has no internet access then the application may be made at the appropriate overseas post. As registrations are optional and rarely time sensitive, the FCO anticipates providing this assistance in only a small number of cases. It may help if I remark that in 2012 the UK registered some 6,200 births and some 550 deaths overseas; this is a small number.

In conclusion, I stress once again that the proposed amendment to legislation is a minor one that will help the FCO to modernise and make more efficient the consular service that it offers to British nationals overseas. This will help the FCO to reach its major goal of streamlining non-essential services and helping our most vulnerable citizens in trouble overseas.

Lord Kennedy of Southwark (Lab): My Lords, in respect of the legislative reform order, I have a few brief comments. The present regulations oblige the FCO to register births and deaths overseas of qualifying British nationals when asked. These procedures are different, depending on where the events took place. I accept that it is a complex process which needs trained and qualified staff to undertake this work.

I understand that the passport issuing service has been centralised from around the globe back to the UK some time ago. I can see the merits of setting up a similar procedure back in the UK, with a unit of trained staff which can develop real expertise in this area of work. Can the noble Lord assure me that this is genuinely seen as a sensible efficiency measure and not some sort of back-door reduction in services? Can he tell the Grand Committee that he is confident that, in all cases, this new system will be better and that at no point will a British citizen living abroad be disadvantaged by moving to this new system?

Whether it is the joyous occasion of a new life being brought into the world or the death of a loved one, the official processes that have to be gone through should be done as simply and quickly as possible. In the case of deaths overseas, there will also be conditions from the country in which the death occurred that will need to be complied with. From the points that the noble Lord made, he has assured us that in no case would getting a body back from abroad be more difficult with the adoption of the legislative reform order. In respect of births and death, is this purely an optional process that people and families can use, or not, as they decide? If that is the case, I have no further points to make on this order.

Lord Wallace of Saltaire: My Lords, the noble Lord touched on a number of wider issues. On British citizens resident abroad, we are in a different world

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from 50 or 100 years ago. That is part of why we need to adjust. After all, communications are now infinitely more rapid and easy than they were even 50 years ago. My wife spent five years working in Florence, and we spent some time talking to the British consul-general in Florence, who used to play a large role in the days when a relatively small number of rich British people lived in Italy, out of touch with Britain and needing the help of the local consul. Now that they fly whenever they like from Florence airport to Gatwick, there are instant communications and we are all within the European Union—and long may that last—we do not need consular services of that type.

Part of what has shifted has been that we are therefore operating on a different level. The numbers of British citizens living abroad and, even more, the number of British visitors abroad has mushroomed on an astonishing scale over the past 50 years. I find it quite surprising how small the number of registered births and deaths from abroad has been, given that I have this image—partly from my elderly parents’ stories of holidays in Spain and Portugal—that lots of elderly people go on holiday to those countries and do not quite make it back afterwards. Obviously, this is not a wide-scale activity.

I would argue that this is a sensible efficiency measure, which allows for careful checks of people’s backgrounds and allows the local staff to concentrate on those who are vulnerable—including, of course, those who fall ill while abroad—those who are charged with crimes or indeed imprisoned while abroad and the families of those who die while abroad.

Motion agreed.

Localism Act 2011 (Consequential Amendments) Order 2014

Motion to Consider

4.02 pm

Moved by Baroness Stowell of Beeston

That the Grand Committee do consider the Localism Act 2011 (Consequential Amendments) Order 2014.

Relevant document: 17th Report from the Joint Committee on Statutory Instruments

The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Stowell of Beeston) (Con): My Lords, the Localism Act 2011 introduced council tax referendums as a replacement for the previous capping regime. It did this by amending the Local Government Finance Act 1992, into which it inserted a new chapter—Chapter 4ZA—on council tax referendums and a new Section 31A, which changed the way local authorities in England determine their council tax. Other consequential amendments were made to legislation, including to the Greater London Authority Act 1999.

The order before the Grand Committee today updates the legislation to take account of changes that have taken place since the Act was passed. The order corrects

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several minor drafting errors, such as the incorrect classification of grant repayments as income rather than expenditure, and it provides a route for the GLA to recover from errors and oversights during the budget setting process. I do not propose to cover each of the amendments in detail, but I will just give a summary of what each article in the order does.

Article 2 details how local authorities should take account of any transfers from their general fund to their collection fund when determining their council tax requirement. Such transfers would be rare but theoretically possible, so it seems sensible to include a reference to them in legislation.

Article 3 makes it a requirement for major precepting authorities, such as county councils, when estimating their expenditure for the year, to take account of certain payments which may become due to billing authorities. This is again a minor amendment to ensure that legislation captures all the existing payments and transfers between authorities.

Article 5 corrects a drafting error in amendments made to the Greater London Authority Act 1999 by the Localism Act 2011. It requires repayment of grants by the GLA to be classed as expenditure rather than—as currently, and incorrectly, stated—as income.

Article 6 removes a redundant reference in the GLA Act to “relevant special grants”.

Article 7 also amends the GLA Act to address an unforeseen deficiency in the statutory timetable for the GLA when setting and revising its budget and council tax requirement. If the GLA were to set an excessive council tax increase, in common with the obligations on all local authorities it would be required to hold a binding referendum to seek local agreement to the increase. As part of this process, the authority would be required to draw up an alternative budget that did not require an excessive increase in council tax, which could be adopted if the referendum was lost. There are fixed statutory deadlines for these budgets to be set, revised and approved. Currently it is possible for the GLA, through error or oversight, to set an excessive council tax increase without leaving itself sufficient time to gain approval for an alternative, non-excessive budget. Article 7 provides the GLA with a way to recover from such a situation, by allowing the Assembly to approve a revised non-excessive budget at a later date.

A copy of the draft order was shared with the GLA and revised in the light of their comments. I commend the order to the Committee. I beg to move.

Lord McKenzie of Luton (Lab): My Lords, I thank the noble Baroness, Lady Stowell, for introducing the order. I do not think we will detain her long in our consideration of the amendments that it makes, although this is one occasion—perhaps the first—when I found the Explanatory Note somewhat more impenetrable than the actual instrument.

As we have heard, the amendments focus on aspects of the calculations necessary as a result of the changes brought about by the Localism Act for so-called potentially excessive amounts of council tax. They amount to a capping regime and are driven by the

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determination of basic amounts of council tax for a financial year, rather than, as previously, budget requirements. Whatever our views on these arrangements, we accept that the detail of the calculations and the process should be logical.

Article 2 is said to be consequential and aimed, it seems, at ensuring symmetry by making sure that sums transferred from an authority’s general fund to its collection fund are excluded from the calculation of expenditure, just as funds transferred in the opposite direction are excluded from income. I think that that is the purpose, but I presume that this is not retrospective. Can the Minister say what the impact has been on any specific local authority situations of these provisions being absent? Is it possible that a preceding year has been done on the basis of the current rules, and can she therefore say what the implications of this change are?

Article 3 requires estimated expenditure as well as payments and receipts to be taken into account when calculating council tax requirements. Will the Minister assure us that there will be no double counting, whereby amounts estimated for one period are excluded from a later calculation when they are actually paid?

Article 5 is a consequential amendment to ensure that repayment of grants are taken into account on the expenditure side of the equation rather than netted as income. The Minister said that this corrected an error in the drafting. Can the Minister say a little more about the nature of the grants involved and the implications of the provision? How many authorities’ calculations have treated grant repayments as income to date, and how will matters be rationalised if they have? What is the impact of this? Does the new treatment affect the calculation of amounts of council tax in any circumstances?

So far as Article 6 is concerned, we accept that the provision is purely consequential.

On Article 7, the Explanatory Note was most difficult to fathom, but at the end of the day it seems to be essentially about a process issue. We understand that there is currently a range of circumstances in which the London Assembly has to initiate a substitute consolidated budget, or substitute council tax requirement, where the Mayor has failed to present one. However, currently these have to be made within statutory deadlines. Where a major precepting authority fails to notify an excessive increase to a billing authority, the precepting authority must issue a precept based on substitute calculations. However, until it does so, the billing authority cannot pass any funds back to the precepting authority, so it needs to have a process for making substitute calculations at a later date. Is our understanding of that correct? Is that all there is to this article?

Subject to any points the Minister may make, we certainly would not seek to resist the order.

Baroness Stowell of Beeston: My Lords, I am grateful to the noble Lord, Lord McKenzie, for his comments and his point that, while we may differ on the underlying principles associated with the order, he agrees with us on the need for accuracy and, therefore, the importance of making the order.

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The noble Lord raised a few questions which I will seek to address. He asked whether the order was retrospective and I can confirm that it is not. On Articles 2 to 5, he asked whether there had been any problems related to these inaccuracies being in place. We are certainly not aware of any reported problems, losses or errors on the part of local government due to the issues addressed by these articles. These are things which we see are inaccurate and need to be changed, but we are not doing them because we have had things reported to us as problems which need to be taken care of. The noble Lord also asked about double counting. Based on the information that I have given, I can confirm that the concern that he raises would not arise from the changes we are making.

