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[Amendments Nos. 89 to 93 not moved.]
Lord Kirkwood of Kirkhope moved Amendment No. 94:
“( ) require the Commission to instruct an independent assessment of any self-employed non-resident parent’s income when an agreed income figure continues to be in dispute after 28 days of a maintenance claim being made which assessment will be binding on all parties for the rest of the financial year.”The noble Lord said: This is another look at requiring the commission to instruct an independent assessment. Amendment No. 101 looks at the commission’s duty to investigate. Amendment No. 94
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Amendment No. 191, also in my name and that of my noble friend, looks at placing a statutory duty on CMEC to investigate a non-resident parent where there are grounds for suspecting that the information held regarding his income does not give the full picture. We have discussed that before. Indeed, Amendment No. 191 was run in the Public Bill Committee in the other place with a slightly different wording. The departmental response was that there would be a danger that the commission might be swamped with references for investigation, and that the future reliance on HMRC data would solve many problems. This amendment has been refined to make it clear that CMEC would be expected to investigate only where there really were grounds for suspicion, so that there is no prospect of any fishing expeditions without them. I hope that that new wording might be more acceptable to the Minister.
Looking at why we need Amendment No. 191, there is no doubt that the agency and CMEC going forward will have a considerable array of methods and powers to investigate financial circumstances. As I understand it, the staff guidance at the moment says that decision-makers are not required at any time to undertake independent investigations. In practice, that leaves parents with care to prove the NRP’s financial circumstances by themselves. As I argued earlier, I do not think that is fair. The balance is against the parent with care. I believe that the new system we are setting up should try to create a more level playing field, otherwise it will still be too easy for non-resident parents to evade their responsibilities. I beg to move.
Lord Skelmersdale: As I understand it, these amendments give the commission powers to reconsider or investigate, depending on whether they are acting for or against the non-resident parent, the payments that the non-resident parent is obliged to pay in relation to their income. I call these enforced
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Of course, the commission must develop a human face—we all agree with that—and make accessible to parents a whole support network, but it must be seen to have conviction on its decisions. Of course, the decisions can be appealed and later we will have discussion on what level of appeal is appropriate in particular cases. Although they can be appealed, the commission must have conviction over what it does. That is absolutely essential.
Lord McKenzie of Luton: These amendments mirror concerns raised in amendments debated in the other place that the new calculations rules may not reasonably take account of a non-resident parent’s ability to pay and, in part, they carry on the debate we have just had. It is important that the new rules are seen to apply fairly. However, I do not think that these amendments offer the best way to proceed.
Amendment No. 94 provides for an independent assessment of self-employed income in a case where the figure used in the calculation is in dispute. We recognise that a minority of self-employed parents will want to obstruct the commission by giving income information which is incorrect or incomplete. We have already taken steps to deter them. The use of HMRC income data will mean that in fewer cases will information be required from non-resident parents, reducing the opportunity for them to directly mislead the commission. We are retaining the provision which means that knowingly giving false information will be a criminal offence, in the way that it is currently with HMRC and the Child Support Agency.
Where a decision is disputed, there will, as the noble Lord, Lord Skelmersdale, said, continue to be a right of appeal to an independent appeal tribunal. A tribunal can serve with a financially qualified member and is empowered to direct any party to the appeal to supply any information it considers relevant.
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Amendment No. 189 proposes a change to the variations scheme rather than to the mainstream calculation. It would allow the commission to initiate the variations process itself instead of having to wait for a formal application from a parent. Although we recognise the concerns, there is a serious practical difficulty here. For the types of income likely to be considered in relation to a variation, the information received from HMRC is unlikely, on its own, to be sufficiently comprehensive. To initiate a variation in these circumstances would not result in a fair and
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Amendment No. 191 would require the commission to investigate a non-resident parent’s income whenever a new maintenance calculation is made or a variations application considered. The commission will be able to undertake further investigations into a non-resident parent’s income where appropriate. In supporting this process it will be able to obtain information from a number of sources, such as local authorities and accountants. If in the course of an investigation, it comes by information which may be of interest to HMRC, the commission will be able to pass that information on through the gateways.
We consider that this approach is preferable to investigating income in every case. The majority of non-resident parents are straightforward in their dealings with public bodies. The task of effectively double-checking income information would add greatly to the commission’s workload and, in the case of independent assessment, would add to delay. In most cases, this additional effort would not change maintenance calculations. We are also retaining the power to estimate income where available information is unreliable, insufficient or atypical. We shall be working with the commission to decide how to make best use of that power.
Finally, I remind Members of the Committee that detailed provisions for the treatment of income are in regulations and that Parliament will have full opportunity to debate these. Accordingly, I ask the noble Lord to withdraw the amendment.
