Child Maintenance (Assessment of Parents’ Income)

John Bercow Excerpts

1st reading: House of Commons
Wednesday 19th April 2017 Commons Chamber

Motion for leave to bring in a Bill (Standing Order No. 23)

[Mr Speaker]

I am sure the hon. Member for Enfield, Southgate (Mr Burrowes) is greatly encouraged by the interest in his ten-minute rule motion.

[Mr David Burrowes (Enfield, Southgate) (Con)]

I beg to move,

That leave be given to bring in a Bill to equalise the assessment and enforcement of child maintenance arrangements of children of self-employed parents with that of children of other employed parents; and for connected purposes.

I welcome the great interest and attendance of hon. Members for my Bill, but I feel somewhat like the filler in the Prime Minister’s sandwich. I guess that hon. Members’ attention will be focused on the next motion rather than on my Bill. However, many parents have waited all too long for fair child maintenance for their children, and they will not let a general election get in the way of their campaign. The campaign message at the heart of my Bill, to use the Prime Minister’s parlance, is that we need a child maintenance service that works for everyone, not just for a privileged few. [Interruption.]

[Mr Speaker]

Order. Stop the clock, please. I appreciate the interest in other matters, but the subject matter of the hon. Gentleman’s Bill is of very great importance to huge numbers of parents and children around the country. I think it is, to put it mildly, unseemly that while the hon. Gentleman is speaking to his Bill, there are a number of rather animated private conversations taking place, including those being conducted by normally immensely courteous Members of the House. If the House can settle down and listen to the eloquence of the hon. Gentleman, I think we will all be grateful for that.

[Mr Burrowes]

This is an issue of great importance and interest to the public. It is a cross-party issue, but it has been a Conservative cause since the Thatcher Government recognised the principle that all parents have a continued responsibility to contribute reasonably to their children’s upkeep. When parents cannot agree about a child’s maintenance, the state steps in to protect the child’s interests. It is there for parents who are in need of child maintenance and have nowhere else to turn. As such, it must cater for all children, including those whose parents are self-employed and who have complex financial affairs.

My interest in this issue has arisen from the case of my constituent Elizabeth, who is in attendance today, as well as those of four equally brave and determined women whom my hon. Friend the Member for South Cambridgeshire (Heidi Allen) refers to as her supermums. Similarly like-minded, brave and determined women will have come to the surgeries of other hon. Members.

Elizabeth, Melissa, Jo-Anne, Sue and Kate have for years relentlessly pursued their cases with the Child Support Agency, and they could write the textbook on how non-resident parents can easily evade the system by claiming self-employment. The ability to challenge on the grounds of assets or “lifestyle incompatible with earnings” that existed in the CSA system has been removed from the replacement Child Maintenance Service process. Those flaws have led me to introduce this Bill, and they have encouraged my hon. Friend the Member for South Cambridgeshire and the Select Committee on Work and Pensions to hold an inquiry into the CMS; that inquiry is due to report imminently.

The fact of the matter is that a child whose non-resident parent is self-employed is at risk of being financially disadvantaged in comparison with a child whose non-resident parent is employed. Non-resident self-employed parents are being indulged by the CMS. The Government’s defence against the charge of injustice is that closing the loopholes that make possible such child maintenance avoidance is “expensive and time-consuming”.

However, the Government do not take such a relaxed attitude towards individuals who avoid paying their benefits or taxes. Her Majesty’s Revenue and Customs has a 56,000-strong tax collecting department with an annual budget of more than £4 billion, but even with that money it fails to get a grip on non-resident parents who hide their income from the CMS by exploiting legal loopholes.

It is welcome that HMRC has beefed up its financial investigations unit to a 50-strong team. It is good that, as the Minister for Welfare Delivery, my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes)—she is here today to listen—told the Work and Pensions Committee, the team has the power to look at bank accounts and tax records and seek clarification when things

“just do not add up”.

I do not believe that is good enough, however. Children should not be paying the price for the ongoing injustice of unpaid child maintenance. Unpaid maintenance is estimated to total £52.5 million, which means that more than half of eligible children do not receive anything at all. Elizabeth’s son should not be paying the £40,000 price—that is what he is owed for more than six years of child maintenance—simply because his father has a clever accountant who can help to hide his assets in non-income-bearing accounts, businesses and property.

That maintenance liability would not have been uncovered without Elizabeth’s determination in taking the case through to tribunal hearings under the old CSA system and in relying on the old rule, which allowed for an assets variation. The hearings eventually revealed that the other parent had assets to the value of some £800,000 from the sale of various businesses and from inheritance, and found that he could regularly pay CSA maintenance to support their teenage son.

