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After meeting with senior judges, including someone who is now a Law Lord, it was felt that, if we could produce a formula, lawyers on both sides would come to an agreement about the appropriate level of child support within the court. The phrase that we used was “in the shadow of the CSA”. In other words, they would know that there was a presumption in favour of what was then, in terms of net, 15 per cent for the first child and so forth. Obviously, with consent that could be varied, and would be for issues such as school fees—always one of the biggies—or adjustments in the arrangements of who stayed with whom.
We were asked to include the 12-month ruling because it would provide steadiness. For 12 months after the court settlement, things could bed down and there would be no immediate return to the court under ever-changing arguments. After that 12 months, provided that you gave the other party two months’ notice, you could return to the court to vary the arrangements. The two months’ notice was to make sure that solicitors and lawyers on both sides could see whether they could resolve the disputed issue—whether appropriate payments for school fees or whatever—between themselves without formally going back to the court to ask for a new ordnance on the level of child support.
That scheme was carefully contrived with the support of lawyers because people pass between the benefit and the non-benefit systems. Clearly, the parent with care might want to benefit from the CSA and then may want to come off CSA and move to voluntary payments. We wanted consistency with consent for the lawyers to use. I was assured by lawyers and solicitors at the time that they thought that it was a sensible way forward.
The noble Lord may have evidence which I have not so far seen in the public domain that this has produced some hard cases. In that case, it is obviously right to look at it again. However, the purpose was to try to get voluntary agreements within the framework of the CSA, with a time limit of 12 months to get some stability and two months to give notice to give those parents with care who might cycle between the voluntary and involuntary systems some degree of
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I welcome this as a probing amendment, but I hope that it does not trigger a change in policy unless there is evidence for one. For every hard case we may see, the provision has allowed some stability and a structured response to the needs of children whose position would otherwise be much more precarious.
Lord McKenzie of Luton: Amendment No. 84 would prevent parents who have a maintenance order made by consent, or minutes of agreement registered in the Books of Council and Session or the sheriff court books, from making an application to the commission for a maintenance calculation. At present, they may apply once the order or minute has been in force for 12 months. Although the preamble to the amendment has changed a little, we understand the intent.
I start by thanking my noble friend Lady Hollis for reminding us in her powerful intervention about the history of this provision and why it was introduced in the first place. It is our understanding from responses to our consultation that solicitors support the use of the child maintenance formula for agreeing the level of child maintenance when that is done through the court. This negotiating “in the shadow of the CSA” has proved to be powerful. They said that it is a useful guide and that even without the 12-month rule they would advise their clients to agree maintenance at a similar level to the formula. In terms of removing Section 6 compulsion, we are extending choice that is available to parents.
The existing 12-month rule applies where parents have a maintenance order or registered minute of agreement made on or after 3 March 2003. It has two main purposes. When agreement between parents breaks down, it provides a swift and readily available route into the commission so that children are not left for considerable periods with either no maintenance or inadequate arrangements. It also encourages agreements that contain levels of child maintenance broadly consistent with the amount calculated under the statutory scheme and discourages agreements that divide up property and assets between adults and leave children without regular, ongoing payments of child maintenance.
We do not wish to restrict any effective and agreed maintenance arrangements, in whatever form, to 12 months, 48 months or any other period of time. In fact, the repeal of Section 6 will break the link with the benefit system so that any existing maintenance arrangements will not be overturned simply because the parent with care claims benefit. Only the action of one or both parents can do that. We want to encourage dialogue and agreement between parents which leads to effective maintenance arrangements providing ongoing support for children. As long as parents are happy that their arrangements are providing adequate maintenance for their children they can continue.
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Our hope is that parents will not need to turn to the commission for a calculation under the statutory scheme. The agreements will continue and benefit the children for as long as both parents want them to. However, if things do go wrong, or a parent decides that another type of arrangement would be more suitable for their children, they need a readily available route into the commission. Children must not be left for considerable periods with either no maintenance or inadequate arrangements—neither should we lock parents into agreements that are no longer working.