Let me add a few more points to reassure the noble Lord. We are making the amendment in Article 3 because payments made by billing authorities to precepting bodies are sometimes subject to revision during the year, which could involve the precepting body making a payment back to the billing authority. The article requires major precepting bodies to take into account any estimate they make of such payments.

The noble Lord asked whether Article 5 would affect the basic amount of council tax calculations. The answer is no. There was, as I said, a drafting error when the provisions were first produced, so it is right to make that change; it is clearly inappropriate for them to remain in place.

The noble Lord also gave his assessment of what Article 7 meant, which is that it concerns a process issue, and asked whether his understanding of it was correct. He is absolutely correct. This is about process and about making sure that the Greater London Authority is acting in line with all local authorities in the way that it is required to set its council tax and consult its electorate. The order will make sure that, if it is necessary for the authority to hold a referendum because its budget is excessive, it can both do that and introduce a lower council tax rate should the referendum not support the excessive council tax increase. I assure the noble Lord that this is purely about process, and I hope that we will ensure that the situation that the GLA inadvertently found itself in is not repeated. I think that I have covered all the issues raised by the noble Lord.

Lord McKenzie of Luton: I am grateful for those further explanations. I do not propose to prolong this, but perhaps I might come back to Articles 2 and 5, which deal with drafting points. My question is: in respect of prior or current periods, were calculations done on the basis of the legislation as it is before the amendment, or did they anticipate the drafting errors and were therefore done on what we would now call the correct basis? If it was the latter, all well and good; if it was the former, I wonder what the implications of that are.

Baroness Stowell of Beeston: Yes, I can confirm that they were operating in line with these amendments: they have not been operating outside of the requirements of the Act.

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Lord McKenzie of Luton: I am grateful for that.

Motion agreed.


Child Support Fees Regulations 2014

Motion to Consider

4.16 pm

Moved by Lord Freud

That the Grand Committee do consider the Child Support Fees Regulations 2014.

Relevant documents: 18th Report from the Joint Committee on Statutory Instruments, 23rd and 27th Reports from the Secondary Legislation Scrutiny Committee

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con): My Lords, I will speak also to the draft Child Support (Ending Liability in Existing Cases and Transition to New Calculation Rules) Regulations 2014.

These regulations were laid before both Houses on 2 December 2013. They enable the department to charge application, collection and enforcement fees for the statutory child maintenance scheme introduced in 2012, which is delivered by the Child Maintenance Service. They also make provision for the department to close cases on the 1993 and 2003 schemes delivered by the CSA, and specify the means by which existing clients must exercise their choice to make an application to the 2012 statutory maintenance scheme. I am satisfied that these instruments are compatible with the European Convention on Human Rights.

Before addressing the regulations in detail, I should emphasise that the programme of reform began in 2006 when Sir David Henshaw delivered an independent report on the future of child maintenance. In his report, Sir David recommended stopping using the CSA as a default option for parents, and introducing charges to provide both parents with an incentive to collaborate. Since then, as part of our reform programme, we have ended compulsion on parents on benefits to apply to the CSA, secured the powers to introduce a new child maintenance system and introduced a full disregard of child maintenance for the purpose of assessing benefit entitlement from 2010.

All these actions have been about helping parents to collaborate in the best interests of their children and to reduce levels of conflict between parents after a separation. This is because evidence suggests that children do better when their parents work together. We are taking a twin approach to increasing the number of parents who work together after a separation to agree child maintenance rather than relying on state intervention. First, we are supporting them to work together on not only child maintenance but the whole range of issues faced following a separation. Secondly, we are incentivising them to think twice about whether they could set up a more collaborative family-based child maintenance arrangement without automatically turning to the statutory scheme.

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We are therefore reforming the child maintenance landscape to put collaboration and family-based arrangements at the centre. We are investing £14 million in the Help and Support for Separated Families initiative, directing parents to the support they need during and after separation. For those unable to make family-based arrangements, the new, faster, more efficient 2012 statutory scheme, delivered by the Child Maintenance Service, will be there. The 2012 scheme has a built-in HMRC interface.

We opened the 2012 scheme using a pathfinder approach in December 2012 and, following assurance that the processes, procedures and client interfaces were working well, we opened the scheme to all applicants on 25 November 2013. Those making an application to the statutory scheme will be invited to enter into a discussion with the Child Maintenance Options service, which provides free, impartial information and support on the various ways to set up maintenance arrangements. This conversation gives parents the information they need to consider what is the best arrangement for them.

We propose to introduce fees for those wishing to apply to the 2012 scheme and for continuing to use it. Sir David Henshaw’s report recommended this as a balanced incentive. His argument was that people are more likely to consider whether a service is necessary for them if a charge is applied for it.

Evidence shows that more than half of parents with care using the Child Support Agency could reach their own family-based arrangements with the right support. We launched a consultation on the draft Child Support Fees Regulations 2013 and the draft Child Support (Ending Liability in Existing Cases and Transition to New Calculation Rules) Regulations 2013 to seek feedback on our proposals, and published the Government’s response in November 2013.

We listened carefully to the feedback and reduced the proposed application fee from £100 to £20. Vulnerable applicants who declare that they have experienced an incident of domestic violence or abuse and have reported it to one of the organisations named in the guidance referred to in the regulations will be exempt from paying the application fee. Those under 19 years of age will also be exempt.

We have reduced the parent with care collection fee from the proposed “7 to 12%” to 4%. By reducing the fee to 4%, we have shifted the balance in favour of the parent with care even further so that it stands in a one-to-five relationship with the 20% non-resident parent fee. It is also charged only on money actually collected. It is the non-resident parent who faces by far the highest charges, reflecting the fact that they have greater control over whether they use the collection service. We believe that both parents should make a financial contribution towards the cost of the service. The proposed fees will bring in revenue of £170 million per year. This is a financial contribution towards the cost of the service, which remains heavily subsidised by the taxpayer.

We wanted to ensure that there was provision to enable parents who need to use the statutory scheme to avoid ongoing collection fees. We have therefore

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introduced Direct Pay. Direct Pay is where the Child Maintenance Service calculates the amount payable and the non-resident parent makes payments directly to the parent with care. Direct Pay will provide a way for parents to access the statutory service in a way that can help rebuild trust between them. We are also proposing enforcement charges for non-resident parents to encourage them to comply with their commitments and to help to offset the cost of administrative action to enforce compliance. The current system offers no financial incentive for non-resident parents to pay in full and on time.

There are currently three statutory schemes in operation: the 1993 and 2003 schemes, delivered by the CSA, and the new 2012 scheme, delivered by the Child Maintenance Service. We propose that cases will close on the 1993 and 2003 statutory schemes. We considered the responses to the consultation on these regulations and have altered our initial approach.

The main change is the order in which cases are selected for closure. The details of this order are included in the scheme that accompanies these regulations. We will divide the caseload into five segments and close them sequentially. To summarise: the first cases to be closed are those where the non-resident parent is assessed to pay a nil amount, followed by those where the non-resident parent is non-compliant. The next cases to be closed will be those handled off the system, followed by the remaining compliant cases.

The final group of cases to be selected will be those where there is an enforced method of payment in place, or legal enforcement action ongoing. Non-resident parents in this category will be invited to undergo a positive test for compliance. They will be required to demonstrate their ability to pay voluntarily for a period of six months. This will inform the department’s decision as to whether they should be allowed to pay the parent with care directly, and avoid collection fees, if an application is made to the 2012 scheme.

This programme of reforms aims to promote collaboration between separated parents in order to ensure that their children achieve the best outcomes in life. We have consulted on both the fees and the case closure proposals, changing our initial proposals on fees and the sequence in which cases will close. I have held two briefing sessions in the House of Lords with the aim of keeping noble Lords fully informed on the reform programme.

I understand that introducing fees to encourage collaboration is a significant change, but emphasise that under Section 141 of the Welfare Reform Act 2012 we have committed to reviewing the effect of the fees regulations within 30 months of their coming into force, and to laying a report about the conclusions of that review before Parliament.

I spoke earlier of the careful way in which we introduced the 2012 scheme. We will continue with this approach, and will not introduce fees or begin the process of closing cases on the 1993 and 2003 schemes until we are confident that the 2012 scheme is working well. We anticipate that this will be in the summer. Those on existing child maintenance schemes will have already been told about case closure and the introduction

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of the charging of fees. We will not begin charging collection fees until six weeks after the regulations come into force, so anyone affected will have plenty of notice about when the collection changes will begin to affect them personally. I beg to move.

4.30 pm

Lord Mackay of Clashfern (Con): My Lords, I want to comment on Regulation 7(3) of the fees regulations and, incidentally, on Regulation 8(2). I have interests in children’s charities and care organisations, which may or may not be relevant to what I am going to say now but I declare them for caution.