Yet the problem my Bill seeks to resolve is that, under the 2012 CMS scheme, the same parent is held legitimately to have a nil child maintenance liability—it was £40,000, but it is now nil—based largely on gross taxable income figures provided by HMRC. I accept that this model works in the majority of straightforward cases, where a paying parent’s sole income is from pay-as-you-earn employment. It works less well where the paying parent takes income in other forms, such as dividend or rental income. It does not work at all where the paying parent’s living costs are met from income that does not show up at HMRC—for example, income from ISAs, or from venture capital trust fund dividends. There are also some non-resident parents who do not support their lifestyle from income at all—they may have substantial assets, such as from capital gains or property transactions, but no apparent income—and such paying parents may have no child maintenance liability at all.

Parents are now left with a limited child maintenance support system that may be cheap and more efficient for simple cases, but for more complex cases is weak and leads to injustice. This injustice is compounded by the 2012 rules, which not only abolished the grounds for challenging assessments, but cut off the avenue for redress through the courts. The Government’s response to my constituent Elizabeth was that the

“assets grounds for variation proved difficult to administer...and difficult for our clients to understand.”

However, what has proved difficult for my constituent Elizabeth is to obtain justice for the maintenance of her son, and what is difficult for her to understand is why the state has chosen to prioritise its own administrative convenience above the interests of her child.

The Work and Pensions Committee inquiry into this issue has heard evidence from parents about other non-resident parents whose lifestyles do not match their declared income. The CMS advised them to contact HMRC’s fraud hotline, only for them to be left in limbo, because non-resident parents are not committing tax fraud, only avoiding child maintenance, which means that they can hide behind their self-employed status. They have organised their financial affairs in a tax-efficient manner by taking income in forms other than earnings, which are beyond the reach of the CMS. One mother told Mumsnet how the CMS advised her

“to ‘accept’ my £100 pcm payment from my ex as he was self-employed and it was the best I could hope for”.

That was regardless of her evidence that he was capable of paying more because he had a very successful business, multiple properties and, in her words,

“more physical assets than you can imagine.”

Fiona Weir, the chief executive of Gingerbread, which I commend, has said:

“Britain’s child maintenance system is contributing to a culture where too many parents think it’s optional, rather than obligatory, to pay their child’s maintenance.”

It cannot be right—can it?—that a haulier can avoid paying child maintenance because his relevant tax return year removed his liability. Why was that? Because during that year he had bought a truck. The CMS should not allow the financial interests of a truck to come before a child. The state should not be an accessory to child maintenance avoidance. The Government rightly have their eye on the self-employed in wanting to make the tax system work for everyone, and they should include the child maintenance system in that.

My Bill will reform the CMS to correct its current failure to cater for the children of traders, company directors and those with financially complex affairs. The variation ground previously available in the CSA scheme, whereby a notional income could be assumed where a paying parent’s lifestyle was inconsistent with income, should be made available in the new CMS scheme. A new variation ground should be made available in the new scheme whereby a notional income at a fair rate of interest can be assumed from an asset or assets capable of producing a reasonable level of return, where a paying parent has chosen to forgo such income without good reason, bearing in mind their maintenance responsibilities for their children. My Bill will also grant the court jurisdiction where the non-resident parent has assets or a lifestyle inconsistent with income and the CMS is unable to determine, or incapable of determining, the child maintenance and support.

My Bill admittedly comes at the very end of this Parliament, but it may just help to prompt the publication of the Government’s spring report setting out the conclusions of the 30-month review into the progress of the CMS and a statement on future policy. Back in 2012, the noble Lord Freud said that

“we will make clear our intentions, including a specific view on the position of the poorest parents.”—[Official Report, House of Lords, 14 February 2012; Vol. 735, c. 778.]

No doubt that will include the impact on poor families of the £20 fee from which my Bill would seek to exempt them. Gingerbread, which has led the campaign on behalf of single-parent families, has found that child maintenance can lift a fifth of parents on low incomes out of poverty. The lack of child maintenance should be seen as another burning injustice for the Government to tackle.

Given the next motion, I appreciate that this Bill is probably the least likely ever to become law during its parliamentary Session. Some may think, “Well, what’s the point? Sit down, and let’s get on with the general election motion.” As my hon. Friends who are supporting the Bill know, however, there is every point in highlighting —on behalf of our constituents and, more importantly, their children—the unfairness of the present child maintenance system. If you will indulge me, Mr Speaker, let me make a bid for this issue to be in the Conservative manifesto, and let me make an early and most public bid for its inclusion in the next Queen’s speech. Either way, I look forward to the return of a Conservative Government who will deliver social justice with an improved and fairer child maintenance system for all.

Question put and agreed to.

Ordered,

That Mr David Burrowes, Heidi Allen, Suella Fernandes, Antoinette Sandbach, Mrs Cheryl Gillan, Dame Caroline Spelman, Stephen McPartland, Dr Tania Mathias, Mr Ranil Jayawardena, Nusrat Ghani, Nigel Adams and Kit Malthouse present the Bill.

Mr David Burrowes accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 12 May, and to be printed (Bill 169).