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

I beg to move, That the clause be read a Second time.

The clause would allow the commission to

“consider a variation on its own initiative”

rather than leaving it to the parent with care. At present, it is up to the parent with care to challenge a maintenance calculation and to seek a variation if they believe that the calculation does not truly reflect the non-resident parent’s financial circumstances.

In practice, it can be hard for a parent with care to take such action, and the criteria under which a variation may be granted are tightly drawn. Also, it can be difficult for the parent with care to access sufficient information and evidence regarding the non-resident parent’s financial circumstances, or to prove her case to the satisfaction of a tribunal.

The commission will have access to considerable financial information and will be sufficiently experienced to know to look at a non-resident parent’s income, and to spot an anomaly that, on investigation, would suggest a variation. Such action is often difficult for a parent with care to undertake, and they might not have the confidence or ability to take action, even when they ought to.

Michael Weir (Spokesperson (Business, Enterprise and Regulatory Reform; Energy; Work and Pensions); Angus, Scottish National Party)

I understand what the hon. Gentleman is saying but will he clarify the basis on which the commission’s staff would initiate an  investigation? Investigation of a non-resident parent’s income would be instigated by information from HMRC at the time of an application. I am not clear about the basis on which the commission would begin an investigation after that, other than if a parent with care went to the commission to ask for a review.

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

I understand the hon. Gentleman’s point but, for example, an investigation ought to be initiated if the non-resident parent had significant dividend income that was logged by a different system—we should recall our earlier discussion of the different pots of income that are on separate HMRC systems. I understand what the hon. Gentleman is saying and that the basis for initiation would be prior year HMRC tax accounts, but there could still be cases in which an assessment did not include the full scope of a person’s income. In such cases, given the separation of sources of income—I mentioned dividend income—the parents’ agreement might not fully reflect the scope of income.

Paul Rowen (Shadow Minister, Work & Pensions; Rochdale, Liberal Democrat)

I hope that the Minister will accept the new clause. We are moving to a different situation from that under the CSA, which places the onus on the parent with care to provide evidence before a variation will be made. Under the new system, the commission will progressively gain access to more information about the financial circumstances of non-resident parents with care—it will not happen overnight. It is about gaining progressively more information. There is no way that from day one of the commission’s operation its systems and HMRC’s systems will be set up in such a way that information flows smoothly and without glitches. I am thinking in particular about what the hon. Member for South-West Bedfordshire has said about dividend income, which is declared in a totally different context from that in which any other earned income is declared, and which may well be declared later.

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

I am sure that the hon. Gentleman will confirm my understanding that dividend income is disregarded for child support purposes, unless the parent with care seeks a variation and can prove that dividend income is being received, which they may not have the power to do. That, in part, may give a fuller answer to the hon. Member for Angus.

Paul Rowen (Shadow Minister, Work & Pensions; Rochdale, Liberal Democrat)

I agree with the hon. Member for South-West Bedfordshire. Dividend income is a substantial part of some people’s income, so it should be taken into account. When a family splits up, the longer the split, the more difficult it is for the parent with care to say, “This is the income source that you need to look at, and therefore you need to have a variation on it.” Once the systems are operating with HMRC, during the year in which an initial income assessment is made, based on previous years, more information, which may not be directly available to the parent with care, may come to light, demonstrating that there are considerable assets that should be taken into account in any maintenance calculation.

The situation is simple: it is about allowing the commission to initiate that variation, which is an important principle. If the systems between HMRC and the commission work well, there will not be a once-over flow of information, but a continual flow of  information. Knowledge and systems operation will get better. The commission’s ability to make that variation is an important flexibility that would not detract from the principles of the Bill, but would ensure that it works better. I understand that the commission may not want to burden itself by having to run checks automatically, but that is not the point. The number of parents for whom dividend or other income sources are an important part of their income is tiny but nevertheless important. When the information comes to light, it must be acted upon, so I hope that the Minister will look on the new clause favourably and understand what we are trying to do, which is to ensure that all information and income is properly taken into account.

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

I am grateful to the hon. Members for South-West Bedfordshire and for Rochdale for speaking to the new clause. I entirely understand the motivations behind what they have said, but I shall try to demonstrate that the provision already exists to achieve what they rightly seek. Sufficient powers are already at the disposal of the agency as it is—the commission as it will be—to address their points. Furthermore, the means that they have encouraged us to use would throw up some difficulties.

Sections 28A to 28G of the 1991 Act allow the rules by which a maintenance calculation is made to be varied in special circumstances. For example, a non-resident parent may incur significant travel costs in order to see their child, or a parent with care may feel that the income figure used on the assessment is inconsistent with the income needed to maintain the lifestyle of the non-resident parent. They are variations as we know them. Currently, before a variation can be made there must be an application by one of the parents, which the CSA then considers. The new clause would allow the commission itself to initiate the process of making a variation, without being asked to do so by either party involved in the case.

We are aware that parents with care can find it difficult either to make an application for a variation in the maintenance calculation or to know when to make one. Few of them are likely to have an intimate knowledge of the non-resident parent’s finances, certainly as time goes on, and particularly if they are non-resident parents who already manipulate their finances to reduce their maintenance liability. However, we do not believe that it would be helpful to have the commission make variations without an application, as the amendment proposes. First, the commission will not routinely hold all the information that would suggest the need for a variation. For example, it would be very unlikely to hold information about the lifestyle of the non-resident parent and whether it is significantly inconsistent with the declared income, or information that suggests that the non-resident parent is diverting income to a new partner. We simply do not think that the commission is ever likely to have such information at its disposal.

Officials are in discussion with HMRC about the types of income information that they will provide to the commission for maintenance purposes, but, although it may include information on certain types of unearned income, it would not cover all non-resident parents with such income. Hence, variations would be  initiated for only part of the caseload, which would create an inequity problem.

A further reason why the amendment is inappropriate is that it would apply to all types of variation. Six of the grounds for a variation are those on which a non-resident parent applies to have their maintenance reduced. Five of those are for cases where the non-resident parent has certain expenses—for example, the costs of maintaining contact with their children. We see no reason why the commission should initiate a variation in such cases, as the non-resident parent has at their fingertips all the information and evidence that they need to make an application. If they believe that paying the expenses means that they will be unable to pay the liability under the standard maintenance calculation, they can apply for a variation. Some non-resident parents may easily be able to afford to pay the basic maintenance liability, despite paying expenses. The commission will ensure that non-resident parents have access to information about variations, but it should be their decision to apply for one.

We are liaising with key stakeholders and are currently considering all aspects of the variations scheme. Any resulting changes would, of course, be set out in secondary legislation. As part of that work, we are looking at providing more information, so that parents are better informed when making variation applications. In particular, we are considering how we might alert parents with care that an application for a variation may be appropriate. We are considering developing a system of risk profiling to highlight such cases, which may well include exactly the sort that have been mentioned. We think that that will allow better use of the commission’s resources than would placing an onus on the commission to initiate a variation in all likely cases. The commission will also be able to use its information-gathering powers to investigate applications, once such an application is drawn to its attention. With those assurances, I hope that the hon. Gentleman will withdraw the new clause.

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

I have listened carefully to what the Minister has said. I draw his attention to the two words “may consider” in the new clause. There is no onus or requirement. Discretion is left entirely in the hands of officials of the commission, who are not forced to do anything. The new clause says only that, on occasion, it might be useful to them to do so.

I do not feel that the Minister has specifically addressed dividend income, which I fully accept would apply in only a minority of cases. He made the argument that because the commission could not help in every case, therefore it should not help in any case, which did not stack up. I would like to press new clause 16 to a vote.