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The Deputy Chairman of Committees (Lord Brougham and Vaux): If Amendment No. 98 is agreed to, I have to inform the Committee that I cannot call Amendment No. 99.

Lord Carter moved Amendment No. 98:


Page 19, line 9, leave out ("compensation or partial") and insert ("full").

The noble Lord said: As Amendment No. 97 has not been moved—it was grouped with Amendments Nos. 98 to 100—I shall move Amendment No. 98 and speak to Amendment No. 100. I shall leave the noble Earl, Lord Russell, to deal with Amendment No. 99.

Amendment No. 98 is intended to ensure that family credit or disability working allowance claimants are fully compensated for the reduction in the maintenance assessments which are brought about by amendments to the legislation.

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The White Paper suggests compensation for half of the reduction in the assessment for the remainder of the benefit award. But we feel that that is inadequate. Even with 50 per cent. compensation, because the level of family credit or disability working allowance is set for a period of six months and cannot be reviewed during that time, claimants with awards over £15 a week will be worse off than if they had never expected any maintenance.

The Minister dealt with the six months' point on the last amendment. However, it is important in the context in which I move the amendment.

The point was not debated in another place. We wish to press the Government for full compensation for all low income persons with care. If full compensation was defined as being equal to the reduction in the maintenance assessment, I am advised that the estimated cost would be an extra £1 million in 1995-96.

The effect of Amendment No. 100 is similar: that no family credit or disability working allowance claimant ends up worse off than they would have been without any CSA assessment. It is calculated that 70 per cent. is the rate at which the benefits are withdrawn as income rises. This is the group of people which the Government aim to encourage—the parents in low waged work. Those people are already losers as a result of their maintenance assessment being reduced. That will not be reinstated by recalculation of the benefit at the end of the six month award.

Compensation of 70 per cent., if agreed, would never mean that parents with care end up by gaining overall as a result of the reduction in their maintenance assessment. However, it would ensure that no claimant for family credit or disability working allowance would end up worse off than if he had been assessed at the reduced rate of maintenance at the time either of the benefits were calculated.

It is a complicated point. I think the Minister will understand the point we make. The issue relates to the previous amendments. However, the amendment deals with the issue from a slightly different direction. I shall be interested to hear the Government's response. I beg to move.

Earl Russell: Amendment No. 98 in the name of the noble Lord, Lord Carter, and my Amendment No. 99 are identical, for all practical purposes. If there is any reason for distinguishing between them, it would be purely drafting. I cannot imagine what it would be, but if the Minister has a preference I am sure that neither the noble Lord, Lord Carter, nor I would argue against it.

Amendment No. 100 is obviously a fallback position. It would be better than nothing, assuming that we had lost both the other two in the Lobby. I believe that the noble Lord, Lord Carter, will agree that it is only if we cannot possibly win either of the others that we will settle on Amendment No. 100.

We are dealing here with people having enough to eat. We are also dealing with the fact that people's outgoings are normally proportional to their income. If they are on a very low income, the proportion may be tight, so suddenly withdrawing a large proportion or even a significant proportion of their income will cause

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a considerable shock to the family's economic system. For example, it may interfere with their ability to pay their fares to go to work.

It also rather defeats the purpose of the concession embodied in Clause 24. I said that the Government were playing the Old Man of Thermopylae. On 23rd January I was pleased when I heard that they were making the concession but it was not until I saw the way that they had done it that I realised that my pleasure had been premature and I am now sorry.

Lord Mackay of Ardbrecknish: To a certain extent we must retrace our steps, but for completeness, especially in the record, it is probably worth doing that and I hope that the Committee will bear with me.

Clause 24 provides for the payment of compensation to persons with care in receipt of family credit or disability working allowance who suffer a reduction in their maintenance assessment as a result of changes in the child support legislation. If a person with care is in receipt of income support, that benefit can be increased immediately to balance any reduction in the amount of maintenance that they receive. Similarly, housing benefit and council tax benefit can be increased by 65 per cent. and 20 per cent. respectively of the amount of the reduction.

Family credit and disability working allowance, however, cannot be increased in this way. One of the most important features of the benefits is that they are payable at a fixed rate for 26 weeks at a time, based on the person's income at the time that they claim. I do not believe that anyone disputes that the great advantage is that it gives the claimant a secure source of income for the six months, even if his or her other income should increase.

However, it also means that the benefit cannot be increased to take account of a drop in other income such as maintenance. So in the desire to have a fixed six-month period, there is the inevitable consequence that there could be variations in both directions which the family credit does not take into account.

