Clause 17
Child Maintenance and Other Payments Bill
6:30 pm

Andrew Selous: I beg to move amendment No. 118, in clause 17, page 7, line 32, at end insert—

‘(aa) 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 per cent. from the gross income figure fixed by the calculation currently in force.’.

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Christopher Chope (Christchurch, Conservative)

With this it will be convenient to discuss amendment No. 124, in clause 17, page 7, line 32, at end insert—

‘(aa) make provision to include that where there is a change in circumstances of the non-resident parent, the Commission shall review maintenance arrangements if the gross income of the non-resident parent has increased by greater than 25 per cent. or decreased by greater than 10 per cent. from the gross income figure fixed by the calculation currently in force;

(ab) make provision for supersession in circumstances in which updated income information is provided to the Commission and the maintenance calculation currently in force has been calculated using historic tax year information held at Her Majesty’s Revenue and Customs.’.

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Andrew Selous (Shadow Minister, Work & Pensions; South West Bedfordshire, Conservative)

I shall be brief, as it is getting late in the day.

Amendment No. 118 would change the provision in the Bill whereby a reassessment takes place only if the income of a non-resident parent either increases or decreases by 25 per cent. I can almost hear the Minister’s response about the agency’s difficulties with readjusting assessments on small amounts of income, but the 25 per cent. figure is much too high. It can be as unfair to the parent with care as it can be to the non-resident parent when income both goes up and goes down. If there is an increase in income of 24 per cent. and children do not benefit from it, that is wrong. If someone has a gross weekly income of £100, it goes down to £76 and the percentage is applied on the £100 figure, that is wrong, too.

The figure is too wide in scope. The Minister will say, “We will get it all through, it will be simpler, it will be administratively easier,” but the scope is just too wide. It is another example of too much rough justice in the Bill. The figure of 10 per cent. would be more reasonable, and variations of 9 per cent. either way could be borne more easily than variations of 24 per cent.

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Danny Alexander (Shadow Secretary of State for Work and Pensions, Work & Pensions; Inverness, Nairn, Badenoch and Strathspey, Liberal Democrat)

I speak in support of amendment No. 124, which is part of this group of amendments. To some extent I share the concerns that the hon. Gentleman has expressed, but amendment No. 124 would introduce asymmetry to the arrangements. It would make provision that

“where there is a change in circumstances of the non-resident parent, the Commission shall review maintenance arrangements if the gross income of the non-resident parent has increased by greater than 25 per cent. or decreased by greater than 10 per cent. from the gross income figure fixed by the calculation currently in force”.

The asymmetry is proposed for two reasons. Although it is important to ensure that children benefit from increases in income, it is also important to provide for non-resident persons whose income falls by, for example, 24 per cent., because if there is no variation, the proportion of their income that is taken up by maintenance could, in some cases, rise to 42 per cent. The amendment is designed to concentrate more of the commission’s limited administrative resources for processing variations and changes in circumstance  on those cases in which a fall in income could have a serious effect on the non-resident parent’s circumstances.

The Select Committee’s report includes a helpful table in paragraph 133 on page 37 that shows, using different figures, the proportions of employed non-resident parents who would be eligible for adjustment. A 10 per cent. variation for income falls would result in an increase of 9 to 16 per cent., but a 10 per cent. reduction for income rises would result in the proportion of cases being dealt with rising from 15 to 33 per cent. I accept what the hon. Gentleman said about the importance of ensuring that income increases are passed on, but if the interest of justice and fairness is balanced with the administrative efficiency that CMEC will have to pursue as one of its objectives, our amendment would enable those cases to be addressed in which income falls could lead to serious hardship, although when significant income increases occur they would have to wait until the start of the following year to be processed.

That would be the right balance, and would allow CMEC’s resources to be devoted to cases in which hardship might occur. I agree with many of the points made by the hon. Member for South-West Bedfordshire, but our asymmetric system would make the balance more right and I hope that the Committee will support our amendment.

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James Plaskitt (Parliamentary Under-Secretary, Department for Work and Pensions; Warwick and Leamington, Labour)

This is an important matter, and I appreciate the points that have been made in support of the two amendments.

Amendment No. 118 would provide for regulations to require a fresh assessment to be made if the gross income of a non-resident parent has increased or decreased by 10 per cent. or more. Amendment No. 124 would provide for maintenance to be reviewed if the gross income has increased by more than 25 per cent. or decreased by more than 10 per cent. from the gross income figure used in the maintenance calculation. It further makes provision for regulations to provide for an immediate change in the maintenance calculations when updated HMRC income is provided to the commission.

Clause 17 provides powers to make regulations on supersessions, which may include the ability to restrict the type of changes in circumstances for which maintenance liabilities can be adjusted. At present, when a relevant change of circumstances takes place the maintenance calculation can be changed to reflect that, and such an adjustment is a supersession. If a client reports repeated changes in income or shared care, the maintenance calculation can change every week. That creates uncertainty for the other parent and also means that agency staff are constantly calculating maintenance rather than focusing on collection and enforcement. I shall illustrate that with some real numbers on which hon. Members should reflect.

