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Child Maintenance and Other Payments Bill

My Lords, I am delighted about so much in this Bill. Real additional money will go to the poorest children—and I congratulate my noble friend on achieving that. CSA1 was very much about saving the taxpayer money and offered nothing additional to families. Not surprisingly, he did not pay and she did not try to make him pay as there was nothing in it for her, except possibly revenge. CSA2, the 2003 scheme, allowed a £10 disregard for the 50 per cent of families on benefit, which was useful but limited. Now all existing families in the system will keep £10 and, under the new settlements in the Bill, not £10 but up to £20 in 2008, going up to £40. First, that should attack child poverty. We have seen figures slipping, because by definition if poverty is relative, benefit must be increased faster than earnings to narrow the gap. Paid as an addition to the benefit bill, not only is that hugely costly but it has implications for work incentives. Coming through child maintenance, however, this is like an additional form of privatised tax credit and could therefore make a substantial contribution to addressing the problem of child poverty. Secondly, the proposals are more likely to keep fathers as players in their children’s lives. If he pays and sees money going to the child, and the parent with care is in turn sufficiently appreciative to facilitate contact and access, it is a win-win situation, especially for the child. We know that the best predictor of the daughter of a lone parent doing well is the lone-parent mother in work. The best predictor of the son of a lone parent is contact with and support by his natural father, even though the parents may be living apart. Thirdly, I suspect that the extra money coming through CSA payments will raise, not dampen, aspirations to do part-time work—the mini-jobs that are the best stepping stone into full-time work. I hope that the Government will follow through on that. At the moment, if you think about it, we have a completely absurd benefit system. If you are a lone parent, you keep payment for the first two to three hours of your work. You then lose the next 10 or 12 hours and are allowed to keep the lot after 16. That then gets topped up by tax credits. Talk about manmade stupidity. You should be able to keep a proportion of each additional hour that you work until at some point you can rely on full-time work, together with tax credits. We should have dials and not dichotomies. I hope that this will be the basis of a ladder of income and therefore a ladder of opportunity, and not the foolish polarities of the existing benefit scheme, which assumes that you are either in work or not in work, when all the evidence suggests that lone parents in particular inhabit a huge grey area between the two. Fourthly, over and beyond child poverty, father involvement and support for part-time work, I am pleased that the automatic deductions from earnings, which were not allowed under the old system, and the tougher responses to NRPs who are wilfully absent and who fail to support their own children in the hope that other fathers—called taxpayers—will do so have been ratcheted up, and that CMEC will be the default arrangement where voluntary arrangements fail. Above all, I am delighted that, at last and for the first time, there will be an appropriate contribution from the HMRC to this effect. Again, this is something that CSA1 and CSA2 were denied. If CSA2 had had full automatic information on the previous year’s tax income from the non-resident parent, the maintenance income for thousands and thousands of children would have been very different. The compliance of HMRC at last will probably turn out to be as important as the compliance of the non-resident parent. I go on to describe some worries in the context of my very real pleasure that more money could go to poor children. If the Bill can deliver that, most of us will cheer it along. My worries are twofold, and were touched on in the very thoughtful speeches of the noble Lords, Lord Skelmersdale and Lord Kirkwood. First, for new cases, he and she will in essence operate in a voluntary system—free bargaining. For that to be fair, there must be equity of bargaining power and knowledge. She may know what percentage of his income she may expect—15 per cent net, 12 per cent gross—but not what that income is. Obviously, if the parents have been married or she has done the books for his small business in the past, she will have a good idea. But where the child is from a more casual arrangement or relationship where the father changes jobs freely, may or may not do overtime or work on the side, or may be on to the second or third girlfriend since, how can she know? She has to have information about his income, otherwise a voluntary system is weighted far too much towards him. That is without assuming that he will bully or threaten, possibly saying, ““Settle for £15 and I might manage it; go for £30 and I will see you don’t get a