It is rather remarkable that the Explanatory Memorandum comments on this provision and puts the point rather succinctly:

“The introduction of fees is politically significant. Child maintenance elements of the Welfare Reform Act 2012 had a difficult passage through the Upper House and charging persons with care, often single mothers of limited means”—

I do not know how many people are of unlimited means, but anyway it is quite clear that these are people of rather limited means—

“remains a controversial issue for stakeholder groups, service users and the wider public”.

I assume that I am included in the wider public.

I am entirely in favour of everything that can be done, and that this Government are doing, to try to help people who have had a relationship that has broken up. I am familiar from long ago with divorce cases; I did a lot of them but, as the Committee knows, that was a long time ago. However, the difficulties of interpersonal relationships were as formidable then as they are now, and I wish every success to the moves that have been made to try to help people by the Department for Work and Pensions, the Ministry of Justice and the Department for Education, which are involved in the Children and Families Bill, which is having its Third Reading tomorrow. I went to a meeting that Ministers organised in connection with that Bill, and I had to remind them that the DWP was also working in this area of trying to help people. Of course, they said that they work very closely together, so I am glad to hear that. The closer they get together, the more chance that their measures will be successful. As I say, I wish them every success in that. Unfortunately, so far those efforts have not produced universal success, and the regulations contemplate at least the possibility that they will not have universal success in future.

The point that I want to stress is that when it comes to the obligation to maintain a child, the parents’ obligation is absolute. It does not matter what sort of dispute they have had with the other party to the arrangements in the past. I accept immediately that there are many different types of squabble that can emerge, and it is by no means clear that the non-resident parent is always fully responsible. I entirely understand that for the question of the break-up of the arrangements, both parties usually have some degree of responsibility. When it comes to the payment of maintenance, though, that obligation is absolute and is not qualified by the fact that the other party to the arrangement has been terrible, difficult or whatever. That is what these fee regulations are concerned with.

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The collection fee that I have referred to appears when the collection system comes into operation. That happens only when the Child Maintenance Service, not the other party, is satisfied that without the collection service, maintenance is unlikely to be paid. That is in Section 137 of the Welfare Reform Act 2012. The decision that the collection service comes into operation, with its charges, is entirely the responsibility of the Child Maintenance Service and has nothing whatever to do with any responsibility of the parent with care. In that situation, the imposition of the collection charge on the parent with care is unjustified in principle.

Of course, this is not by any means the first time that I have raised this issue, and I thank the departmental Ministers, who have changed over time, for the courtesy with which they have listened to the same thing being said again and again. That has not been an altogether unproductive process, because concessions have been made that I warmly welcome. The concessions are narrated in the Explanatory Memorandum; I will not weary the Committee by going over them but I agree that they are quite substantial. The most recent one was the reduction from the 7% to 12% charge that was originally thought of to 4% in the case of the parent with care. As I say, I welcome that very much and am glad that it has happened. However, as the Explanatory Memorandum says, this charge remains controversial, and I think it is unjustified in principle.

I did not feel inclined to table a Motion of Regret or a Motion to set aside the regulations, for pretty obvious reasons but primarily because the Government know what our House decided about this matter long ago. Of course, it was overcome by the financial protection of the House of Commons and therefore went through. But as the Explanatory Memorandum says, the passage through the upper House was not entirely easy. That vote is there and, as far as I know, opinion on that point remains.

I submit that the review that is to take place 30 months after the matter comes into force will take particular account of this point, which I am sure will remain controversial until the inquiry is completed, whether or not I am here to promote it—although that may be a matter of opinion. I do not intend to weary your Lordships further but I do wish to indicate the principled objection to this that remains.

Baroness Howe of Idlicote (CB): My Lords, your Lordships may remember that I was one of those who supported the noble and learned Lord, Lord Mackay of Clashfern, in the very important amendment that he has just referred to. I, too, remain concerned that despite the concessions made by the Government in reducing the application fee for a child maintenance calculation to £20 and reducing the parent with care collection charge by 4% on every payment—on which I congratulate them—there is a real danger that the effect of the new charging regime will be that fewer children end up with fair and reliable child maintenance.

In this respect, I share the conclusion of the Secondary Legislation Scrutiny Committee, which found that,

“although the transfer scheme may make savings it may imperfectly achieve the overarching objective of providing financial support for children”.

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I want to press the Minister for assurances that the Government will closely monitor what happens to maintenance for children whose CSA cases are closed during the next three years. After all, the department has details of the parents and children so can track what happens to them, case by case, in terms of future maintenance arrangements—or the lack of them.

It will not be enough for the Government to congratulate themselves if fewer parents apply to use the statutory maintenance service, unless they know for certain that the parents concerned have made private arrangements for maintenance that result in regular payments of realistic amounts for the children concerned. Similarly, it will not be enough to be satisfied that fewer parents are asking to use the collection service and have opted for a direct payment arrangement—again, unless they know for certain that those direct payment arrangements are resulting in regular payment of the liabilities that have been calculated by the Child Maintenance Service.

In the past, the department has said it can assume that every direct payment arrangement is paid in full and on time because, if not, parents with care would ask to use the collection service. Even if this assumption were true now, it will certainly not be true in the future, given that the collection charges are expressly intended to deter parents from asking to use the collection service, regardless of the circumstances. I therefore seek full assurances from the Minister that the department will track in detail how children fare as their CSA cases are closed down and charges are brought in.

Lord Kirkwood of Kirkhope (LD): My Lords, it is a pleasure to follow my two colleagues in this important debate. My noble and learned friend Lord Mackay led the House in earlier stages of the Bill in a commanding and profoundly serious way. His weight being added to this question is something to which I hope that the Minister and department will pay careful attention; that is also true of the noble Baroness, Lady Howe.

I underscore what my noble and learned friend Lord Mackay emphasised at earlier stages of this discussion: the fee money that we are talking about is actually the child’s. My noble and learned friend is right to point to the clause in the memorandum that says that this is controversial; that is why it is controversial. This money which is being taken out of the system should be going to the assistance of, mainly but not exclusively, poorly paid families who are doing their best to struggle to bring up children in very difficult circumstances. That controversy is not going to go away. I pay tribute to my noble and learned friend Lord Mackay and the noble Baroness, Lady Howe, for the work that they have done in the past.

I also acknowledge that there have been concessions, and I do not think that my noble friend the Minister needs an alibi. He has other fish to fry; this is none of his business. It is a very bad change. I actually take a more fundamental view. I have been of the opinion since 1991, when I started on all of this, that charging was wrong in principle. I am long enough in the tooth to remember the period during 1993 and 1995 when we tried charging. I have said this before: it was a

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disaster. Why? Because nobody collected any money. They were not collecting fees or enforcing debts, so people were saying, “Why are we paying these fees when we are not getting any money?”. The scheme was quickly abandoned. We need to learn lessons about that. I do not believe that even the new, all-singing, all-dancing Child Maintenance Service—while the improvements are welcome—can offer guarantees that the enforcement will be effective.

Changing the balance of my concern, because I have always been really worried about the parents with care more than anything else, some of the charges which are going to be levelled at the non-resident parents are eye-wateringly high. There are a lot of non-resident parents out there who do not understand the difference that will be made with the combination of a recalculation and a collection fee. I wait with bated breath to see where this new co-operation which is going to break out all over the place is going to start. It is fantasy. A long time ago I was a divorce lawyer, and I know what people can do to one another when they separate. It is sometimes quite unbelievable. I am sure that my noble and learned friend Lord Mackay, with his previous distinguished legal career and all his work with children’s charities, would reinforce that. I object to fees in principle. I do not think that they will work. I hope that I am wrong, but that has always been my position and it is worth restating.

Secondly, this system that we have used for charging fees is flawed. Again, I agree with everything that my noble and learned friend Lord Mackay has said, but I want to add a point which has been drawn to my attention by Gingerbread, which is right in saying that if the Child Maintenance Service has the weight of decision in testing the question of “unlikely to pay or not”—to allow the parent with care to join or stay in the service—that is a contestable decision. It is an important decision for both parents. It is an administrative decision which is taken out of both their hands. I do not know what assurances have been given, or whether there is anything that I have missed in the regulations which makes it a requirement to explain in detail why that decision has been taken, but it seems to me contrary to natural justice. In any other area of public life where such an administrative decision is made an inbuilt independent appeal is automatically attached to it. That is entirely absent from this new system. I appeal to my noble friend to go away and look at the provisions in the Child Maintenance and Other Payments Act 2008, Section 6(5), where, I think, the Secretary of State is given discretion about introducing an appeal. As part of the undertaking that I hope my noble friend will give to the Committee to continue to monitor all this carefully there should be the possibility of the Secretary of State making that discretionary decision, so that we can have an appeal available, if it becomes obvious—as I believe it will—that it is necessary.

