Child Support Fees Regulations 2014

Tuesday 4th February 2014 Grand Committee

Motion to Consider

16:16

Moved by

[Lord Freud]

That the Grand Committee do consider the Child Support Fees Regulations 2014.

Relevant documents: 18th Report from the Joint Committee on Statutory Instruments, 23rd and 27th Reports from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, I will speak also to the draft Child Support (Ending Liability in Existing Cases and Transition to New Calculation Rules) Regulations 2014.

These regulations were laid before both Houses on 2 December 2013. They enable the department to charge application, collection and enforcement fees for the statutory child maintenance scheme introduced in 2012, which is delivered by the Child Maintenance Service. They also make provision for the department to close cases on the 1993 and 2003 schemes delivered by the CSA, and specify the means by which existing clients must exercise their choice to make an application to the 2012 statutory maintenance scheme. I am satisfied that these instruments are compatible with the European Convention on Human Rights.

Before addressing the regulations in detail, I should emphasise that the programme of reform began in 2006 when Sir David Henshaw delivered an independent report on the future of child maintenance. In his report, Sir David recommended stopping using the CSA as a default option for parents, and introducing charges to provide both parents with an incentive to collaborate. Since then, as part of our reform programme, we have ended compulsion on parents on benefits to apply to the CSA, secured the powers to introduce a new child maintenance system and introduced a full disregard of child maintenance for the purpose of assessing benefit entitlement from 2010.

All these actions have been about helping parents to collaborate in the best interests of their children and to reduce levels of conflict between parents after a separation. This is because evidence suggests that children do better when their parents work together. We are taking a twin approach to increasing the number of parents who work together after a separation to agree child maintenance rather than relying on state intervention. First, we are supporting them to work together on not only child maintenance but the whole range of issues faced following a separation. Secondly, we are incentivising them to think twice about whether they could set up a more collaborative family-based child maintenance arrangement without automatically turning to the statutory scheme.

We are therefore reforming the child maintenance landscape to put collaboration and family-based arrangements at the centre. We are investing £14 million in the Help and Support for Separated Families initiative, directing parents to the support they need during and after separation. For those unable to make family-based arrangements, the new, faster, more efficient 2012 statutory scheme, delivered by the Child Maintenance Service, will be there. The 2012 scheme has a built-in HMRC interface.

We opened the 2012 scheme using a pathfinder approach in December 2012 and, following assurance that the processes, procedures and client interfaces were working well, we opened the scheme to all applicants on 25 November 2013. Those making an application to the statutory scheme will be invited to enter into a discussion with the Child Maintenance Options service, which provides free, impartial information and support on the various ways to set up maintenance arrangements. This conversation gives parents the information they need to consider what is the best arrangement for them.

We propose to introduce fees for those wishing to apply to the 2012 scheme and for continuing to use it. Sir David Henshaw’s report recommended this as a balanced incentive. His argument was that people are more likely to consider whether a service is necessary for them if a charge is applied for it.

Evidence shows that more than half of parents with care using the Child Support Agency could reach their own family-based arrangements with the right support. We launched a consultation on the draft Child Support Fees Regulations 2013 and the draft Child Support (Ending Liability in Existing Cases and Transition to New Calculation Rules) Regulations 2013 to seek feedback on our proposals, and published the Government’s response in November 2013.

We listened carefully to the feedback and reduced the proposed application fee from £100 to £20. Vulnerable applicants who declare that they have experienced an incident of domestic violence or abuse and have reported it to one of the organisations named in the guidance referred to in the regulations will be exempt from paying the application fee. Those under 19 years of age will also be exempt.

We have reduced the parent with care collection fee from the proposed “7 to 12%” to 4%. By reducing the fee to 4%, we have shifted the balance in favour of the parent with care even further so that it stands in a one-to-five relationship with the 20% non-resident parent fee. It is also charged only on money actually collected. It is the non-resident parent who faces by far the highest charges, reflecting the fact that they have greater control over whether they use the collection service. We believe that both parents should make a financial contribution towards the cost of the service. The proposed fees will bring in revenue of £170 million per year. This is a financial contribution towards the cost of the service, which remains heavily subsidised by the taxpayer.

