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