4.45 pm

The statement that charging will induce these behavioural changes is completely fallacious. The David Henshaw report came out of the blue, to put it mildly. I did not know him before, and I have not seen or heard of him since. However, his report was devoid of evidence—there was no evidence for this ex cathedra

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statement that fees would suddenly make all the difference, the scales would fall from people’s eyes, they would fall into one another’s arms and they would say, “Let’s agree it is £40”, or £50 or £60. It is not real; it will not happen. In particular, 2 million parents will be caught by the CSA closure programme over time, 36% of whom have been apart for more than 10 years. A charging regime, we are asked to believe, will drive them together so that they can avoid paying the charges. What it will actually do is cause a whole new level of tension within the families. If the parties have been apart for more than 10 years the children have probably flown the nest, and that is probably the safest place for them when such questions are being considered. It is fantasy. I hope I am wrong, but I think it is nonsense. This whole policy is built on sand.

Another point is that for the first time—and this changes the dimension the department is now operating in—the DWP is conflicted about, on the one hand, garnering fees to pay the Treasury debts that it has incurred, and on the other, making proper financial provision for children in lone-parent families, many of them serially disadvantaged. I received an interesting answer to a question I asked. Over a 10-year period, from 2013-14 to 2022-23, fee revenues are estimated at £1.612 billion. You may say, “Well, there have been concessions, and it is down from 7% to 4%”, and so on. The noble and learned Lord, Lord Mackay, made these points, rightly, and I agree that that is a welcome change, and 10 years may be a long time. However, that is £1.612 billion that is not going into family household budgets. The department is now in a very different situation; it is not trying to do its best for families, but trying to save money. It cannot successfully do both. The more fees it collects, the less chance it has of looking after these families and the children in them. By the way, I do not understand the analysis of future fee income, but it got past the Treasury and maybe that is all it was designed to do.

I will make two further points. It is wrong to start charging in case closure until we know support systems are put in place. The Minister reminded us that there will be £40 million over quite a period of time; a £20 million-period of expenditure will end in 2015, which will set up the help and support for its separated parents pilots. However, let us be careful and think about this, as the pilots will end in 2015, and we heard earlier that this charging process and the case closure will roll out earlier than that. Therefore it is not just a question of the system being there and waiting.

By the way, it is not safe for the department to rely on the fact that there are a lot of relational support services for separating parents. There are many, and they are very good, but they are designed in the main to deal with newly separated parents who are willing to work together, not people who have been apart for more than 10 years. Therefore the contexts in which those questions are tested and in which the support is offered are totally different. It is not safe to go into this new domain, where the pilots have not been evaluated; I have no confidence in it. I do not mean that the people who are doing it are acting in bad faith; I am sure that they are doing their absolute best and that they are sincere. The resources that were put behind them are inadequate for the task. If we are

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raising £1.612 billion over 10 years, surely to goodness we can think about spending a little more money to support those families who will find themselves in that new and challenging set of circumstances.

Finally, how well is the shiny new Child Maintenance Service doing? As the Minister said, it has been in operation for more than a year and took all-new applicants for the first time in November last year. I would like to know what proportion of current CMS cases have been paid in full right now. If the Minister does not have that information in his inside pocket, I would be pleased to hear about it as soon as possible. I know that those figures will come out in due course, because the quarterly statistics are informative and regular, and we look forward to seeing them. However, if there is any way of getting an early rush on how the proportion of current CMS cases have been paid in full or not, I would be keen to see that this afternoon.

Secondly, how much is owed in current CMS arrears since it began a year ago? The point of those two questions is that if we taking enforcement seriously—in my experience that would be the first time since 1993—we must make enforcement professional, efficient and workable, otherwise condemning people to pay fees is contrary to natural justice, bad policy, and worst of all, inimical to the interests of the long-term future of many of our impoverished children.

Baroness Sherlock (Lab): My Lords, in speaking to these regulations I declare an historic interest as a former non-executive director of the Child Maintenance and Enforcement Commission until 2010, and a very historic interest as a former chief executive of the National Council for One Parent Families, which is now lost in the mists and merged with Gingerbread.

I thank the Minister for his explanation of these regulations, and I am grateful to other noble Lords who have spoken on this for the illumination they have added. Most of the time, when I face the Minister across the Dispatch Box, I would happily change places, but when he faces down the noble and learned Lord, Lord Mackay of Clashfern, he is welcome to that seat, at least for the duration of these proceedings. I wish him well in answering the points raised by the noble and learned Lord.

I thank all those organisations which sent in briefing, including Gingerbread and the Resolution Foundation and, indirectly, Families Need Fathers. We on this Committee are also indebted to the noble Lord, Lord Goodlad, and his Secondary Legislation Scrutiny Committee, which did an extraordinarily thorough job on these regulations. It identified gaps and question marks and pursued Ministers gently but persistently, drawing information from them bit by bit until it got answers. I put on record my appreciation of its intelligence, analysis and perseverance.

These are significant regulations, and despite the lengthy impact assessment, we all know that we do not really know what will happen as a result of both the new scheme and the charges being imposed on both parents. The Government’s aims for these reforms, which were set out clearly in the Green Paper, Strengthening Families, Promoting Parental Responsibility, were twofold: to achieve cost savings for the taxpayer

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and to create an incentive for parents to work collaboratively to make family-based arrangements rather than enter a statutory scheme.

The Secondary Legislation Scrutiny Committee’s excellent 23rd report of the current Session draws these instruments to the special attention of the House on the grounds that they may imperfectly achieve their policy objectives, so it is important for the Minister to reassure the Committee on this point. Specifically, the Select Committee says:

“we conclude that although the transfer scheme may make savings it may imperfectly achieve the overarching objective of providing financial support to children”.

The committee engaged in a correspondence with the relevant Minister in another place, which eventually drew more information out but in my view was not ultimately satisfactory in providing assurance on that point.

I shall ask the Minister to reassure the Committee on those broad points and then ask some specific questions. First, a number of noble Lords have raised behavioural issues. The impact assessment assumes that fewer cases will enter the statutory scheme as a result of the change, but also suggests that the proportion of arrangements affected will rise from the current 60% to 70%. The assumptions seem to be rather optimistic. The present pattern of compliance in family cases is one thing, but that is not necessarily a guide to what we may expect to see in future. As my honourable friend Kate Green put it in another place, at the moment we have parents who may be choosing positively to co-operate, but in future parents with family arrangements will be those who simply see it as the lesser of two evils. There will therefore be a different set of arrangements going on in family arrangements from those that prevail at the moment, so how confident is the Minister of those figures?

On the cost objective, the Government are clear that they expect to score substantial financial gains from the new scheme being introduced, especially as the result of charging fees. Fees both bring in income and reduce running costs, as parents are deterred from using the system. However, I looked in vain for a parallel level of ambition to increase the amount of child support that would actually reach children, a point made by the noble Lord, Lord Kirkwood. What are the Government’s ambitions in that connection? After all, the point of a child support scheme is not to be efficient. It should be efficient, but its point is in fact to get money from the non-resident parent to the parent with care. Presumably the Government have some ambitions for increasing the amount of maintenance that is going to be transferred to children as a result of the reforms. Could they help us on that point?

I also have some questions about the implementation of the new scheme, some of them touched on by the noble Lord, Lord Kirkwood, and some by the noble Baroness, Lady Howe. This is crucial as the Government always said that they would not introduce fees until phase one of the new system was working well. The Minister told us that the scheme started in November and that they aimed to move people on from next summer. Can he tell us a bit more, as the noble Lord,

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Lord Kirkwood, also asked, about how the new scheme has been performing so far? I will certainly be interested to hear the answer to the noble Lord’s question about how many cases have been paid in full.

How is the interface with HMRC working? I am particularly interested in self-employed non-resident parents. There is the issue of who is responsible for enforcement. I am assuming that that will lie with the CMS but it would be helpful if the Minister clarified that. A common complaint is when a self-employed NRP declares very low levels of profit on, for the sake of argument, his business but the parent with care believes, or has evidence based on his apparent lifestyle, that in fact a much higher level of income is coming in than might be suggested by the latest set of accounts made available to the taxman. At the moment, if she has that evidence she can go to the CSA and it can investigate that. If that should happen in future, does the CMS have the powers to investigate that or will it be left to HMRC? If the CMS has the powers, will it exercise them? If it is HMRC, what assurances has the Minister had that it will do this and prioritise it over the other workloads placed on its shoulders?

When does the Minister expect to be in a position to publish a full range of statistics on cases being dealt with by the CMS? Will these stats show how many cases transfer from direct pay to collect and pay? See—I have got the jargon. It would be helpful to know what was happening to cases going into the scheme.

By what precise criteria will the Government decide when to commence the full new regime? A Written Answer to my honourable friend Kate Green in another place on 23 January said that the Government will determine when the new scheme is operationally ready for the transfer of cases in accordance with the criteria of,

“the Department for Work and Pensions Project Change Lifecycle Framework”.—[Official Report, Commons, 23/01/14; col. 263W.]

I apologise that I am not immediately able to translate that for the Committee, but perhaps the Minister can do it for me. What does that mean and how will it be applied?