We wanted to ensure that there was provision to enable parents who need to use the statutory scheme to avoid ongoing collection fees. We have therefore introduced Direct Pay. Direct Pay is where the Child Maintenance Service calculates the amount payable and the non-resident parent makes payments directly to the parent with care. Direct Pay will provide a way for parents to access the statutory service in a way that can help rebuild trust between them. We are also proposing enforcement charges for non-resident parents to encourage them to comply with their commitments and to help to offset the cost of administrative action to enforce compliance. The current system offers no financial incentive for non-resident parents to pay in full and on time.

There are currently three statutory schemes in operation: the 1993 and 2003 schemes, delivered by the CSA, and the new 2012 scheme, delivered by the Child Maintenance Service. We propose that cases will close on the 1993 and 2003 statutory schemes. We considered the responses to the consultation on these regulations and have altered our initial approach.

The main change is the order in which cases are selected for closure. The details of this order are included in the scheme that accompanies these regulations. We will divide the caseload into five segments and close them sequentially. To summarise: the first cases to be closed are those where the non-resident parent is assessed to pay a nil amount, followed by those where the non-resident parent is non-compliant. The next cases to be closed will be those handled off the system, followed by the remaining compliant cases.

The final group of cases to be selected will be those where there is an enforced method of payment in place, or legal enforcement action ongoing. Non-resident parents in this category will be invited to undergo a positive test for compliance. They will be required to demonstrate their ability to pay voluntarily for a period of six months. This will inform the department’s decision as to whether they should be allowed to pay the parent with care directly, and avoid collection fees, if an application is made to the 2012 scheme.

This programme of reforms aims to promote collaboration between separated parents in order to ensure that their children achieve the best outcomes in life. We have consulted on both the fees and the case closure proposals, changing our initial proposals on fees and the sequence in which cases will close. I have held two briefing sessions in the House of Lords with the aim of keeping noble Lords fully informed on the reform programme.

I understand that introducing fees to encourage collaboration is a significant change, but emphasise that under Section 141 of the Welfare Reform Act 2012 we have committed to reviewing the effect of the fees regulations within 30 months of their coming into force, and to laying a report about the conclusions of that review before Parliament.

I spoke earlier of the careful way in which we introduced the 2012 scheme. We will continue with this approach, and will not introduce fees or begin the process of closing cases on the 1993 and 2003 schemes until we are confident that the 2012 scheme is working well. We anticipate that this will be in the summer. Those on existing child maintenance schemes will have already been told about case closure and the introduction of the charging of fees. We will not begin charging collection fees until six weeks after the regulations come into force, so anyone affected will have plenty of notice about when the collection changes will begin to affect them personally. I beg to move.

16:30

[Lord Mackay of Clashfern (Con)]

My Lords, I want to comment on Regulation 7(3) of the fees regulations and, incidentally, on Regulation 8(2). I have interests in children’s charities and care organisations, which may or may not be relevant to what I am going to say now but I declare them for caution.

It is rather remarkable that the Explanatory Memorandum comments on this provision and puts the point rather succinctly:

“The introduction of fees is politically significant. Child maintenance elements of the Welfare Reform Act 2012 had a difficult passage through the Upper House and charging persons with care, often single mothers of limited means”—

I do not know how many people are of unlimited means, but anyway it is quite clear that these are people of rather limited means—

“remains a controversial issue for stakeholder groups, service users and the wider public”.

I assume that I am included in the wider public.

I am entirely in favour of everything that can be done, and that this Government are doing, to try to help people who have had a relationship that has broken up. I am familiar from long ago with divorce cases; I did a lot of them but, as the Committee knows, that was a long time ago. However, the difficulties of interpersonal relationships were as formidable then as they are now, and I wish every success to the moves that have been made to try to help people by the Department for Work and Pensions, the Ministry of Justice and the Department for Education, which are involved in the Children and Families Bill, which is having its Third Reading tomorrow. I went to a meeting that Ministers organised in connection with that Bill, and I had to remind them that the DWP was also working in this area of trying to help people. Of course, they said that they work very closely together, so I am glad to hear that. The closer they get together, the more chance that their measures will be successful. As I say, I wish them every success in that. Unfortunately, so far those efforts have not produced universal success, and the regulations contemplate at least the possibility that they will not have universal success in future.