penny””. The mother must have a statutory right to know his income. If she cannot see directly any of his tax return—I understand those problems—she would be wise not just to consult the support system. The noble Lord, Lord Kirkwood, was right to emphasise the need for that. She should abandon the voluntary system altogether and for at least the first year come into the statutory CMEC system, CSA3, to find out what he should pay and to make it stick. Therefore, the hope to slide people off to the voluntary system is fool’s gold. I share some of the concerns of the noble Lord, Lord Skelmersdale, about the 25 per cent tolerance rule, but perhaps we can explore that more fully in Committee. I should just like to add that the men who are assessed to pay most are usually the best payers, because they are the men who have come out of a divorce, are attached to their children, are the higher earners and want to pay. The problem is much more the somewhat feckless fathers of casual relationships, especially the 28 per cent of those men who are on benefits themselves who would prefer to walk away if they could, or the 7 per cent of the self-employed who I always estimated were responsible for about 25 per cent of the problems in the CSA. They could not manage their own books, let alone move payments across to children. My first doubt is about the equity of knowledge without first going through CMEC, which therefore undermines the whole thrust of this Bill; namely, to achieve a voluntary system. The second area where I have doubts follows from that. It is about layering a voluntary system, which was again mentioned by the noble Lord, Lord Kirkwood, on top of not one but two preceding statutory systems. For some separating couples, voluntary arrangements may work. I hope that they will. Let us consider a brand new case where the baby is the first for the mother and the father, and they have equity of knowledge, a tolerable amount of good will, a steady income and steady circumstances. Perhaps all will be well. She will know what he should pay. He will pay it and the child will flourish. That of course will not necessarily be widespread. A high proportion of cases that come to CMEC will be linked to other cases in CSA1 and CSA2. Those linked will, on average, be linked to three previous cases in the old system. I saw a chart with 29 linked cases, most of which had to have their income and payments reassessed. Folklore has it that—I think that my noble friend Lord McKenzie may have seen such a case—there was a case with 70 or 90 connections at one stage. Many—probably most—of those cases do not have financial implications and do not need to come into play in the future, but a significant minority will. Let me explain: a man has a baby with a new partner who he then leaves. The new PWC, under CMEC, seeks a voluntary arrangement with him. Whether known to his partner or not, he is already supporting a child in the previous scheme for whom he is paying the statutory net 15 per cent, gross 12 per cent. What child support can the voluntary-arrangement PWC get from him? In theory, he should now pay 20 per cent net, 16 per cent gross; that is, 8 per cent gross to each of the two PWCs—one in the statutory system and one in the voluntary system. The old case would have to be closed down and brought into the new system. The maintenance of the existing first PWC would have to be reduced, the payments recalculated and new payment arrangements made. Of course, that would all be done by computer—except that from my experience of the computer, like that of the noble Lord, Lord Kirkwood, it may not. If there was a single reason for failure of CSA2 over and beyond the culture of non-compliance of NRPs and, to some degree, the culture of non-compliance of HMRC, it was a failure of the computer system to cope with linked cases, requiring a recalculation of existing payment, a review and update of the man’s income, and new payments to be made with which the system could not cope. Too often, the calculation had to go off for manual processing and got stockpiled. The concept of annual reviews of income of course went by the by. Therefore, in trying to make a new recalculation, there were years of dirty data underlying, which first had to be cleaned before the new calculation could be made. This mattered less when those on CSA1 got nothing whether or not he paid, and those on CSA2 got only £10. In other words, missing moneys were relatively modest. But now, the money available—this is the flip side of the welcome increased generosity to the parents with care—could be £40 and worth fighting for. I hope that the system will be more robust because new cases will be voluntary and the system will be increasingly complex. If the PWC and CSA2 is getting her 12 per cent gross, how are we going to ensure that PWC2 under CMEC will get a voluntary satisfactory arrangement of the 8 per cent to which she would be due under the statutory system? Either the NRP pays the 12 per cent to PWC1 plus a voluntary payment of 8 per cent to PWC2, in which case