5 pm

The noble and learned Lord, Lord Mackay, gave us the benefit of his wisdom, gained over many years, about what happens to divorcing couples and the challenges that will be faced in dealing with family-based arrangements. That point was taken up by the noble Lord, Lord Kirkwood. I, too, worry that the Government are being overly optimistic about how easy those parents will find it to make family-based arrangements. I have seen a copy of a joint letter to the Government from Gingerbread and Families Need Fathers, which says that 13% to 14% of parents describe their relationship with the other parent as “not friendly” and more than 40% of parents in the current scheme have no contact with one another at all. That is a pretty big standing start, to go from no contact to being able to agree a familial arrangement. I am very interested to know what kind of support will be available to people in that situation to help them to do it. The noble Lord, Lord Kirkwood, also raised this important point.

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The Government have said previously that their aim was to offer an integrated model of family support services but, as the noble Lord, Lord Kirkwood, pointed out, the pilots are getting up and running only now and some are not due to start until May. Can the Government explain how they are holding together their plans to move some of the longer-standing cases, where the parents are least likely to be in contact, on to the new scheme early with the kind of provision of help they will need to enable them to do this?

Turning to the question of fees, I would be grateful if the Minister could clarify the purpose of introducing the fees. Is it to bring in money to offset the costs of running the scheme, or is it to try to disincentivise parents from using the scheme? It would be helpful to the Committee if the Minister could make that clear. If it is the latter, either solely or in part, what thought have the Government given to the kinds of parents who may be deterred? The Government’s own statistics show that a third of new CSA applicants have already experienced a broken private arrangement; more than half have experienced violence or abuse from the non-resident parent; and almost six in 10 have poor or non-existent relations with the other parent, as we have just discussed. So there will be some—possibly many—parents with care who have good reason to want to use the statutory scheme, and the Government need to think carefully about the consequences if the fee regime was used to deter them.

I would also like to understand the role the fees are playing. The noble Lord, Lord Kirkwood, has been busy with Written Questions, and he drew out from the Government not just the fee income that is predicted but the cost saving that the service is anticipating over the next 10 years—not just in the current scheme but the additional costs that will have to be invested. Does the DWP want to encourage parents to use the statutory scheme to pay fees so that it can use the money to offset its costs, or does it want to deter them from using the scheme because that way the running costs will be lower? Given that, what steer has been given to parents?

The noble and learned Lord, Lord Mackay of Clashfern, expressed very clear concerns about the fact that a parent with care faces a collection charge, despite the fact that she is able to access the scheme only if it has already been established—and not by her—that the non-resident parent is unlikely to pay. The Minister mentioned behavioural incentives. Can he explain what the behavioural incentive is for the parent with care in those circumstances? If she is able to access the scheme only when it has become clear that the non-resident parent will not pay, what should she do differently?

The noble Lord, Lord Kirkwood, has raised the question of appeals so I do not need to revisit that, but I will listen with interest to the Minister’s response. I have a couple of other small points. One concerns domestic violence. I very much welcome the decision not to charge application fees in cases of domestic violence. The Minister will be aware that even where domestic violence has been alleged or indeed admitted, the non-resident parent can still use the direct payment option. He will also be aware that voluntary organisations,

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including Gingerbread, are concerned about what impact that might have on the safety and security of the parent with care in those circumstances.

In the impact assessment, the Government have recognised the need for some sort of money transfer option, which would enable the parent with care to prevent any contact information being shared; for example, normal bank sort codes will reveal geographical information about where she is located, and she may have gone to another part of the country to protect herself and her children from a violent former partner. I believe that the Government are looking at trying to find some kind of bank account which would have non-geographical data attached to it. Can the Minister update the Committee on that? Can he also assure us that, unless and until a parent with care is able to have that kind of safe mechanism, she will not be expected to accept payment directly from the non-resident parent, with the consequences that that brings?

In a letter to the noble Lord, Lord Goodlad, dated 17 September, the honourable Steve Webb, Minister in another place, said:

“We also plan to run a media campaign from early 2014 to make CSA clients aware of the changes”.

Can the Minister update the Committee on that?

Finally, a number of noble Lords have mentioned the 30-month review, which was the concession that the Government made when the Welfare Reform Act was passing through this House. I assume—the Minister may correct me—that that review is likely to be too soon to take advantage of the data coming out of the longitudinal study to which the Government have committed. Given that, can the Minister give the Committee some assurance about what the review will be like? What format will it take? Will it commission proper research evidence? What kind of evidence will it expect to gather for that?

We are left with a good many questions here. I hope that the Minister can answer them all today—if he cannot, perhaps he will write to us. If he finds that he is unable to answer them, I wonder whether he might think again. In particular, I very much hope to hear the Government tell me that I have missed, which I may well have done, the fact that they have set themselves an overriding objective to increase the flow of maintenance to children as their principal policy aim. If they do that, a number of the other questions may come out in the wash.

Lord Freud: I thank noble Lords for a set of very interesting contributions to this debate. It is clear that a lot of thought has gone into this area and it has provided a very constructive approach, not just today but over a considerable time. I therefore need to respond to as many of those issues as I can.

As I said initially, and as the statement read out by my noble and learned friend Lord Mackay confirmed, we have consulted on these two sets of regulations and taken views into account. We have changed our initial proposals on fees and on the sequence in which cases will close.

I want to reflect initially on the contributions that my noble and learned friend Lord Mackay has made to the development of these policies. He has made a

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series of suggestions, both publicly and privately to us, aimed at improving the scheme and helping children. We have listened very carefully to his representations and taken action to reduce the strain on the parent with care. Although my noble and learned friend has made clear his view that the balance is still tilted towards the taxpayer at the expense of the parent with care, I hope that there is agreement that this is a question of striking the right balance and that it is appropriate that we do that by considering actual behaviour.

First, as a result of the consultation, we have amended our proposals for case closure by putting back those cases where parents within the statutory service have most to lose. We have put to the end of the case closure process those cases where money is flowing, which often follows hard-fought compliance, and the flow is maintained only by enforced collections. We have done this to ensure that money keeps flowing and compliance continues. These cases are most likely to fall into the category that my noble and learned friend is most concerned about, where parents with care find themselves unable to establish workable direct payment arrangements regardless of their willingness to do so.

Secondly, the 30-month review allows us to consider actual behaviour, to check that the impact of the reforms is as expected and to provide an indication of whether there are any unintended consequences for clients or the taxpayer. We intend to evaluate the overall impact of the child maintenance reforms in wider society, including the impact on overall maintenance outcomes. Our approach to the review is to use existing survey and administrative data sources where possible, combining these with internally and externally commissioned quantitative and qualitative research where necessary.

Our aim is that the child maintenance system in Great Britain should work better. We are going to focus on the impact on children of these changes. A key criterion for success of our reforms, which will be tested in the 30-month review, would be to increase the number of children benefiting from maintenance. Our estimates suggest that this number should rise, and we look forward to having this confirmed by the review—a point that the noble Baroness, Lady Sherlock, was particularly interested in. If there are fewer children receiving child maintenance as a result of our charging regime, this will be made clear by the 30-month review and we could consider what changes might be required. By that time, we will know how people will behave and refinements to the system, along the lines that my noble and learned friend Lord Mackay has recommended to us in the past—in other words, segmenting the caseload into “can make direct pay arrangements” and “cannot make direct pay arrangements”—can be considered on a more informed basis. To introduce this complexity at this stage would add delay to bringing the benefits of the new system to parents and further complicate the Child Maintenance Service’s processes.

Pressing ahead with the reforms will mean that more children will be better off, as our estimates suggest that there will be an increase in the proportion of positive outcomes for clients on the statutory scheme. This is due to more availability of data and more

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updating of maintenance liabilities, together with a significant increase in the number of effective family-based arrangements. In the statutory scheme, the effect of the annual review coupled with direct interfaces with Jobcentre Plus and HMRC should mean that in future fewer cases are nil-assessed, meaning that more money could flow. We estimate that the percentage of nil-assessed cases will fall from the current 23% to around 6% of all arrangements in the longer term; I hope that this answers the questions asked by the noble Baroness, Lady Sherlock.

Over the 20-year period considered in the impact assessment published in 2013, including case closure, charging and the overall reform package, the assessment consistently gives a higher proportion of effective arrangements for parents who would have used or will use the statutory scheme than if the 2012 scheme was introduced on its own. As noble Lords have pointed out, we estimate that these reforms are likely to increase the proportion of effective arrangements from 60% to 70%.

There were a large number of questions, and I will try to go through as many as I possibly can. The noble Baroness, Lady Howe, asked how we will know if the arrangements are working for parents. We will be using data from the Understanding Society longitudinal study to assess progress on family-based arrangements across the whole population. She and the noble Baroness, Lady Sherlock, also mentioned the Secondary Legislation Scrutiny Committee. This was responded to by the Minister for Pensions subsequently and that response has now been published.

