Child Support (Miscellaneous Amendments) Regulations 2007

I thank both noble Lords who have contributed to the discussion on these regulations. It has been an interesting prelude to what will come when we consider the Bill before too long. The noble Lord, Lord Taylor, asked what these regulations do for faith in the CSA and asked why there was no regulatory impact assessment. It is important to consider in context the numbers of people likely to be affected, in particular by the capital allowance issue. Some 84,500 of cases of the CSA’s cases deal with self-employed people—who noble Lords recognised as representing about 7 per cent of the total caseload. Within that cohort, very few are significantly impacted by capital allowances. I do not have the number with me, but I think it is literally a few hundred where it makes a significant difference. It is important that we see this in context. The noble Lord asked how much the enforcement changes will cost. I shall clarify this, because it stumped me at first: the term ““non-resident parent”” does not mean a parent who is living overseas, but the parent other than the parent with care. With these changes to the processes of enforcement of notice periods, we are dealing with those non-resident parents who are overseas. I think I am right in saying that there are about 6,600 of those; again, a relatively small number in the context of the total caseload of the CSA. The noble Lord, Lord Taylor, asked about how departments were co-operating with each other on this. The change has certainly been discussed with the Treasury and HMRC. Although I am anticipating the debate we will have when the Bill comes through, the new system provided for in the Bill where we are dealing with HMRC data on gross income means that that data will flow directly from HMRC to the DWP. That is an important fact, because it means we no longer have to reply upon the non-resident parent for details of income. If a non-resident parent is not keen to co-operate with the agency, that creates problems. That is a huge issue associated with the redesign. The noble Lords, Lord Taylor and Lord Kirkwood, talked about why we should be dealing here with the tax calculation and capital allowances. Capital allowances effectively include a measure of depreciation for business. It is right as a matter of principle that we assess the income from a business to determine what the income of the non-resident parent is, but we should allow a deduction for the fact that some capital assets are used up in the business over time. There are a number of variations we could use, such as accounting depreciation, but we are using tax depreciation, which is defined in tax legislation, for purposes other than the macro-economic issues associated with that. Our conclusion was that it would provide a definable figure—a definable concept—which flowed from the data that would come automatically from HMRC. If we did what the noble Lord, Lord Kirkwood, was suggesting, fettered that and had variations to it, we would get back into the problem that has bedevilled the CSA from the very start: as soon as you have variations with regard to calculation, you have the problem of complexity and everything that goes with that. We seriously considered whether there should be some limits on capital allowances. The thing to bear in mind is that if, because you can get 100 per cent first-year allowances in some instances, you get an accelerated write-off in one year, you would correspondingly get a reduced write-off in a subsequent year, so in time there is an automatic smoothing of the arrangement. We accept that this system is not a perfect answer. An answer that had all the bells and whistles we might logically or intellectually want to apply to it, to ensure that it was fair and covered every circumstance, would generate complexity and the problems that went with it. The noble Lord, Lord Taylor, suggested that we were changing the rules in relation to people’s rights to ask for a variation. None of this touches upon that. There are rights under both the old system and the new system for the non-resident parent, in certain circumstances, to seek adjustments in respect of expenses, and for the parent with care to seek a variation of what the formula would otherwise produce in certain circumstances. No part of the instrument affects those rights; they continue. I would be happy to run through each of those provisions, which are quite extensive, but they are genuinely unaffected by the regulations. The noble Lord made reference to liability orders and the 65 per cent figure of error that was quoted, although I think that conflates various things. A key point to bear in mind is that, at the moment, liability orders are granted by the magistrate’s court. Only 1 per cent of requests for magistrate’s court are rejected now, which demonstrates that there is a high level of acceptance. When the agency seeks a liability order, it is granted by the court. There were various references to the new basis of assessment the preceding year and HMRC data. We will come on to that, but I believe, as I have said, that the change provided for in the Bill will make a major difference to the operational effectiveness of CMEC, as it will be. I am sorry that the noble Lord felt that there was too little information about the amendments. As ever on these things, we would be very happy to meet him and other colleagues to discuss any issues and to run through them, as would officials from the CSA. The noble Lord, Lord Kirkwood, said that we have not been robust enough with the self-employed. Again, a clearer basis of assessment helps that. We anticipate that there will be wider enforcement powers under the Bill, which will certainly help. The noble Lord talked about the operational improvement programme and asked whether we have to wait until year three for increased outcomes. The answer to that is: no, we can point to improvements that have already taken place at the end of year one. More improvements will take place in the current year. I think it is right to say that at the end of March 2007, compared with a year ago, 45,000 more children were in receipt of maintenance or had Maintenance Direct arrangements. A higher proportion of NRPs are paying or using Maintenance Direct. It is a three-year programme and there are still some benefits to come from it. Notwithstanding that, we still do not believe it will deliver what ought to be delivered for parents and children, which is why we have the new world of CMEC. So far as I am aware, but I will check, we have not gone back over all the cases that might have been affected by Smith; the CSA has enough on its hands dealing with current cases. These are relatively few cases. I presume that until we had the new judgment, we would have properly settled them on the basis of what the CSA believed to be the policy that was operating. It is right that it did so. I do not think that there is a significant group of people out there who are prejudiced one way or the other. Using capital allowances is an efficient and effective way of dealing with the calculation. I hope that has dealt with the points noble Lords have raised; if there are further issues that you want to have a go at, please do. I am sure that we will have a strong debate around this when the Bill comes our way before too long. It is something for people to put in their suitcases for the Summer Recess. With that, I thank noble Lords for their input. I commend the regulations to the House.