Lord Kirkwood of Kirkhope: I perfectly understand what the Minister has said. I shall think about that a bit more clearly. I certainly accept that government Amendment No. 101 and the groups we are coming to are a significant step in the right direction. We will discuss them when we reach them and I think that we will want to reflect on them. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 17 [Power to regulate supersession]:
Lord Skelmersdale moved Amendment No. 96:
“( ) make provision that where there is a change in circumstances of the non-resident parent, the Commission shall make a fresh assessment if the gross income position of the non-resident parent increases or decreases by 10% from the gross income figure fixed by the calculation currently in force;”The noble Lord said: Clause 17 states that a calculation can be reconsidered only if the parent’s income changes by 25 per cent or more. My amendments are not like the amendments we discussed in the previous group—that is, pernickety
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I have tabled Amendment No. 98 on the advice of the Solicitors Family Law Association, Resolution. This provision would mean that no longer is it down to the non-resident parent to provide income information, which could be obtained by the commission direct from HMRC. Indeed, it should be done under the system proposed in the Bill. This amendment is tabled with the intention of producing quicker and potentially more accurate calculations than the Bill would produce. Does the Minister not also believe that it is imperative that the calculation, where possible, reflects the up-to-date income position of the NRP? This is a slight over-hang, and I might have asked the question during our tête-� -tête towards the end of the last group of amendments that I moved. I am convinced that this amendment would also assist in alleviating child poverty: in cases where the updated information shows an increase in the non-resident parent’s income, this will maximise any maintenance calculation.
Amendment No. 97 was drafted by Gingerbread, and is very sensible. It is a probing amendment to prompt a discussion on how CMEC intends to avoid the situation where non-resident parents can get a reduction in their child maintenance, but only face a levelling-up in a year’s time when their liability is reset to the following year. Where, in a tax year, a non-resident parent’s child maintenance is assessed on current income or where he is required to pay only the flat rate of maintenance, the amendment would require CMEC to retrospectively check, using HMRC data, that during the tax year in question, the NRP’s actual income, as calculated for child support purposes, did not exceed the figure used to calculate his child maintenance by more than 25 per cent. If he did so, the non-resident parent should be made to pay the underpayment of liability. In another place, Ministers rejected an amendment which would have required non-resident parents to notify CMEC if their income rose by more than 25 per cent.
A non-resident parent will be able to switch to a lower current-year assessment if he can show that his income has dropped by 25 per cent or if he claims benefit. There seems to be no CMEC mechanism for revising this reduction, even if it becomes apparent in retrospect that the reduction in income or period on benefit lasted for only a short while, perhaps while he was unemployed for three months. That lower
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Lord Kirkwood of Kirkhope: I concur with the noble Lord, Lord Skelmersdale, and the way in which he has moved his amendment. We need to be careful as regards the figure of 25 per cent, which is a very steep cliff edge. In my Amendment No. 100, I suggest reducing the figure to 20 per cent. Under Amendment No. 99, there is scope for thinking about imposing a duty on the commission when constituted to come up with a low income protection scheme of some kind that is not too bureaucratic or onerous. That would give some comfort to those who have been following these proceedings and think that this is just a little bit of a bridge too far all in one go.
Amendment No. 97 seeks to allow retrospective review of supersessions so that we can prevent misuse of some of the supersession rules. The arguments were not run earlier in the Public Bill Committee in the House of Commons, but this amendment is designed to allow discussion of how CMEC intends to avoid a situation where non-resident parents can get a reduction in their child maintenance but only face a levelling-up in a year’s time when their liability is reset for the following year.
In the Commons, Ministers rejected an amendment which would have required NRPs to notify CMEC if their income rose by more than 25 per cent. Again, we are trying to level up the playing field and put the parent with care in a stronger position. A lower assessment for an NRP would continue to apply for the rest of the year. It would be re-evaluated the following year when he could do the same again. There is a danger of potential abuse. The parent with care cannot apply for a variation because she has got no access to the financial information to which we have referred and have had discussions about earlier. In that circumstance, she is flying blind. Amendment No. 97 looks at ways to prevent misuse of that kind.
Lord McKenzie of Luton: Members of the Committee will be aware of our proposals for the statutory maintenance service to introduce a system of fixed term awards with annual reviews of maintenance calculations. In between annual reviews, maintenance will be adjusted only for a change in the non-resident parent’s income if that change exceeds a tolerance level, which will be specified in regulations. As has been mentioned, we have proposed a level of 25 per cent. We believe that provides certainty for parents on the amount of liability, allows for significant changes in income to be reflected and will reduce significantly the volume of reassessment work carried out by the commission.