Normal fluctuations in maintenance are, I contend, similar to fluctuations in earnings or other income and therefore do not warrant special arrangements. However, we decided that there is a special case where a reduction in the amount of maintenance that a person receives is the direct result of a change in the child support legislation. The clause therefore provides for persons with care who are in receipt of either family credit or disability working allowance to receive compensation payments.

It is necessary because of the technicalities involved to have a power to prescribe the detailed circumstances in which compensation will be payable. The Committee will have the opportunity to debate the regulations in due course. We have already been making compensation payments extra-statutorily to those parents with care whose maintenance assessment was reduced as a result of last April's regulations. They have been paid on the same basis as we have set out in this clause and we propose to set out in regulations.

We intend to provide for the compensation to be at the rate of 50 per cent. of the reduction in the maintenance assessment. For many parents with care on

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family credit, that formula will provide full compensation for their actual financial loss. Indeed, some will be over-compensated.

In proposing compensation by this route we are seeking to strike a balance. There is no direct connection between the level of the maintenance assessment and the level of maintenance taken into account in the family credit award, except that the amount taken into account cannot exceed the amount of the maintenance assessment at the time that family credit is claimed. The amount taken into account for family credit is based on the actual maintenance in payment in the period before the award. That is the first important point. The other important point that is worth making is that there is a £15 disregard which Members of the Committee should bear in mind when they do the arithmetic regarding the consequences of our proposal.

If compensation were based on the actual loss of benefit, over 40 per cent. of parents would not be assisted, even though they would have lost maintenance. For the majority—some 33 per cent.—that is because the maintenance received is less than the £15 disregard. The remainder, some 8 per cent., would not be assisted because they already receive the maximum family credit for their type of family. A compensation system based on the maintenance assessment is the only way to address their loss of income.

In the majority of cases the maintenance assessment is higher than the amount taken into account in the family credit assessment or than the parent with care's actual income from maintenance. There is also the question of timing: because family credit is paid at a fixed rate for six months, some parents will begin to receive maintenance in that time, which will lift them off family credit altogether when the next benefit is reassessed. When payment is first made, those parents on family credit will be what I might describe as gainers for the remainder of the six months until the six-month period for reviewing family credit comes up.

I appreciate that the rate of 70 per cent. is intended to reflect the fact that the effect of the taper in family credit is that reductions in income are generally compensated at the end of the award period by an increase in family credit to the extent of 70 per cent. of the reduction. But as I have pointed out, the majority of family credit awards take into account much less maintenance than the maintenance assessment itself. So even compensating at 70 per cent. of the reduction is giving much more than could be received in increased benefit.

Taking all those factors together, we took the view that there was no simple way to compensate exactly for losses suffered. But it was clear to us that compensation at the rate of the full difference between the old and new maintenance assessments would be over-generous. In some cases, the proposed 50 per cent. rate will provide full compensation for the financial loss. In others it will be less than the loss, and in some it will be more. The issue is complicated.

I have some interesting arithmetic here which I think I will resist the temptation to share with the Committee at this time of night and perhaps without an overhead projector or a blackboard (if anybody uses anything as

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old-fashioned as a blackboard). In the circumstances we believe that our proposal strikes a fair balance. I hope, with that rather complicated explanation, the noble Lord can withdraw his amendment.

9.45 p.m.

Earl Russell: While the noble Lord, Lord Carter, decides what to do with his amendment, perhaps I may intervene. The Minister's arithmetic has in some ways assisted us. I am grateful to him for the amount of time that he took to explain it, which was helpful. However, it also illustrates how reliance on a formula tends to conflict with any genuine concern with individual cases. The Minister said that some would benefit and some would lose. There is no attempt to judge a case on its merits.

Another matter puzzles me. The Minister announced a 50 per cent. formula according to which the payments operate. If that is the Government's intention, it is at least clear. But why did they not say that in the Bill? Then we should have known where we were, and, had we so wished, we should have been able to put down an amendment to change 50 per cent. to 60 per cent. or 70 per cent., or even perhaps 40 per cent. This is another example of the way in which the reliance on delegated legislation must diminish parliamentary control. This Government keep on talking about parliamentary sovereignty. In fact, their practice is coming near the point where it puts the very survival of Parliament in danger. I really do wish that they would think about their drafting before it is too late. They believe that they make the law and we rubber-stamp it. If that is a correct understanding, what are we all doing here at this time of night?


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