New Clause
15
Prevention
of maintenance avoidance by non-resident
parents
‘(1) The Secretary of
State shall by regulations provide
that—
(a) where the
Commission is satisfied
that—
(i) a person has
deprived himself of income or capital with the effect that his gross
weekly income is reduced;
and
(ii) the effect of that
deprivation is to reduce the amount of his gross income by at least 25
per cent below that which it would otherwise have been;
and
(iii) in all the
circumstances of the case it would be reasonable to do
so;
his gross weekly income
shall be taken to include income from that source of an amount
estimated by the
Commission.
(b) in determining
what is reasonable under sub-paragraph (1)(a)(iii) above, the
Commission shall regard the person’s obligation to support his
children of paramount
importance.
(2) The Secretary
of State may by regulations provide that, in such circumstances and to
such an extent as may be
prescribed—
(a) a person
is to be treated as possessing income which he does not possess;
and
(b) income which a person
does possess is to be disregarded.’.—[Andrew
Selous.]
Brought
up, and read the First
time.
Motion
made, and Question put, That the clause be read a Second
time:—
The
Committee divided: Ayes 6, Noes
10.
Division
No.
20
]
Question
accordingly negatived.
4.30
pm
New
Clause
16
Variations:
Commission’s power to
initiate
‘After Section 28G
of the Child Support Act 1991 (c. 48)
insert—
“28H (1)
The Commission may consider a variation on its own initiative (an
‘own-initiative application’), where it has information
or evidence available to it which suggests that the case is one which
may fall within Part 1 of Schedule 4B or in regulations made under that
Part.
(2) The Commission may by
regulations provide
for—
(a) sections 16, 17
and 20; and
(b) sections 28A to
28G and Schedules 4A and 4B to apply with prescribed modifications in
relation to such an own initiative
application.”’.—[Andrew
Selous.]
Brought
up, and read the First
time.
Andrew
Selous:
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.
Mr.
Mike Weir (Angus) (SNP): 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:
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:
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:
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:
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.
Mr.
Plaskitt:
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:
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.
Question
put, That the clause be read a Second
time:—
The
Committee divided: Ayes 6, Noes
10.
Division
No.
21
]
Question
accordingly negatived.
| 