Since the introduction of the revised scheme—the 2000 change—5 million changes of circumstances have been notified to the agency, and the current rate is 145,000 a month. That is the scale of changes of circumstances that the agency must deal with at the moment. Taking that into account, I hope that the Committee supports our intention to reduce that  volume in the interest of supporting collection and enforcement rather than constant and repeated recalculations.

For the statutory maintenance scheme, the intention is that only significant changes in circumstances—for example, a child starting work or a substantial change in the non-resident parent’s income—will lead to an immediate adjustment in the maintenance calculation. More minor changes will be reflected when an annual case review is carried out, and the maintenance liability will be updated using income data for the most recently available tax year provided by HMRC.

For changes in income, we propose a tolerance level of 25 per cent. If the non-resident parent’s income goes up or down by 25 per cent. or more compared with the historic HMRC figure that was used, the maintenance calculation will be changed so that it is based on the non-resident parent’s current income. That tolerance will not apply when income data are updated at the annual review. If the new income figures result in a change in the amount of maintenance due, then regardless of the amount by which income has changed the calculation will be updated.

The tolerance level must be set where it strikes a balance between allowing significant changes in income to be taken into account, and ensuring that the commission is not inundated with requests for recalculations. We believe that the 25 per cent. level strikes that balance.

We have analysed income changes between 2004-05 and 2005-06 for non-resident parents in the 2003 scheme. That analysis shows that around 40 per cent. of them had a change in their income of 25 per cent. or more. It also shows that just over 60 per cent. had income changes of 10 per cent. or more. Clearly, a tolerance level of 10 per cent. suggests that the commission would be required to make adjustments in a far greater proportion of cases than under our preferred level of 25 per cent. It would affect the commission’s ability to manage its case load effectively and would provide much less certainty for parents. It would, at a stroke, prevent us from moving to a system in which maintenance awards are generally fixed for a year and only updated on an annual review basis.

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Danny Alexander (Shadow Secretary of State for Work and Pensions, Work & Pensions; Inverness, Nairn, Badenoch and Strathspey, Liberal Democrat)

Will the Minister place the information that he has just given, and from which he has quoted excerpts, in full in the Library? His figures differ significantly from those that were given to the Select Committee by the Secretary of State and published in the report on page 37, which would suggest that reducing the threshold from 25 per cent. to 10 per cent. for downward adjustments only would lead to 7 per cent. more cases coming through the system. The totals in the report do not match the ones that he has given. Could he provide the information and set the record straight on how the two sets of figures are consistent with each other? If he could make that clear, I would be grateful.

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James Plaskitt (Parliamentary Under-Secretary, Department for Work and Pensions; Warwick and Leamington, Labour)

I am happy to do that in order to help members of the Committee.

Amendment No. 124 would provide a tolerance of 10 per cent. for decreases but keep the level for increases at 25 per cent. It would also increase the number of  cases that would need to be reviewed. We consider that the system will be simpler for staff and parents to understand if the same figure applies to increases and decreases in income. Under the amendment, non-resident parents could get their payments lowered and based on current income much more readily than a parent with care could ever get them raised. Parents with care would perceive that as unfair.

A much lower tolerance level for decreases in income could also tempt some non-resident parents to manipulate their finances in order to portray a drop in income. We will make provision to prevent the scope for that, but if the tolerance were as low as 10 per cent., non-resident parents might be more tempted to try to do that than with a higher tolerance of 25 per cent. in the knowledge that, if successful, their maintenance would be reduced with immediate effect.

The second part of amendment No. 124 would provide that a maintenance calculation based on historic HMRC income information should be changed immediately if updated income information is provided to the commission. Under the new arrangements, all calculations will be based on HMRC income information unless the non-resident parent’s current income is significantly higher or lower. The calculation will then be updated at the time of the annual review.

The amendment appears to provide that a non-resident parent could submit income details for a more recent period at any time and have their maintenance  calculation reviewed. That, too, would clearly inundate the commission with requests for changes.

The system of annual reviews will mean that parents will know how much maintenance they are to receive or pay for the year, and be able to budget accordingly around that figure. Under the amendment, which would allow for maintenance to be reviewed whenever updated information became available, parents would never be able to predict when it might change. If the commission were required to update calculations as soon as new information became available, it could also lead to unmanageable peaks in its work load following the end of the tax year, when most non-resident parents’ new income information for the previous year would become available. It is therefore vital that reviews take place in individual cases when they are due rather than on demand, in order to spread the commission’s work load evenly throughout the year.

Finally, I recognise that although the principle of having the tolerance is accepted, there is a range of views as to what it should be. We do not want to fix it in primary legislation, as it would not be possible to review it in the light of experience. It is therefore much more sensible to provide in secondary legislation.

With those reassurances, I hope that the hon. Gentleman will withdraw the amendment.

Debate adjourned.—[Mr. David.]

Adjourned accordingly at fourteen minutes to Seven o'clock till Thursday 11 October at ten minutes past Nine o'clock.