CHILD MAINTENANCE DISREGARD (No. 2)

Part of Orders of the Day — Child Support Bill – in the House of Commons at 5:30 pm on 22nd May 1995.

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Photo of Peter Lilley Peter Lilley Secretary of State for Social Security 5:30 pm, 22nd May 1995

The new clause deals with an area that has been the main cause of disagreement. However, disagreement has not been characteristic. On the contrary, I endorse the remark by the Opposition Front-Bench spokesman, the hon. Member for Glasgow, Garscadden (Mr. Dewar) that the Opposition have been supportive, co-operative and constructive. I welcome that, and may have the opportunity to say more about it later. That attitude is in marked contrast to that of the Liberal party, which has been fundamentally irresponsible and negative in this matter.

Before coming to my overall reply, I should like to mention one or two points raised by hon. Members. The hon. Member for Greenock and Port Glasgow (Dr. Godman) spoke about problems that he has encountered at Falkirk. I shall certainly respond to his specific points if he pursues them with me or with my hon. Friend the Under-Secretary.

The hon. Gentleman asked whether community care grants could be an alternative to a maintenance disregard. It would not be possible or sensible to give privileged access to community care grants to people who were getting maintenance, and the new clause would give them the right to higher benefit. The Child Support Agency does not give advice on access to community grants. That would be delivered by the Benefits Agency, which is often housed in the same building, and would be in accordance with existing criteria.

As always, the hon. Member for Croydon, North-West (Mr. Wicks) made an interesting contribution. He has always been robust in his support of the Bill's underlying principles—even when he disagrees with us on the detail. He suggested that the choice of the mother to return to work was at stake. By its nature and through its rules, income support loads the choice against taking up work, because it means that, for every £1 earned above the first few pounds, one is paid £1 less benefit. To try to restore the balance, we have introduced maintenance credit. The new clause would intensify the disincentive, and bias the choice against work.

The hon. Member for Stoke-on-Trent, South (Mr. Stevenson) and some other hon. Members said that the resources raised by the Child Support Agency go mainly to the Treasury. But the Treasury has no money. All the maintenance is paid to the mother and belongs to her. To the extent that benefit is offset by that, money is returned to the taxpayer who is the source of all public finance. We should never forget that.

5.45 pm

Although I have carefully considered the arguments for a maintenance disregard as set out in the new clause and as argued in Committee, I reject the proposal for three basic reasons. First, the best way to help lone parents raise the standard of living of themselves and their children is to help them to return to work. Most of them wish to do that. The disregard would effectively pay people more to refrain from working. It raises the hurdle that they have to vault if they are to get back into work and the amount they have to earn to make that worth while. It is precisely the wrong approach.

We have put the £15 disregard into the benefits that help people who are seeking work or are in work. They are: family credit, disability working allowance, housing benefit and council tax benefit. On top of that, we have increased the incentive to get off income support and back into work by introducing the maintenance credit, which is worth up to £1,000 and is payable when people get back into work.

The hon. Member for Hemsworth (Mr. Enright) asked us to be flexible and imaginative if we could not accept the new clause. Ours is a flexible and imaginative response, and it was certainly not expected until we presented the Bill. The proposal to introduce a maintenance disregard is particularly odd, because it would give extra only to those who get maintenance, and nothing to those who get none. It would be hard to justify to those who were in that unfortunate position.

Secondly, I do not support the proposal because we are sceptical about the claim, by the Opposition in general and by the hon. Member for Bow and Poplar (Ms Gordon) in particular, that a disregard would persuade absent parents who were otherwise resisting paying maintenance to pay up with more enthusiasm. There is no evidence that, because parents with care receive a £15 disregard in the in-work benefits, absent parents would be less reluctant or more willing to pay maintenance.

If there is any such effect, the maintenance credit, which enables a parent with care and the child to benefit by up to £1,000 in maintenance from the absent parent, should act as a spur. It should encourage the parent with care to go back to work, and if she does that she may share part of the financial responsibility of maintenance and reduce the assessment of the absent parent. Because of the maintenance credit, the absent parent should be more willing to pay than he was in the past.

By contrast, the disregard would discourage parents from returning to work. I regret to say that that has been a major source of friction, because the absent parent sees the parent with care staying at home on benefit, and resents the fact that that parent is not working.

In any case, the changes that we have made through the package of measures introduced by regulations from the beginning of April and incorporated in the Bill will go a long way to reduce the genuine resentments that caused many absent parents to be reluctant to co-operate with the agency and to pay maintenance. I hope that we will undermine resistance in that way rather than by the introduction of a maintenance disregard.

The final reason for rejecting the proposal for a maintenance disregard is the cost to the taxpayer. The administration cost alone would be some £40 million a year. At the level that the hon. Member for Glasgow, Garscadden (Mr. Dewar) originally proposed, it would cost in total some £340 million, including administration costs. His last proposal would cost some £245 million a year, including administration costs.

Certainly, whatever the Opposition are talking about—and they are not specific in the new clause—they are talking about hundreds of millions of pounds extra for the taxpayer to pay. This very day, the Leader of the Opposition in his Mais lecture is claiming that the Labour party has abandoned the politics of tax and spend, yet the new clause is down on the Order Paper in his name. We have to ask whether he is aware of that, or whether it has been put down by his hon. Friends without his knowledge.

If so, I have to say that it is a fairly frequent occurrence. I have today listed and published 20 spending commitments in the social security sphere alone, the bulk of them put down in the name of Leader of the Opposition, that have been debated in this Parliament and to which we may suppose that the Labour party is committed. They effectively amount to the rejection of the average £4 billion a year of savings that I proposed, as a result of my Mais lecture, in social security spending by the end of the decade, and £14 billion a year in the next century.

We know that the average working family—married couples and self-supporting lone parents—on average pay around £1,500 a year in extra tax to meet the cost of supporting lone parents on benefit. I do not believe that they want to spend hundreds of millions of pounds more on top of that, yet that is what the new clause would mean. They certainly will not believe any Labour leader who claims that he is against tax and spend while advocating that sort of policy.

The Leader of the Opposition claims that he is clothing his party in the robes of fiscal responsibility, but the new clause shows that the emperor has no clothes. The Labour party has no clothes; it is not so much new Labour as nude Labour. The proposals that we have before us today are typical of old Labour—throwing money at any problem and encouraging dependency.