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Child Maintenance and Other Payments Bill

I will deal with some of the individual questions, but will first deal with my prepared text. The amendments together relate to the statutory maintenance calculation in the future scheme, and raise a number of important questions on the accuracy of information, how maintenance will be calculated and how information about income might be obtained. The changes we made in 2003 to maintenance calculations are working reasonably well, and we do not intend in the Bill to make any substantial changes to the principles behind them. The changes proposed in the Bill will further simplify the calculation process, resulting in more transparent calculations which can be made more quickly. Many of the changes—for example, the new basic rate percentages and the definition of weekly income to be gross rather than net—are the result of our decision to make calculations by using income information provided by HMRC. I shall come on to some of the more detailed points around that in a moment. Amendment No. 86 would provide in regulations a performance target for the commission in relation to the accuracy of income information used to make a statutory maintenance calculation. Such information would have to be accurate to within 2 per cent. Since the implementation of the operational improvement plan in 2006, the Child Support Agency has increasingly focused on improving accuracy. For example, in the year ending this March, the agency expects to check fully about 6,000 decisions for accuracy, a four-fold increase on last year. The agency’s latest published QSS shows an accuracy rate for the year to date of 87 per cent for maintenance calculations; the figure for the whole of 2005-06, before the OIP started to have an impact, was 81 per cent. So although there is more to do, the agency is already making improvements and will continue to do so. However, it is not appropriate for this kind of target to be placed in the Bill. The commission’s performance targets will be agreed between the commission and the department, and will be published in the commission’s business plan. The point that the noble Lord really pressed was that, unless you have an accuracy figure, as my noble friend Lady Hollis said, you can waste a lot of time trying to fine tune the calculation when, in practice, you do not need to. Amendment No. 87 would provide in regulations for an alternative method for calculating the basic rate of maintenance. We want the calculations to be based on the non-resident parent’s gross income, subject to certain limits: the number of qualifying children, the shared care attributed to those children and the number of relevant children in the non-resident parent’s new family. While this amendment retains the same principles, it is possible that noble Lords want a pre-set amount of liability based on non-resident parents’ gross income but not adjusted for income above £800 per week. In fact, I do not think that that was the noble Lord’s point. However, just for the record, the £800 broadly corresponds to the amount of weekly income at which the 40 per cent income tax rate starts to apply. There is therefore a greater difference between gross and net income at these levels. The lower percentages are designed greatly to reduce the impact on liabilities of this difference. It would not be right for either parent if, in existing cases, there was to be a substantial change in liability built in to the design of the scheme on moving to the new statutory maintenance liability. We want there to be as much stability as possible at that point. The noble Lord, Lord Kirkwood, challenged us a bit, asking how we know that the new percentages are right. Effectively, it has been based on a process of arithmetic. Work has been done to look at what the liabilities would be under a range of incomes for someone entering the system now on a net basis and what the equivalents would be that were set out in the RIA and other documents. The idea was to try to get it as close as possible so that it was aligned as closely as possible. The noble Lord and my noble friend Lady Hollis said that we might need to adjust those, and we need them to be in regulations. It is already the case that percentages for the maintenance calculation can be adjusted by regulations, in paragraph 10 of Schedule 1 to the 1991 Act. There is the scope to do that. That is particularly important because we have also suggested that we would probably wish to review that £800 limit once during each Parliament as the threshold for higher rate tax potentially changes. There is already that scope. Amendment No. 91 would preclude the possibility that regulations could allow income from a past period to be considered. We want maintenance calculations to be based on the historical income data as provided by HMRC. The commission will also be assisted by having calculation rules, which means that the HMRC information can be used with minimal adjustment. In cases where the latter differs from HMRC data by 25 per cent or more, a parent will be able to ask for a calculation to be made using that current income figure. Reliance on HMRC historical gross income data at the time of assessment and annual reviews will make maintenance calculations quicker and transparent for parents. The noble Lord asked what data we are talking about here. Effectively, we are talking about employment income data and self-employment data. There is already a process by which employers have to report to HMRC gross employment incomes net of occupational pension deductions. That information should be provided within a month of the end of the year.