The point that I want to stress is that when it comes to the obligation to maintain a child, the parents’ obligation is absolute. It does not matter what sort of dispute they have had with the other party to the arrangements in the past. I accept immediately that there are many different types of squabble that can emerge, and it is by no means clear that the non-resident parent is always fully responsible. I entirely understand that for the question of the break-up of the arrangements, both parties usually have some degree of responsibility. When it comes to the payment of maintenance, though, that obligation is absolute and is not qualified by the fact that the other party to the arrangement has been terrible, difficult or whatever. That is what these fee regulations are concerned with.

The collection fee that I have referred to appears when the collection system comes into operation. That happens only when the Child Maintenance Service, not the other party, is satisfied that without the collection service, maintenance is unlikely to be paid. That is in Section 137 of the Welfare Reform Act 2012. The decision that the collection service comes into operation, with its charges, is entirely the responsibility of the Child Maintenance Service and has nothing whatever to do with any responsibility of the parent with care. In that situation, the imposition of the collection charge on the parent with care is unjustified in principle.

Of course, this is not by any means the first time that I have raised this issue, and I thank the departmental Ministers, who have changed over time, for the courtesy with which they have listened to the same thing being said again and again. That has not been an altogether unproductive process, because concessions have been made that I warmly welcome. The concessions are narrated in the Explanatory Memorandum; I will not weary the Committee by going over them but I agree that they are quite substantial. The most recent one was the reduction from the 7% to 12% charge that was originally thought of to 4% in the case of the parent with care. As I say, I welcome that very much and am glad that it has happened. However, as the Explanatory Memorandum says, this charge remains controversial, and I think it is unjustified in principle.

I did not feel inclined to table a Motion of Regret or a Motion to set aside the regulations, for pretty obvious reasons but primarily because the Government know what our House decided about this matter long ago. Of course, it was overcome by the financial protection of the House of Commons and therefore went through. But as the Explanatory Memorandum says, the passage through the upper House was not entirely easy. That vote is there and, as far as I know, opinion on that point remains.

I submit that the review that is to take place 30 months after the matter comes into force will take particular account of this point, which I am sure will remain controversial until the inquiry is completed, whether or not I am here to promote it—although that may be a matter of opinion. I do not intend to weary your Lordships further but I do wish to indicate the principled objection to this that remains.

[Baroness Howe of Idlicote (CB)]

My Lords, your Lordships may remember that I was one of those who supported the noble and learned Lord, Lord Mackay of Clashfern, in the very important amendment that he has just referred to. I, too, remain concerned that despite the concessions made by the Government in reducing the application fee for a child maintenance calculation to £20 and reducing the parent with care collection charge by 4% on every payment—on which I congratulate them—there is a real danger that the effect of the new charging regime will be that fewer children end up with fair and reliable child maintenance.

In this respect, I share the conclusion of the Secondary Legislation Scrutiny Committee, which found that,

“although the transfer scheme may make savings it may imperfectly achieve the overarching objective of providing financial support for children”.

I want to press the Minister for assurances that the Government will closely monitor what happens to maintenance for children whose CSA cases are closed during the next three years. After all, the department has details of the parents and children so can track what happens to them, case by case, in terms of future maintenance arrangements—or the lack of them.

It will not be enough for the Government to congratulate themselves if fewer parents apply to use the statutory maintenance service, unless they know for certain that the parents concerned have made private arrangements for maintenance that result in regular payments of realistic amounts for the children concerned. Similarly, it will not be enough to be satisfied that fewer parents are asking to use the collection service and have opted for a direct payment arrangement—again, unless they know for certain that those direct payment arrangements are resulting in regular payment of the liabilities that have been calculated by the Child Maintenance Service.

In the past, the department has said it can assume that every direct payment arrangement is paid in full and on time because, if not, parents with care would ask to use the collection service. Even if this assumption were true now, it will certainly not be true in the future, given that the collection charges are expressly intended to deter parents from asking to use the collection service, regardless of the circumstances. I therefore seek full assurances from the Minister that the department will track in detail how children fare as their CSA cases are closed down and charges are brought in.