The commission will advise Ministers on the level at which the tolerance should be set, taking into account the potential impact on child poverty and
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Amendment No. 96 seeks to set the tolerance level in primary legislation at 10 per cent. Currently, the agency receives around 160,000 applications for a change of circumstances every month. Since 2003, a staggering 5 million changes of circumstances have been cleared by the agency for new scheme cases alone, which results in the agency spending far too many of its resources constantly adjusting maintenance liabilities. Many non-resident parents report repeated—even weekly—changes to their income and shared care arrangements.
For the commission to be successful, we need to avoid burdening it with the same level of re-work and reassessment that the agency has faced. Restricting the scope for in-year adjustments will help us to achieve this. Cases will be reviewed annually, and the income figures from HMRC will be updated so that they will always represent the latest available tax year. Analysis shows that between 2004-05 and 2005-06, 39 per cent of non-resident parents had an increase or decrease in income of 25 per cent or more.
If the tolerance were set at 10 per cent, that would hugely increase the volume of cases needing adjustment. For the period mentioned, 61 per cent of cases had an increase or decrease in excess of 10 per cent. Setting the tolerance level at 10 per cent therefore would not result in the reduction of reassessments needed for the commission to effectively manage its caseload, nor would it provide the desired level of income stability for parents.
We recognise that a tolerance for changes in income means that until the next annual review of the case, a non-resident parent who has had a significant drop in income will pay a higher proportion of their net income in maintenance. For example, a non-resident parent with one child who was earning £20,000, whose income drops by 24 per cent to £15,200, would have to pay around 20 per cent of their net income during this period. In a worst case scenario, a drop in income of 24 per cent would mean that a non-resident parent earning £800 per week with three or more children to support, might pay around 34 per cent of their net income until their next annual reassessment. However, since only 11 per cent of all non-resident parents have three or more children, and only 2 per cent of all non-resident parents are likely to experience a drop in income of between 20 per cent and 25 per cent, this scenario will be somewhat rare.
Amendment No. 97 applies to cases where a maintenance calculation has been adjusted for a reduction in the non-resident parent’s income. The amendment would provide that where the commission subsequently receives information from HMRC that shows that for the period covered by the lower maintenance calculation the income was actually 25 per cent or more higher
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When a non-resident parent can show that their current income has fallen by 25 per cent or more compared with the figure on which their maintenance liability has been based, it will be possible for their liability to be adjusted to be based on current income. This type of adjustment is known as a “supersession”. Before the agency will carry out a supersession, it will require robust evidence that income has reduced for a period that is long enough to give a comprehensive and accurate picture of the non-resident parent’s income. This minimises the scope for manipulation and ensures that figures are not affected by short-term falls in income or by seasonal fluctuations.
I assure noble Lords that the current rules that allow for a revision of maintenance liability that has been found to be based on inadequate or incorrect information will continue to apply under the new arrangements. This means that if a parent with care believes that the non-resident parent’s income has not dropped by 25 per cent, the decision can be disputed and, if they do so within one month and are successful, the lower calculation will be changed from its start. If she successfully disputes it after the one-month dispute period, the lower calculation could be replaced from the date she disputed it.
If the commission subsequently receives information that shows that maintenance should not have been reduced because the non-resident parent had misrepresented or failed to disclose a material fact, the lower maintenance calculation could be revised and the original higher assessment could be put back in place from the outset. There are already existing provisions in place to allow for a decision to be reconsidered in the circumstances envisaged by the noble Lord. It is worth pointing out, however, that data from HMRC will only ever reflect the most recent complete tax year. The current income figures provided by the non-resident parent would inevitably be for a different period.
Carrying out routine reconciliation of HMRC data, even if it were possible, would be a resource-intensive and potentially complicated exercise that would reduce many of the administrative benefits of basing maintenance on HMRC information, resulting in frequent minor overpayments or underpayments which would require adjustments to ongoing maintenance that would be complex for parents to understand and budget for and for staff to explain to them.
Under Amendment No. 98, regulations would provide that an immediate adjustment takes place where the maintenance calculation had been based on income data supplied by HMRC and the commission subsequently receives updated income information. A non-resident parent could submit new income details at any time and their maintenance calculation would be reviewed. This could have an overwhelming effect on the commission by creating unmanageable peaks
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Amendment No. 99 would place a requirement on the commission to make proposals to protect low-income non-resident parents from too high a threshold. Noble Lords might consider that there should be a separate, lower tolerance for non-resident parents on low incomes, but that could add significant operational complexity and create other difficulties. For example, would the lower tolerance only apply to those already on incomes below a certain threshold, before their income falls? Or would it also apply when the drop in income itself brings the income level below the threshold?
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