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Lord McIntosh of Haringey: My Lords, the Minister is of course paraphrasing.

Lord Mackay of Ardbrecknish: My Lords, of course I am paraphrasing. I know the honourable Member for Garscadden well enough to know that I would have to paraphrase; otherwise I might be here for quite some time. I hope that your Lordships will approach the Bill in a similarly constructive spirit.

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The Bill includes important measures, first, to introduce an element of discretion to depart from the standard maintenance formula in special cases; secondly, to increase support to parents with care; and, thirdly, to improve the operation of the Child Support Agency.

The Bill amends the 1991 Act to enable a better service to be provided to both sides of a broken partnership. It will improve the assessment, collection and enforcement of child support maintenance and will enable our child support system to ensure that more maintenance is paid, more regularly, for more children.

The key provision in the Bill builds on the introduction of broad-brush allowances within the maintenance formula, by introducing an element of flexibility in the small proportion of cases where the formula-based assessment causes particular difficulties.

The existing child maintenance formula will continue to be appropriate for the assessment of child support in most cases. However, to recognise pre-existing arrangements, or to take account of special circumstances, the Bill will introduce a system of departures. This will allow flexibility to depart from the formula assessment in clearly defined circumstances where that is fair to all parties.

The Bill also introduces a number of other changes: first, a child maintenance bonus of up to £1,000 payable to parents with care when starting work; secondly, provision to compensate people on family credit or disability working allowance whose income drops as a result of changes in child support legislation; thirdly, refinements to the way disputes over parentage are resolved; fourthly, improvements to the review and appeal procedure; and, fifthly, provision to defer take-on of some cases by the Child Support Agency.

We have listened carefully to the concerns expressed both in and outside Parliament. Our response addresses many of those concerns effectively. The revised formula for maintenance assessments is fairer, and the introduction of simplifications will ease the task of administering child support and enable the agency to improve its service. This will help maintenance assessed to become maintenance paid. I believe that these proposals are consistent with the original purpose of the Child Support Act and that that is what Parliament wants.

I turn now to how the departure system will work. The starting point for calculating liability for child maintenance continues to be the formula. This will be the method of assessment in the majority of cases. The formula ensures that people in similar financial circumstances pay similar amounts of maintenance. But the Government accept that a small minority of people who face additional costs because of special circumstances would not be treated fairly under the formula. We therefore propose to allow some strictly limited discretion to depart from the formula assessment in such cases for: unavoidable high costs of travel to work; high costs of maintaining contact with children; extra costs arising from long-term illness or disability of the applicant or a dependant; for the costs of step-children, in exceptional cases; and for some debts, either from the

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relationship, or arising from pre-1993 commitments when those concerned believed their maintenance position to be settled.

Subject to some rules about minimum amounts, either parent will be able to apply for their maintenance assessment to be reduced to take account of the costs. Specially trained staff within the Child Support Agency will consider applications in the first instance. Any direction to depart from the formula will be given on behalf of the Secretary of State. Either parent can subsequently appeal to an independent child support appeal tribunal.

A departure will be allowed only if it would be "just and equitable", taking into account the circumstances of both parties and the best interests of the children and the taxpayer. Any expenses allowed will then be treated like other allowable expenses and deducted from the parent's income before maintenance is assessed. The regulation-making powers in the Bill will enable us to ensure that those to gain most from departure directions will be those on whom the formula bears hardest.

A major criticism of the Child Support Act has been the treatment of past property or capital settlements within the formula. Although the formula took account of many of the practical consequences of property or capital transfers which were intended to contribute to child maintenance, it did not explicitly reflect their value.

The April regulations introduced a "broad-brush" allowance for past property transfers, but inevitably some parents will find that the broad-brush allowance does not reflect the true value of their property settlement. In these cases, the departure system will allow flexibility to recognise all the relevant factors.

The departure provisions relating to special expenses will apply more usually to absent parents, but either parent could apply where appropriate in their circumstances. For example, those parents with care earning enough to contribute to maintenance with high travel-to-work costs can apply.