[Lord Kirkwood of Kirkhope (LD)]

My Lords, it is a pleasure to follow my two colleagues in this important debate. My noble and learned friend Lord Mackay led the House in earlier stages of the Bill in a commanding and profoundly serious way. His weight being added to this question is something to which I hope that the Minister and department will pay careful attention; that is also true of the noble Baroness, Lady Howe.

I underscore what my noble and learned friend Lord Mackay emphasised at earlier stages of this discussion: the fee money that we are talking about is actually the child’s. My noble and learned friend is right to point to the clause in the memorandum that says that this is controversial; that is why it is controversial. This money which is being taken out of the system should be going to the assistance of, mainly but not exclusively, poorly paid families who are doing their best to struggle to bring up children in very difficult circumstances. That controversy is not going to go away. I pay tribute to my noble and learned friend Lord Mackay and the noble Baroness, Lady Howe, for the work that they have done in the past.

I also acknowledge that there have been concessions, and I do not think that my noble friend the Minister needs an alibi. He has other fish to fry; this is none of his business. It is a very bad change. I actually take a more fundamental view. I have been of the opinion since 1991, when I started on all of this, that charging was wrong in principle. I am long enough in the tooth to remember the period during 1993 and 1995 when we tried charging. I have said this before: it was a disaster. Why? Because nobody collected any money. They were not collecting fees or enforcing debts, so people were saying, “Why are we paying these fees when we are not getting any money?”. The scheme was quickly abandoned. We need to learn lessons about that. I do not believe that even the new, all-singing, all-dancing Child Maintenance Service—while the improvements are welcome—can offer guarantees that the enforcement will be effective.

Changing the balance of my concern, because I have always been really worried about the parents with care more than anything else, some of the charges which are going to be levelled at the non-resident parents are eye-wateringly high. There are a lot of non-resident parents out there who do not understand the difference that will be made with the combination of a recalculation and a collection fee. I wait with bated breath to see where this new co-operation which is going to break out all over the place is going to start. It is fantasy. A long time ago I was a divorce lawyer, and I know what people can do to one another when they separate. It is sometimes quite unbelievable. I am sure that my noble and learned friend Lord Mackay, with his previous distinguished legal career and all his work with children’s charities, would reinforce that. I object to fees in principle. I do not think that they will work. I hope that I am wrong, but that has always been my position and it is worth restating.

Secondly, this system that we have used for charging fees is flawed. Again, I agree with everything that my noble and learned friend Lord Mackay has said, but I want to add a point which has been drawn to my attention by Gingerbread, which is right in saying that if the Child Maintenance Service has the weight of decision in testing the question of “unlikely to pay or not”—to allow the parent with care to join or stay in the service—that is a contestable decision. It is an important decision for both parents. It is an administrative decision which is taken out of both their hands. I do not know what assurances have been given, or whether there is anything that I have missed in the regulations which makes it a requirement to explain in detail why that decision has been taken, but it seems to me contrary to natural justice. In any other area of public life where such an administrative decision is made an inbuilt independent appeal is automatically attached to it. That is entirely absent from this new system. I appeal to my noble friend to go away and look at the provisions in the Child Maintenance and Other Payments Act 2008, Section 6(5), where, I think, the Secretary of State is given discretion about introducing an appeal. As part of the undertaking that I hope my noble friend will give to the Committee to continue to monitor all this carefully there should be the possibility of the Secretary of State making that discretionary decision, so that we can have an appeal available, if it becomes obvious—as I believe it will—that it is necessary.

16:45

The statement that charging will induce these behavioural changes is completely fallacious. The David Henshaw report came out of the blue, to put it mildly. I did not know him before, and I have not seen or heard of him since. However, his report was devoid of evidence—there was no evidence for this ex cathedra statement that fees would suddenly make all the difference, the scales would fall from people’s eyes, they would fall into one another’s arms and they would say, “Let’s agree it is £40”, or £50 or £60. It is not real; it will not happen. In particular, 2 million parents will be caught by the CSA closure programme over time, 36% of whom have been apart for more than 10 years. A charging regime, we are asked to believe, will drive them together so that they can avoid paying the charges. What it will actually do is cause a whole new level of tension within the families. If the parties have been apart for more than 10 years the children have probably flown the nest, and that is probably the safest place for them when such questions are being considered. It is fantasy. I hope I am wrong, but I think it is nonsense. This whole policy is built on sand.