Amendments Nos. 194 and 195 apply only to registered minutes of agreement. They extend the 12-month rule to 48 months and would prevent those with a registered minute of agreement made on or after 3 March 2003, which has been in place for less than 48 months, from making an application to the commission for a maintenance calculation. Registered minutes of agreement have many advantages, but if circumstances change and the original agreement needs adjustment, difficulties may arise. If parents cannot agree, there are limited circumstances in which they may apply to the court to vary the financial arrangements and, in the case of parents who were never married or in a civil partnership, the opportunity for variation is often severely restricted. We believe that a 12-month period strikes the balance between giving registered minutes of agreement a chance to bed in and work and providing a means to resolve difficulties quickly and keep payments flowing.
Those are all very good reasons for the 12-month rule to stay as it is and why a period of 12 months is preferable to an extended period of 48 months. The 12-month rule gives time for agreements to bed in and work but allows swift intervention by the commission to keep maintenance flowing to children. Therefore, it puts parents with court orders and registered minutes of agreement on the same footing as any other separated parents. On the basis of that explanation, I hope that the noble Lord will not press the amendment.
Lord Skelmersdale: I am certainly not going to press the amendment, but I wonder if the Minister has considered an event which must be quite common. There are two parents with care, who, having taken their children to school, are sitting in a local cafe having a cup of coffee or tea and a bun together. One parent with care has been married and has a settlement through the courts where a capital sum has been taken into account and the maintenance on an ongoing basis is only slightly reduced from the statutory CMEC rate as a result—although I understand that it could be quite a lot reduced in some circumstances.
The other parent with care has gone through the CMEC system and is getting £x a week, which is considerably more than the weekly income of child maintenance of the first parent with care. Immediately, jealousy will raise its ugly head. As a result of that, the first parent with care will turn to CMEC. There is absolutely no doubt about that at all, even though I understand exactly what the noble Baroness, Lady Hollis, said about the reasons for introducing the 12-month rule.
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5.30 pm
Baroness Hollis of Heigham: Of course, they will receive different amounts if their former partners have different incomes. The presumption is that they will both have the same percentage, unless there was agreement through the lawyers for the first parent with care to have a different percentage because some other trading went on.
Lord Skelmersdale: Yes, of course. My point is that, if there is agreement between the lawyers about a capital split, that is of no interest to CMEC, is it? CMEC is interested only in weekly income—I am putting it badly. It is interested only in a sum that flows regularly to the parent with care, whereas the courts look at things rather differently for very obvious reasons. I shall have to consider this very carefully and take further advice on this amendment because I am not satisfied with the Minister’s answer, although it has been backed up by the undoubted experience of the noble Baroness, Lady Hollis.
Lord McKenzie of Luton: In the example outlined by the noble Lord, would he accept that, inevitably, in relation to a settlement through the court, advice would have been available to the parent with care, the non-resident parent and the court and that that advice would have been given in the shadow of the statutory system and the amount of maintenance available under that system? Generally, one would expect that to be factored into the overall arrangement. It seems to me that that does not preclude capital being part of the settlement. We are talking about child maintenance and not espousal maintenance arising from a divorce or separation.
In a sense, I do not see the problem. If there is an awareness of the statutory system being available and an awareness of what that system would produce—indeed the awareness of what the statutory system would produce should be much easier to calculate on the new basis because there will be a ready-reckoner via the information and support service—the information that will be taken into account in that calculation will be clearly and swiftly obtainable, particularly if we recognise sharing information between the commission and the court. I do not see why the noble Lord has a problem with that. It may well be that parents will end up in different situations, but the key is doing that in the shadow of what the statutory system would produce, which seems to me to be the right way to proceed.
Lord Skelmersdale: I thank the Minister for having another go at explaining his point. We shall have a resolution to this matter only if we have figures for something that, as I understand it, the CSA does not collect: namely, the number of divorces that result from these problems and how often the 12-month rule is activated. If we can have those, we might come to a resolution to the problem which I have tried to outline.