I also intend to introduce some grounds for departures which will be particularly relevant to parents with care. These grounds will include: first, assets which do not produce income, but are incapable of doing so; secondly, the other parent's standard of living appearing to be inconsistent with their declared income; thirdly, unduly high housing costs or such costs that a new partner should meet; and, fourthly, where the broad-brush allowance towards the other parent's travel-to-work costs is not reasonable.

For absent parents, consideration of a departure from the formula may be conditional on their making regular payments of child maintenance, although, if paying the full assessment would cause difficulty, a lower amount may be permitted until the application is decided.

The costs of the departure system are estimated as £10 million a year in benefit savings foregone, and £25 million in 1997-98 reducing to £15 million a year thereafter in administration.

The administration of a departures system will be complex. To ensure its effective introduction it is important to avoid overloading the agency. For this reason the Government propose to defer the take-on of

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applications from parents who have a court order or written agreement made before April 1993 when the parent with care is not receiving benefit. They will retain their right to use the courts if they wish to vary the amount of maintenance. I shall also offer them the opportunity to use the agency's collection and enforcement service.

It is important to achieve the right balance for both parents, for their children and for the needs of the taxpayer. The provision in the Bill for a child maintenance bonus will help the parent with care to improve her family's standard of living by smoothing her transition to work. It will accrue at the rate of £5 a week or at the rate of maintenance paid, if less, and will be paid to the parent with care on leaving benefit because either they or their partner has returned to work. This measure will every year provide 60,000 parents with care with a greater interest in securing maintenance and an increased incentive to work. The annual cost of the child maintenance bonus will be £10 million in 1997-98 rising ultimately to £20 million.

Where maintenance is reduced because of child support policy changes, parents with care on income support will not lose money since income support is adjusted immediately. Awards of family credit and disability working allowance are, however, set for six months and some parents on those benefits could lose financially if their maintenance assessment drops. The Government wish to be able to give some compensation until the end of the award period and the Bill will provide the necessary power to make compensatory payments.

The Bill also makes provision for overpaid maintenance. At present an overpayment of maintenance is repaid by a reduction in the absent parent's maintenance assessment until it has been cleared. Most overpayments will continue to be dealt with in that way. In some cases, however, a reduction in maintenance may not be possible, or it would not clear the overpayment in a reasonable time. For example, maintenance liability may be about to cease because the child will leave school soon. The Bill therefore introduces a provision which will allow for a cash reimbursement in suitable cases.

We are introducing a number of administrative easements which will reduce the pressure on the agency, including simplifying the review process in cases where circumstances change; and replacing the current charging of interest where maintenance is paid late with an alternative financial charge.

We are also introducing a measure to clarify and merge the legislative provisions for joint payment of income support and maintenance which will ensure that the parent with care continues to receive her full entitlement whether or not the absent parent pays fully or regularly. This measure will also be extended to the income-based jobseeker's allowance.

Subject to the approval of Parliament, some of these measures will be introduced this year after the Bill becomes law. Most of the changes will require detailed operational planning and will take effect as soon as is practicable during 1996-97.

The new child maintenance bonus scheme will start from April 1997. None of these changes will pre-date the enactment of the Bill.

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I note that the noble and learned Lord, Lord Simon of Glaisdale, has put down an amendment regretting certain aspects of the Bill. As always, I look forward with interest to what the noble and learned Lord has to say. While I can guess from the terms of his amendment at least some of the points he is likely to make, I shall discuss the amendment in my wind-up after I have had the pleasure of listening to the noble and learned Lord.

The Government have responded positively to criticism of the child maintenance system by producing a fair and just package of measures which balances carefully the interests of both parents, their children and the taxpayer.

These changes will improve our child support scheme for both parents and should encourage and enable more absent parents to pay child maintenance regularly. No absent parent will be able reasonably to refuse to pay their child maintenance.

I believe the changes we made in April will ensure that the formula produces fair and realistic results in the vast majority of cases, but the new departures system introduced in this Bill will deal with those exceptional cases. I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord Mackay of Ardbrecknish.)

3.32 p.m.


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