5.15 pm

One of the many questions of my noble friend Lord Kirkwood was why the non-resident collection fee was higher than the parent with care collection fee. That is to provide a greater incentive for the non-resident parent to collaborate and to pay directly, outside the collection service.

How will we decide who is unlikely to pay? We believe that in general it is fair to allow non-resident parents the opportunity to pay by the direct pay option. However, we are conscious that they should not be given the opportunity to avoid their responsibilities. Where there is a disagreement between the two parents, the Secretary of State must decide whether the non-resident parent is unlikely to pay. There will be a set of predetermined criteria as a starting point.

My noble friend talked about the experience of charging in the 1990s. The difference is that parents will now have the option of avoiding the charges in most cases. Where charges are levied they are designed to be a fair contribution to a system that remains highly subsidised. We have already tested the basic system. We will not charge until we know it is working well. Sadly, those precautions were not necessarily taken in 1993.

With regard to the right to appeal where the waiver is refused, applicants can make an internal complaint, a complaint to the independent case examiner, a complaint—in cases of maladministration—to the Parliamentary Ombudsman, or they can appeal to the court for judicial review.

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Who will explain to the parent with care? We will do that, and the rationale for the decision will be recorded and explained to both parents at the time of the decision. If the parent with care does not agree, they can complain to the bodies I have referred to. Will the charging regime drive people apart? Our operational experience is that the older cases—the ones that my noble friend cited—are more compliant than new cases. These older cases often find it easier to work together; perhaps some of the immediate passions have died down. Will charging support collaboration and what is the evidence for that? Our research shows that over half of parents could come to a private arrangement if given support, and the fees regulations provide a nudge towards this step.

My noble friend asked about the postponement of case closure until we are confident of an effective support infrastructure. The sector already provides support for separated parents, and this support will be crucial in helping separated parents through case closure. A programme of work has been running since before the introduction of the Child Maintenance Service, to provide the sector with training and information materials to enable these organisations to provide effective support to separated parents.

On the question from my noble friend and the noble Baroness, Lady Sherlock, on what proportion of current child maintenance cases are being paid, that will become available in April 2014 when we have some management information. On the question from my noble friend about what drives us—revenue versus helping parents—I repeat that the aim of this reform is to help children. The whole point of having the full review is so that Parliament can test if we have achieved this.

The noble Baroness, Lady Sherlock, asked a question on the 60% to 70% rise. We estimate that around 50,000 cases could move from being nil-assessed to being positively assessed should a new application be made to the Child Maintenance Service. The calculations made under the scheme are based on the non-resident parent’s gross taxable annual income, which we can source from HMRC directly, and we can review annually. Those are the two main reasons why we believe that those outcomes will increase in the way we are anticipating.

The noble Baroness, Lady Sherlock, asked a question on what we mean by “working well”. We mean that the system is stable and there are no major periods of unplanned outage or long periods with long response times; and operations colleagues are happy that the system is working as intended, with full application volumes so that they are able to progress work to the planned timeframe—so it is a practical, working system.

On the noble Baroness’s question on information, clearly one of the differences is that there is direct access to HMRC, which does not happen in the older systems. Therefore it is not a question of getting more up to date; the information will be up to date, or up to each year. That issue of being up to date is therefore dealt with. Where there is less than full declaration to HMRC—in other words, misinformation going both to HMRC and to the other parent—that is, of course, tax fraud, which is obviously much more difficult to deal with.

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There will be an option within direct pay for the parent with care to receive payments direct from the non-resident parent without having to reveal their location or other contact details. We are confident that provisions will be in place to ensure that every client is able to use that safely and securely. I think that I have dealt with all the questions.

Baroness Sherlock: I thank the Minister for going through all those questions—I am very grateful. I still have a couple which perhaps he missed out.

The Minister has explained to us that the Government believe that there will be more children in receipt of maintenance and more effective arrangements. However, he did not pick up on the amount of money that will change hands. For example, it would be perfectly possible for someone who was currently getting the full statutory amount through the statutory system to have in future a family-based arrangement in which they agree to take half of that amount to keep each other happy. Will the Government also be monitoring, and set a target for, the amount of child maintenance that is changing hands, and will they monitor in particular whether the amounts for individual families go down? In other words, one could see a change in the mean—by, for example, people who are currently nil-assessed joining the system—but that might disguise a fall in other cases. How well would that be monitored?

I think that I asked a question about the media campaign that Steve Webb had promised in early 2014. Does the Minister have any information on that?

There is a piece of nuance for which I apologise from this side as a pedant. On the question of domestic violence, the Minister said that he is confident that a non-geographic option will be available. Could he reassure the Committee that where domestic violence is alleged or admitted, a parent with care will not be required to accept direct pay unless and until such a scheme is available to them?

Lastly, I want to be sure that I understood his question about enforcement and HMRC. I think that he is saying that it will become more difficult for a parent with care to raise the question of where they believe earnings have been underdeclared. HMRC may deal with the general question of whether enough tax has been paid but at the moment, as I understand it, and I would be grateful if he would tell me whether or not I am right, a parent with care can go to the CSA with evidence showing that the non-resident parent has higher income than has been declared to the CSA—for example, if the lifestyle in terms of a house, a car or money spent would not appear to tally with the relatively small amount of income declared—and it can investigate and address that. Is he saying that that will not happen unless HMRC decides in general terms to conduct a tax investigation?

Lord Freud: On the question of the amount of maintenance, our estimate at this stage is that more children will get maintenance. That is what I have said. How much that maintenance is in money terms is less clear at this stage. It is one of the things that we will find out. I need to remind noble Lords that assistance may take many forms to children—more shared care—so

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the question is not just about money. It is about the level of support. That is an area that we will be looking at closely.

On bank accounts, the parent with care will be able to dictate to which account the non-resident parent must pay. If that fails to happen, it will result in a return to the collection service, which I think in practice deals with the noble Baroness’s question.

At the moment, the CSA gets a complaint from the parent with care. The place where it goes to check is HMRC. That main checking area becomes irrelevant when there is a direct feed. Where she is suspicious—it is a suspicion—of, effectively, tax fraud, that is what we are talking about.

Baroness Sherlock: So the CSA does no investigating of its own? I am sorry; I must have misunderstood that point.

Lord Freud: No. Currently the CSA checks with HMRC. As now, it will be able to provide information to support its suspicions that all might not be well. This is a difficult issue more generally.

On the question about the campaign, we are planning a media campaign using social media and paid-for channels such as radio. We are still finalising those details. The intention is to raise awareness of case closure and to promote parental responsibility. We will get more details of that out in coming months.

With all the issues dealt with—perhaps not to everyone’s absolute satisfaction—I will commit to continuing to provide transparency in the delivery of this programme of reforms. We published a strategy for the publication of information about the 2012 scheme on 18 July last year. We plan to release official statistics once we are assured of the appropriate quality of the data; we expect this to be after April 2014, as I said. Ahead of this, we have used the management information that is available to release limited relevant data on a one-off experimental basis, published on 25 November last year. As I mentioned earlier, we will review the effects of the fees and regulations, and lay a report before Parliament following 30 months of operation. I commend the regulations to the Grand Committee.

Motion agreed.

Child Support (Ending Liability in Existing Cases and Transition to New Calculation Rules) Regulations 2014

Motion to Consider

5.30 pm

Moved by Lord Freud

That the Grand Committee do consider the Child Support (Ending Liability in Existing Cases and Transition to New Calculation Rules) Regulations 2014.

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Relevant documents: 16th Report from the Joint Committee on Statutory Instruments, 23rd and 27th Reports from the Secondary Legislation Scrutiny Committee

Motion agreed.

Consumer Credit Act 1974 (Green Deal) (Amendment) Order 2014

Motion to Consider

5.31 pm

Moved by Baroness Verma

That the Grand Committee do consider the Consumer Credit Act 1974 (Green Deal) (Amendment) Order 2014.

Relevant document: 18th Report from the Joint Committee on Statutory Instruments

The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con): My Lords, over the past year the Green Deal has been steadily growing in momentum. Around 130,000 Green Deal assessments have taken place. Nearly 500,000 energy-efficiency measures have been installed through ECO, cashback and the Green Deal. One company alone says that it has installed Green Deal measures in nearly 10,000 homes so far.

The financing mechanism, allowing customers to pay through their electricity bills, is only one way of paying for the Green Deal. We now have more than 1,600 Green Deal plans in the system. The Green Deal Finance Company is handling around 130 new plan applications a week, totalling nearly £6 million in funds offered. Forty Green Deal Providers are now able to offer Green Deal finance, and 19 of these are actively writing plans for consumers.

One area where we believe the Green Deal could be particularly effective is the rented sector. Action to improve the energy efficiency of private rented properties is, as we know, badly needed. This sector has a disproportionate number of fuel-poor households—21% overall—and a high number of F-rated and G-rated properties: 13% of the stock, almost twice the national average of 8%. To date, energy-efficiency investment in the rented sector has been constrained by split incentives. The landlord pays for the energy-efficiency measures but the tenant benefits. The Green Deal pay-as-you-save model helps to address this split incentive.