Lord McKenzie of Luton: The noble Lord raises a very good point. The evidence base for some of this is
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Lord Skelmersdale: That is very unfortunate. That is the real question that needs answering. As the Minister says, it is unanswerable. I shall read very carefully what the Minister has said, but I most certainly reserve the right to come back to this matter on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 4 [Changes to the calculation of maintenance]:
Lord Kirkwood of Kirkhope moved Amendment No. 86:
“Accuracy of calculationIn Part 1 (calculation of weekly amount of child support maintenance) the accuracy of the assessment of income shall be accurate within a tolerance of plus or minus 2%.”
The noble Lord said: I am lost in admiration for how the noble Lord, Lord Skelmersdale, can make up amendments before introducing them. That is a wonderful precedent, which I might adopt in the future. It took a lot of style, but he got away with it beautifully.
We now turn to the calculation of maintenance. These are probing amendments. They are all in my name and that of my noble friend. They seek to do no more than to look at questions that arise from the calculation of maintenance. I want to spend some time on Amendment No. 91, but briefly I shall refer to Amendments Nos. 86 and 87.
The provenance of Amendment No. 86 is the tolerance limits that are required for public prosecution and court proceedings. The chief executive of the Child Support Agency has a really difficult task if the courts ask him to be penny perfect in every assessment before he takes on a prosecution or enforcement. I am not trying to introduce any slovenly, casual attempts at getting assessments right, but getting things right to the nearest penny, and having cases sent back because they are a few pence or pounds short, one way or the other, has been an enormous cause of delay in the past and I do not think that is fair.
This amendment is far from competent or technically correct, but it is an attempt to say to colleagues that maybe we should take a deliberate decision to achieve the benefits of expediency and getting things done in a sensible way. Is there not a tolerance limit that we would be prepared to accept? This amendment is designed, as much as anything, to help the organisation to get things more or less right.
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I am not trying to put inaccuracy into the system, but there comes a point when parents with care and non-resident parents would be prepared to accept an amount to within 1 per cent or 2 per cent, or anything up to 5 per cent. It would make sense to consider at least the potential for giving the prosecution and enforcement arm of this new organisation some wiggle room when it comes to clearing cases in magistrates’ courts. The sheriff in the Jedburgh sheriff court hated taking cases for local authorities and other public bodies, as I had to do from time to time. One always had a very hard time because when the sheriff had any discretion available to him, naturally enough, he would always take the side of the defender and not the pursuer, so I got the rough end a number of times. My career was short lived, but not just for that reason—I was elected.
Perhaps some consideration should be given to leaving a little more room for manoeuvre for the enforcement mechanisms. Perhaps I can attach to Amendment No. 86 a further question, which arises from page 35 of the annual report of the CSA. The 2006-07 report talks about the standards committee’s work in the previous year and about the committee being relaunched. We are still talking about the accuracy standards of assessments. The annual report says:
“This committee was re-launched mid-year under a new Non-Executive Chair and met twice in the latter half of the year”.
It goes on to talk about acknowledging and endorsing,
- “the new approach to accuracy checking and quality assurance, which is expected to result in measurable performance [improvement] during 2007/08”.
That is very welcome. However, the reports of the old standards committee used to be put on the website and published in summary in the annual report. I have noticed that that seems to have slipped. Perhaps I could have some reassurance about that.
Amendment No. 87 is a probing amendment. There is an argument which says that if we are moving away from the quintessential simplicity of 10, 15 or 20 per cent in the net system that is used currently to 12, 16, 19 per cent gross and we have the change if the income is between £800 and £3,000 a year—of course, there are reductions in the hands of non-resident parents for relevant children—perhaps we cannot be as confident as the proposals in front of us that these will be equivalent amounts. It is a difficult judgment. You are trying to mirror the net system that we have now in the new system and do it accurately. That looks a little rough and ready to me. I do not know how we should do it. I make no complaint about that.
