Child Support (Miscellaneous Amendments) Regulations 2007

I am very pleased to contribute to the consideration of these regulations and the Committee has little option but to accept them. If the Government were to leave the policy so much at odds with the House of Lords judgment, it would bring unfairness in the short and middle terms. For that reason, if no other, the Government are right to do this in the short term and I therefore support the suggested changes in these amended regulations, so far as they go. I look forward to further discussions when the Child Maintenance and Other Payments Bill comes before the House in the next Session—I have always been of the view that, since its inception, the Child Support Agency, which has been beset by problems that we all understand, has been far too lackadaisical and not robust enough about recalcitrant self-employed non-resident parents. The evidence of the old and new systems demonstrates that, particularly for self-employed non-resident parents, maintenance calculations have been notional. The changes made as a result of the Smith judgment do not much improve the situation, but I hope that when we consider the more fundamental primary legislation in the next Session we will get a chance to look at that very clearly. There are lessons to be learned from Smith. The Minister founded his case on the operational improvement plan. He is right to do that; the plan is very important, we are in its second year and I am advised that we cannot expect to see the increased outcomes that we would wish for until year three. I am prepared to believe that because a lot of training and spending is involved in year two. Is the Minister confident that the operational improvement plan will help to deal with the 7 per cent caseload of self-employed people who are difficult cases by definition, because of the trouble there is in trying to assess the real disposable income available to them? I am nervous about overturning House of Lords judgments willy-nilly, because you should do that only if you really, really have to. Reading the judgment is instructive, although the Committee would not thank me for rehearsing some of the finer legal points. The noble and learned Lord, Lord Nicholls of Birkenhead, in paragraph 1 of his judgment in the House of Lords case, used a phrase that caught my eye. Bearing in mind that Smith was an old case scheme, he said that the regulations were, "““a singularly unhappy piece of drafting””." That was an understatement when you look at the impact it had in that case. ““Total taxable profits”” was something that was left completely undefined in the original 1993 scheme. It was not even picked up and put right in the scheme that was introduced as Child Support 2 in 1999 to 2000. The conclusion I draw from that is that when we turn to the forthcoming legislation next Session in the Child Maintenance and Other Payments Bill, we need seriously to consider applying a Social Security Advisory Committee-type mechanism so that the fine print of the legislation is poured over by people who are much more expert than we as parliamentary proponents and practitioners can possibly be expected to be. You really need to be a professor at law and a specialist in child support legislation to be confident that you can pick up all these things without the assistance of something like the SSAC, and I would be quite happy to tag this on—if I can put it that way. I do not mean to sound facetious or casual, but I think that Parliament would like some reassurance that there was another level to the process. None of this is ideologically difficult. There are no differences between any of us in terms of the concept. The past two pieces of legislation from both Administrations of different stripes have been largely accepted by Parliament, but you get into the problems and implementation stage. So it seems to me that maybe Parliament should be looking for extra handers, if you like, in making sure that we get this right when we get to the secondary legislation level. The department does its best, and I do not complain about that, but it is very difficult. I think the lesson of all of this is that we should be much more careful about scrutinising the secondary legislation and the way it is implemented. The Smith case is a minority issue. It will only affect a very small number of the 7 per cent of self employed, but, by goodness, when it does kick in and applies it makes a very big difference. People involved in the Smith case were sentenced to a decade of legislation. Goodness knows what that cost. I do not know whether legal aid was involved. Trying to work out what ““total taxable profits”” meant in reality had a huge impact on that case. It had to go all the way to the House of Lords for that to be decided. That is nonsensical. Somebody should have seen that coming a long way down the track to prevent all that having to happen. I have a question for the Minister on all of that. Has the department taken any steps to go back and look at the consequences of Smith, and, indeed, the consequences of putting it right in a policy sense? Are there any cases out there of a parent with care which might still be prejudiced as a result of either the Smith judgment or the policy rectification that we are engaged in this afternoon? It will not be a big number, but some of them could be prejudiced one way or the other really quite dramatically. I would like to go to my bed this evening to sleep more contentedly knowing that some effort was being made to look back at that, and not just leaving it to parents with care to say, ““Well, now we have the Smith judgment. I have just read the House of Lords judgment. I will go down to my Jobcentre Plus to try to get some advice about whether this affects me””. I think that there is an onus on a department to put any disadvantage right which has occurred as a result of the Smith case, however complicated and difficult that might be. As I said earlier, the CSA historically has been far too willing just to accept at face value the self-assessments of non-resident parents who are self-employed. In my previous experience, I came across not many, but some, extraordinary lengths to which self-employed people would go to make sure that their maintenance assessment was reduced to an absolute minimum. Of course, introducing ““gross”” rather than ““net”” will help that—and is to be welcomed. There are established concepts of deprivation of income in the social security canon of benefits law that could perhaps be used with a bit more creativity to deal with the situation more sensitively, and individual cases could be looked at a bit more slickly. At the end of the day, Her Majesty’s Revenue and Customs investigations into lifestyle versus what is carried in the account would help, too. I dealt with one or two cases in my former constituency in which the lifestyle of the self-employed non-resident parent was clearly at odds with his self-assessment of his income. In one case, a trading profit of £170,000 but a taxable income of £20,000 was shown in the accounts at the end of the year. That disparity is far too big. While in some of these cases there are difficult judgments to make, parents with care are clearly being short-changed if such situations are allowed to obtain in future. We need to think about perhaps setting up some kind of specialist unit within the current Child Support Agency, or the new CMEC if the legislation finds favour in both Houses. We need to look carefully at definitions of capital allowances. I understand why the change is being made in this way in these regulations, but adopting even the definition that we have here is not the full answer. We are importing a taxation term that everyone understands and which is designed for a purpose that has been worked through and understood for many years. However, we are not looking at capital, we are looking at, in a child support context, the income of parents with care—which is a different context altogether from taxation rules and their definitions. Although I think that what is being done by the Government is necessary and essential, we need to be much cleverer in looking forward to how we get a mechanism that allows the possibility of some kind of dialogue between self-employed non-resident parents that tackles capital allowances in a way that keeps his or her business going, because that is essential for everyone—if no profits are generated, then no one gets any money, including children. However, there should be some kind of dialogue with a little bit of discretion and variation. I know that I am always going on about having more simplicity and my suggestion might make the rules more complicated, but going to a tribunal appeal to deal with some of these cases is daft if we can achieve a process that is a little more flexible, allows a little more discussion and engages the self-employed non-resident parent in a way that says, ““You cannot be expected to get away with gratuitous alienation and expect to hide assess in a way that disadvantages your children. That will not be allowed in future””. However, if I were the government Minister I would be doing exactly the same as the noble Lord this afternoon. I hope that he is prepared to accept that this is not the last word on this issue. We must look again very carefully at the House of Lords judgment, take it away to the beaches with us over the Summer Recess, put a wet towel around our heads and come back with a system that is more sensitive to the circumstances of the reality of family incomes, rather than taxation law, because if we do not do that we risk failing parents with care.