The electricity bill payer, who is normally the tenant, meets the cost of the measures through savings on their overall energy bill. The Green Deal repayments will appear on the tenant’s electricity bill and will be collected by their electricity supplier in exactly the same way as their charges for electricity consumption. However, the cost of these repayments should be matched by the savings in overall energy costs that a tenant is likely to benefit from as a result of the Green Deal energy-efficiency measures. A tenant will pay for the Green Deal instalments only while they occupy the property and are therefore benefiting from the measures. The result is that the tenant will live in a warmer, more

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comfortable home. When the tenant leaves, the responsibility for making the Green Deal repayments passes on to the new tenant, or to the landlord if there is a void period.

The only situation in which a tenant will have any liability to pay anything in relation to the Green Deal after they have left the property is if they have built up arrears, which include Green Deal instalments, on their electricity bill. When they move out, their electricity supplier will send them a final bill. If there are arrears on the bill for electricity consumption and Green Deal instalments, the supplier will seek the tenant to pay. This is exactly the same process as exists now for tenants.

When a Green Deal plan is first set up, the existing tenant will receive detailed information about the plan and must give their written consent. The Energy Act 2011 provides that they have 14 days in which they can withdraw their consent if they change their mind. The new tenant moving into the property will be made aware of the Green Deal through specific disclosure requirements. For example, the energy performance certificate, or EPC, which is already a legal requirement in the rented sector, will show the presence of a Green Deal plan at the property, the energy savings that will arise and the level of the repayments. A new tenant will therefore have all the information that they need before they decide to rent the property. They also have the right to request a full copy of the Green Deal plan from the landlord or the Green Deal provider.

We expect to see real demand for the Green Deal in the private rented sector, both from tenants who want to live in more energy-efficient and comfortable homes and from landlords who wish to improve their properties. This provides a real win-win. We expect this to increase as a result of the minimum energy efficiency standards that we are developing for landlords. The Green Deal provides a mechanism that did not exist previously for tenants to work with landlords to improve the energy efficiency of their homes. We want to make sure that tenants do not live in cold, damp and draughty houses for which they end up paying too much on their energy bills.

Among the reasons cited by landlords for their caution towards Green Deal finance was that they needed greater clarity about how consumer credit legislation worked with the Green Deal to have confidence to lend at scale. The amendment to the Consumer Credit Act, provided by the order we are debating today, will give that confidence. We have thoroughly reviewed the consumer credit legislation to ensure that it will work effectively with the Green Deal. Although this analysis has taken long than expected, the amendment will now allow the same Green Deal plan to be offered to all customers, irrespective of what type of property they live in.

I turn to the details of the order. The credit arrangement introduced by the Green Deal, otherwise known as a Green Deal plan, is a new form of unsecured credit. In owner-occupied properties the customer arranging the energy efficiency improvements will generally pay the repayments as they are paying the electricity bill. However, as I have mentioned previously, in the rented sector the landlord is likely to arrange for the

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improvements while the tenant makes the repayments. This has given rise to some uncertainty. When is a Green Deal plan regulated by the Consumer Credit Act, and who is entitled to the protection of the Consumer Credit Act for a Green Deal plan? Is it the tenant or the landlord?

To help to address these uncertainties, the order that we are debating today makes specific amendments to the Consumer Credit Act. The order does not change existing Green Deal policy or its legal framework. The amendments will, however, give Green Deal providers greater clarity and confidence when issuing Green Deal plans. In turn, that will encourage more people to take up the Green Deal.

In particular, these amendments resolve two key issues. First, to address concerns relating to the difficulty in determining whether or not a particular Green Deal plan is regulated, we have now provided that almost all domestic Green Deal plans will be regulated by the Consumer Credit Act, regardless of those who are making the improvements. Tenants moving into a domestic property can be reassured that they will receive the protections afforded by the Consumer Credit Act. Non-domestic Green Deal plans will be regulated only if the person arranging the improvements is an individual, not a business. This approach will greatly simplify the process for Green Deal providers and ensure that in all appropriate cases Green Deal plans are regulated under the Act—including, for example, where a Green Deal plan is set up by a corporate landlord during a void period.

Secondly, while our key policy concern has always been to ensure that consumer tenants receive all appropriate protections under the Consumer Credit Act, we received feedback that the landlord, or the person making the improvements, should be entitled to certain rights and protections, so we carefully analysed this Act to determine which protections would be relevant to them. Following this analysis and discussions with a wide range of stakeholders, our amendment provides that both the bill payer and the person making the improvements are given the protections of a debtor, but each for specified sections of the Act. This ensures that tenants and landlords receive the specific rights and protections that are relevant to their roles under a Green Deal plan.

To make it clear for Green Deal providers which sections of the Consumer Credit Act will apply to a particular person, our amendment sets out whether a reference to the debtor in the Act is to be read as a reference to the bill payer at the time when the plan is made, the current bill payer, any previous bill payers who have arrears outstanding or the person making the improvements. Our approach is that the bill payer, who has liability to pay instalments under a Green Deal plan, will receive all material and appropriate consumer protections. There will be no reduction in the level of customer protection that a tenant can expect. However, the person making the improvements, for as long as they are an owner or occupier of the property, will also receive a number of protections.

Our amendments will not alter the principles, provided for in the Energy Act 2011, that whoever is the bill payer at a given time is liable for making repayments

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under the Green Deal plan. As mentioned previously, a new bill payer automatically becomes liable for instalments from the time when they assume responsibility for the electricity bill—for example, when a new tenant moves into the property. Landlords will become liable for Green Deal instalments if they become the bill payer—for example, during a void period.

As the Committee may be aware, the regulatory regime for consumer credit is changing on 1 April. After that date, lenders will need to be authorised by the Financial Conduct Authority rather than the Office of Fair Trading. In the next couple of months, we therefore also intend to introduce some small amendments to the FCA’s legislation to reflect the approach set out in this order.

In conclusion, I firmly believe that the amendments to the Consumer Credit Act brought about by this order will ensure that consumers and tenants who pay money under a Green Deal plan receive all the appropriate protections. It will give the clarity that Green Deal providers are seeking and give them the confidence to offer plans to consumers across all property sectors. This will allow them to access the untapped demand and to press ahead with rolling out the Green Deal across the country at scale, delivering warmer homes for us all. I commend the order to the Committee.

5.45 pm

Lord Teverson (LD): My Lords, I thank the Minister for that excellent explanation of this rather technical document. I have to disappoint the Committee by saying that my comments will not be immensely profound today, except to say that I welcome the statutory instrument because it helps to clarify to a number of the parties involved in the Green Deal exactly what happens and when. That has to be a good thing, and I thank the Minister for updating us.

Although a number of us have been slightly frustrated at the rollout of the finance, what the Minister said about the stimulus that the Green Deal has given to a number of people to really investigate getting better insulation for their homes was very important. It is obviously one of the big challenges for our nation in terms of meeting carbon targets, let alone in terms of addressing fuel poverty, that we increase the thermal efficiency of our housing stock, and the programme is at least doing that.

One thing struck me as the Minister was speaking, but I am sure that the answer is that it is no problem at all. With the increased amount of switching that is now going on—much as the Government have encouraged and been quite successful in stimulating—I presume that there is still no difficulty in terms of where the liability goes, arises or follows through after a number of switches of accounts by tenants when they come in, because I hope that that will be an increasing feature of the market in terms of competition.

Baroness Worthington (Lab): I thank the Minister for introducing this debate and for speaking to this statutory instrument. I also thank the noble Lord, Lord Teverson, for his comments and his quite pertinent question about switching; I had not thought of that and would be interested to hear the response.

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If the Committee will bear with me, I want to make a few general comments about the Green Deal and then some specific comments about the statutory instrument. I agree that if the impetus behind the instrument is to create clarity about the protections that exist for tenants and owners under consumer protection legislation, it must be a good thing and we support it.

It is interesting to see how the Green Deal more generally is playing out. We have seen 130,000 assessments undertaken but, from those, fewer than 700 financial deals being taken out. The Minister in the other place has been keen to point out that what we want is measures undertaken, and that is a good thing, but the low take-up of the financial aspects points towards something about the scheme that may need to be reviewed. It is clear that it is not as popular as we might have hoped. We look forward to further announcements from the Government on how they are going to change that. A very low take-up of the financial package creates a very small pool of people carrying a liability with them that never becomes normalised or well understood in the wider populace. It can disadvantage those early adopters if it does not ever take off. They will carry liabilities on their properties that few people understand and may instinctively dislike. So the take-up of the financial package is important. It is good that measures are being taken on personal finance and other financial mechanisms, but the Government cannot simply point to the assessments and say, “Oh, it’s all fine”. The financing was always a key part of this and we have to assess why it is not being taken up with more vigour and enthusiasm.