he may pay too much, although I think that is extremely unlikely; or the position of the second PWC will be less financially fair than that of the first and she has to accept too little for her child; or, because payments for both have to be readjusted, payments will falter all round. Now let me complicate it a little more. He has a child in CSA1 and also in CSA2, and a third child in CMEC, all with different systems. Harder still, he may live with a new lady, a lone parent, who has her own children by a previous partner who is not paying maintenance—he is missing, is on benefit, or is abroad—so the new NRP is assumed to be helping to support them. Perhaps he is; he may be doing the right thing. All the children—the two that came with his new lady and the one biological child of his own—are added together and the first PWC, instead of getting 15 per cent net, 12 per cent gross, gets less than half that. All he has to do to substantially reduce his child support arrangements for his own biological children is to move in with another lone parent, as very many do. Let me complicate it with a further twist. Both the PWC and the NRP are sharing care, although the degree to which they do so changes over time and each time the calculation has to be remade; or he may care for one child, she another, and, because their finances are unequal, payments still have to be made from him to her. Not only do any previous arrangements have to be reviewed with other PWCs but the voluntary arrangement must know about them, take account of them, and then with full knowledge negotiate a contribution for the new baby and adjust that for any shared care. It may happen. These child support calculations will be as complicated to assess and deliver as tax credits. They will not go to as many families, obviously, and they will usually be worth far less, but their complexity—because of the interaction with linked cases and issues of shared care, of stepchildren and the like—will be far greater. After all, most tax credits go to intact families whose income may fluctuate but whose structure remains broadly stable. Child support calculations have to reflect not only fluctuating income but, by definition, fluctuating family forms as well. I hope I am wrong; I really do. If I was going to give my noble friend a single wish for Christmas it is that the computer delivers and that, as a result, children will get the money they need. If it does not, CMEC will fail. My noble friend may instead be hoping that most parents will go for voluntary arrangements, but if NRPs were willing to pay voluntarily in the first place we would not have needed CSA1 or CSA2, let alone CMEC. Voluntary arrangements, I fear, may well short-change children. As to the statutory arrangements, I have no confidence they will necessarily yet deliver. Can we reduce the risk somewhat? Given that we have this newfound accord with HMRC, I think we could. Perhaps two-thirds—my figures may be a little out of date here—of non-resident parents are either on benefit, on JSA or in receipt of tax credits. Someone from Mars would find it very odd that one department of government—indeed, that one division of the same department, the DWP—is paying out cash while another department or division is seeking to reclaim cash from those self-same families. Why do we not extract the money at source and pay it net, rather than seeking to churn it through the system and fail to do so? The fear, of course, is the fragility of the tax credits system and that you should not take money away from a second family to pay to a first. I do not agree. Essentially what happens is that first families lose out financially because a man forms or, more likely, joins a second family where the ex-NRP in that family is failing to support it. I believe we need to be more even-handed between them. Where there is good will between parents, voluntary arrangements may work. Where they come to an arrangement within the shadow of the CMEC formula, it may work, but if it does not it will not. Where there is not good will I fear for the outcome. The man is far more likely to do well out of it than the woman because he has the knowledge and the bargaining power and she is likely to be the parent caring for children. Whether or not she returns to CMEC, I hope she gets more regular payments. As a final word, I pay tribute to the staff who are doing one of the most difficult jobs in government. They are not only trying to ensure a flow of money to children, but doing so when placed between two warring parents who seek to take their anger out on the CSA for failing to meet their completely conflictual needs. Most of those staff, I know, have been working under huge stress over many years. They have handled it robustly, professionally and courteously because they are determined—as we all are—to lift children out of poverty. If, under the Bill, what will be CMEC stops being an inefficient debt collection agency and can, for the first time, properly and thoroughly deliver money to children, I am sure we shall all rejoice.