All that Amendment No. 87 seeks to do is to say, in case we get that wrong and in case it needs to be fixed quickly, we should look at putting the percentages into secondary and not primary legislation, so that
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I need to get a series of questions clear in my head. I am not complaining about anything or advocating anything, but I am trying to ensure that I understand the future role that Her Majesty's Revenue and Customs will have in calculating child maintenance. They are important questions so I hope that the Committee will bear with me. It is true to say that there is much to be gained in using HMRC data in terms of spitting out the calculation and looking at ways of dealing with non-co-operation by non-resident parents. That is all understood.
I want to get it clear in my head that we are talking about a system in the new regime which will arrive at a total gross income. The phrase “total gross income” is important. If the new commission is to take the first income figure that is available and that comes through the pipeline—the data gateway from HMRC—and is to use it to get on quickly and do an efficient calculation, that is one thing. It is not what I understand should happen, but it may be what is in mind to happen. The first question is: to what extent are we able and willing to alter and upgrade the systems that HMRC and CMEC will have to get the information that CMEC needs to make a proper assessment of total gross income? We need to know more about the systems. We also need to know what information CMEC understands is held by HMRC and what systems it is held on. There are different sets of systems. I do not know much about HMRC, but I know that there are different work streams to deal with PAYE, self-assessment, repayment of taxes, national insurance contributions and others. There are a lot of sophisticated systems which, for HMRC’s purposes, are in silos. We are asking them, in this important set of cross-examinations we will conduct on CMEC’s behalf, to cost-cut bits of information that will need to be taken from each of these silos. It is important that we understand exactly what processes will be able to do that. There will inevitably be people with combinations of earnings in different silos at different times. A total picture of a non-resident parent’s income from all of these sources must be extracted as a matter of routine if the new system is to work successfully.
5.45 pm
Some of the basic questions revolve around the concept of a consolidated return. I understand that it is possible, on cause shown, for the HMRC to do this, but it is a special procedure which it does not do unless it is required and has a purpose. I think we are asking it to do a whole set of consolidated returns. Maybe we are not, but I would like to know whether we are or not, or are using some other techniques to drill in to the information there. We must ensure that we get it all out. For example, I am not an expert on employment-related benefits, but I know that the
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On processes and systems, what systems will we use to transfer data? The regulatory impact assessment statement with the Bill said:
There is also a commensurate, equal and opposite, reference to the Revenue’s provisions, where it says that relatively minor start-up and ongoing monitoring costs for HMRC will also be put in hand. Can we find out more about the costs of the set-up? Are they minor? Are they ongoing? How much will they cost? What significant investment is being made so that the CMEC staff can have proper access via electronic gateways to all of the data held by HMRC? Could we get the latest progress on all this? We got some information from Mr Plaskitt in the Public Bill Committee, when he talked about discussions evolving and being well advanced. It looks as if everything is in hand and we are on top of it all. I would like some reassurance that that is true.
Finally, I shall ask a question about when a determination has been made that a non-resident parent has significantly underreported his income. During the Public Bill Committee, Mr Plaskitt gave the impression that that will be picked up in the next year’s fixed-term maintenance agreement. I understand that that is the current position, but I do not think that it is right. If you tried to persuade the Inland Revenue that you would start sorting out your tax arrears next year when you do the sums again, it might tap you on the shoulder and say that the tax arrears are due and you are liable. There should be an in-year reassessment of the non-resident parent if he has been found to have significantly underreported his income. A reconciliation should be made there and then.
Then there is the question of arrears. Will there be such a thing as arrears when underreporting is subsequently discovered? Will it be possible to take an historic view of the years of underreporting that have just been discovered? That could amount to a big sum of money. Are we simply going to say that that will be sorted out when the reassessment comes up next year and then everything will be all right again? I do not think that the parent with care would take kindly to that treatment, if that is what is in hand.
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