The other question that arises is around monitoring. The assessment of the Minister in the other place was that 80% of people who undertake an assessment go on to fit measures. That sounds great, but I am afraid that I do not know how that number was calculated or where those numbers are recorded. Perhaps we could hear more about that number. If the numbers are to be a mechanism, but outside the financing mechanism, that tips or nudges other people into action, we perhaps need to think again about how we record and monitor what is actually happening. The figure should be not a guesstimate but a hard number that we can publish and have confidence in. Perhaps it is simply a matter of requiring the companies that undertake the measures to report to an agency. Perhaps the Landmark Group, which currently monitors the EPC, could be that group; it could keep a record. I would be interested in the Minister’s comments on that.

I turn to the rented sector, which is the focus of this new clarification. This is an important issue. The Minister has stated, and it is clear, that a disproportionately large number of people live in fuel poverty in this sector, and the housing stock, with 13% of properties rated F or G, is not being invested in. A lot of people in the private rented sector are living in cold, damp homes. We must address this.

I take the point about the split incentives: it is very difficult to get this right. If it is left on the landlord, they do not feel the benefit of the reduced bills. If the bill payer carries the entire burden, they do not get the same benefit as the landlord whose property has been

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improved and made more attractive. The Government might say, “Well, that’s the way the balance has to tip and we’ve now tipped it back in favour of the tenant”, which is probably a good thing, but it raises a few questions. One is that, while landlords will presumably get some protection under the Consumer Protection Act, what will happen to a property where the tenant leaves but it is then left vacant for a lengthy period? Is it simply that the financial deal is suspended? What happens during that period? There could be properties that are vacant for quite a long time. What then happens to the creditor who is expecting payments that are not being made? Is the time frame extended? What happens in those cases?

There may also be landlords—this will probably not happen frequently—who decide to stop renting and to sell their property for development or demolition. What happens in those circumstances? If it is sold on as a house or as a dwelling that can be lived in, I can understand that it would pass, but if it is demolished, who then makes good the debt owed to the energy finance company?

There are questions around the rented sector that need to be looked at. The Minister mentioned an existing legal requirement to produce an energy performance certificate if a property changes hands between tenants. This is, I believe, poorly enforced. In the publication Energy in Buildings & Industry of November-December 2013, it was revealed that DCLG is currently forced to pay compensation to Landmark, the body that collects the certificates and does the administration, to the tune of £6 million because too few people are complying with this legally binding requirement from the European Union. This seems crazy: taxpayers’ money is being spent to make good a contract signed with a private company because of a failure to enforce a legally binding requirement. That needs to be sorted out. If the uptake of energy efficiency in the rented sector is insufficient, we should look first at why we are not enforcing the use of legally required energy performance certificates. The statement that new tenants will have all the information necessary to decide whether they want to move into a property sounds slightly hollow when the evidence is that the uptake of the legally binding EPCs is not present. The bedrock of enforcement seems not to be in place. Could the Minister come back to me on what we are doing to enforce EPCs in the rented sector?

My final point is that it is good that this statutory instrument is addressing the issue of uncertainty and consumer protection. That is one uncertainty too many, and it is good that it is being resolved with this change in the law. However, this policy continues to be affected by a range of uncertainties. We know that the poor take-up of the financing package is going to lead to changes. We expect it to be continually updated and changed as we find out more about how people are taking it up. That is good if it finally leads to a successful scheme. However, it has been mentioned that the golden rule may change.

If the golden rule changes, and the payback necessary to comply with the golden rule changes, you may edge into the situation where a tenant takes on a lot of debt, knowing they are going to be moving on quite soon,

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and the incoming tenants are then facing something quite unattractive. In those situations, I suspect that landlords are left with potentially unrentable properties. That is something that no one wants to see. It could act as a disincentive for landlords to embrace this scheme, if they fear that there will be a low take-up, high risk and the potential for their properties to be priced out of the market through measures that do not comply with the golden rule. As this policy is being modified, we need to think carefully about the detailed implications. On that point, however, we support this clarification.

Baroness Verma: My Lords, I thank my noble friend for his warm and supportive welcome for the order. He asked a question on switching to which I will refer in a moment. I also thank the noble Baroness, Lady Worthington, for her comments and her general support of the order. She has raised a number of questions. I will try to answer as many of them as I can. Those that I fail to answer I will get into writing and see that the noble Baroness and my noble friend are copied into those responses.

Coming back to the noble Baroness’s opening comments about the take-up of the Green Deal, we tend to assume that everything has to be done through a particular type of finance scheme. We have found that the Green Deal finance is only one payment option for getting Green Deal measures in place. We have found that self-finance—people going out, taking on measures and paying for them themselves—has been a much more popular way of getting these measures in place. The noble Baroness mentioned the numbers. We know that 500,000 measures have already been put into around 400,000 homes, whether through ECO, self-finance or Green Deal finance. To reduce the issue to being seen only through the success of Green Deal finance distorts the real picture of the Green Deal, which is that it is a long-term programme to ensure that we get real energy-efficiency measures put into homes. Those measures may be financed in a variety of ways.

I say to the noble Baroness that we need to take heart. Feedback has come back from one company that has managed to install Green Deal measures into 10,000 homes. The picture is not always as clear cut as measuring it only against Green Deal financing, which slightly distorts the programme’s actual success. Yes, it is slow, but it is a slow-but-steady-progress programme; we would expect that, because it is a long-term programme.

My noble friend Lord Teverson asked whether switching would have an impact on the rights of the customer. The customer is able to switch suppliers exactly as he or she can currently do. What they cannot do it switch to smaller suppliers that do not service the Green Deal programme. That is obviously something of which consumers will be made aware.

The noble Baroness, Lady Worthington, asked what would happen when a property was demolished or ceased to exist. The owners would still be liable to pay because the Green Deal would still be in place. She also asked about the regulations for the private rented sector. We plan to consult shortly on new regulations to require landlords to improve their homes from 2018. From 2016, landlords should not really be able

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to refuse measures if the regulations make them put the measures in. We ultimately want housing stock with energy-efficiency measures, to reduce energy usage and ensure that tenants in those buildings do not end up paying over the odds for energy use.

6 pm

The noble Baroness asked about the EPC regime and whether it was poorly enforced. We are working very closely with the DCLG to improve EPC compliance. We have our own contract with it for Green Deal assessment. Those discussions are ongoing to ensure that incoming tenants are able to access as full a picture as possible of the property that they are about to rent with all the measures that are in place there.

The noble Baroness asked about how we get the feedback about people taking up measures. Social research is being delivered through a well respected independent research company that has actually taken evidence three ways. It has interviewed more than 1,500 people. Those responses will be published on the DECC website so will be there for public viewing.

Overall, it is useful that we have had this amendment put in place. It is helpful that the Committee sees it as a supportive and good amendment to have in place to protect both the tenant and the landlord. It is gaining momentum. It has the potential to help customers to install energy measures across the country. However, my department continues to review the Green Deal. That is right and correct. We will make changes where we can make improvements. It is right that we have constructive debates towards that. I have always said to the noble Baroness, Lady Worthington, and my noble friend that it is right that we are able to have these exchanges so that we can make the process easier and better for consumers. Ultimately, we all share the same goals. We want energy-efficient buildings.

Baroness Worthington: I thank the Minister for her response. Just before she sits down, I want to reiterate the point about the measurement of these measures. There is a danger here that we are seeking slightly to rewrite history. When the Green Deal was launched, it clearly was all about the finance package, and that was meant to be what was going to unlock it. My concern

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is that if we move the goalposts and now say, “Well, it was always about assessments; that’s the main thing”, or, “Self-financing is the important thing”, that creates a problem where early adopters are taking on a mechanism which, if it does not become well understood or commonplace, will mean that we see people not wanting those properties. That disadvantages people who implement the measures because the understanding of the package and the liabilities—this weird thing that never becomes mainstream—stays niche. That is the issue.

On the EPC, I am encouraged to hear that the Minister’s department is working with the DCLG. This is an important issue; after all, it is a legal requirement, so it is very basic. Before we make new requirements, could we perhaps look at thinking about more public information for tenants? That could include advertising, making sure that tenants are aware of their rights to request a new certificate, and maybe adverts that are being placed should carry EPC certificates, as they often do now when you buy a house. Perhaps tenants need the same. I am encouraged by that and I look forward to hearing more about it.

Baroness Verma: My Lords, I am extremely grateful for those comments. I go back to my point that, while it is important that Green Deal finance is an important part of the programme, we do not seek to make that the only method by which people can access measures. Overall, we have seen that people who want to go out and get these measures done are actually doing it through their own self-financing. The Green Deal finance is available, but if they choose to find an alternative way, it is their right to do so. The suppliers make it very clear, through their installers, what measures will work and how they will be reported. We are also working with the Council of Mortgage Lenders to ensure that we educate them on the Green Deal as well, to prevent it becoming a barrier to people wanting to access mortgages.

I am extremely grateful to the noble Baroness and my noble friend. I commend this amendment.

Motion agreed.

Committee adjourned at 6.05 pm.