Another point is that for the first time—and this changes the dimension the department is now operating in—the DWP is conflicted about, on the one hand, garnering fees to pay the Treasury debts that it has incurred, and on the other, making proper financial provision for children in lone-parent families, many of them serially disadvantaged. I received an interesting answer to a question I asked. Over a 10-year period, from 2013-14 to 2022-23, fee revenues are estimated at £1.612 billion. You may say, “Well, there have been concessions, and it is down from 7% to 4%”, and so on. The noble and learned Lord, Lord Mackay, made these points, rightly, and I agree that that is a welcome change, and 10 years may be a long time. However, that is £1.612 billion that is not going into family household budgets. The department is now in a very different situation; it is not trying to do its best for families, but trying to save money. It cannot successfully do both. The more fees it collects, the less chance it has of looking after these families and the children in them. By the way, I do not understand the analysis of future fee income, but it got past the Treasury and maybe that is all it was designed to do.

I will make two further points. It is wrong to start charging in case closure until we know support systems are put in place. The Minister reminded us that there will be £40 million over quite a period of time; a £20 million-period of expenditure will end in 2015, which will set up the help and support for its separated parents pilots. However, let us be careful and think about this, as the pilots will end in 2015, and we heard earlier that this charging process and the case closure will roll out earlier than that. Therefore it is not just a question of the system being there and waiting.

By the way, it is not safe for the department to rely on the fact that there are a lot of relational support services for separating parents. There are many, and they are very good, but they are designed in the main to deal with newly separated parents who are willing to work together, not people who have been apart for more than 10 years. Therefore the contexts in which those questions are tested and in which the support is offered are totally different. It is not safe to go into this new domain, where the pilots have not been evaluated; I have no confidence in it. I do not mean that the people who are doing it are acting in bad faith; I am sure that they are doing their absolute best and that they are sincere. The resources that were put behind them are inadequate for the task. If we are raising £1.612 billion over 10 years, surely to goodness we can think about spending a little more money to support those families who will find themselves in that new and challenging set of circumstances.

Finally, how well is the shiny new Child Maintenance Service doing? As the Minister said, it has been in operation for more than a year and took all-new applicants for the first time in November last year. I would like to know what proportion of current CMS cases have been paid in full right now. If the Minister does not have that information in his inside pocket, I would be pleased to hear about it as soon as possible. I know that those figures will come out in due course, because the quarterly statistics are informative and regular, and we look forward to seeing them. However, if there is any way of getting an early rush on how the proportion of current CMS cases have been paid in full or not, I would be keen to see that this afternoon.

Secondly, how much is owed in current CMS arrears since it began a year ago? The point of those two questions is that if we taking enforcement seriously—in my experience that would be the first time since 1993—we must make enforcement professional, efficient and workable, otherwise condemning people to pay fees is contrary to natural justice, bad policy, and worst of all, inimical to the interests of the long-term future of many of our impoverished children.

[Baroness Sherlock (Lab)]

My Lords, in speaking to these regulations I declare an historic interest as a former non-executive director of the Child Maintenance and Enforcement Commission until 2010, and a very historic interest as a former chief executive of the National Council for One Parent Families, which is now lost in the mists and merged with Gingerbread.

I thank the Minister for his explanation of these regulations, and I am grateful to other noble Lords who have spoken on this for the illumination they have added. Most of the time, when I face the Minister across the Dispatch Box, I would happily change places, but when he faces down the noble and learned Lord, Lord Mackay of Clashfern, he is welcome to that seat, at least for the duration of these proceedings. I wish him well in answering the points raised by the noble and learned Lord.

I thank all those organisations which sent in briefing, including Gingerbread and the Resolution Foundation and, indirectly, Families Need Fathers. We on this Committee are also indebted to the noble Lord, Lord Goodlad, and his Secondary Legislation Scrutiny Committee, which did an extraordinarily thorough job on these regulations. It identified gaps and question marks and pursued Ministers gently but persistently, drawing information from them bit by bit until it got answers. I put on record my appreciation of its intelligence, analysis and perseverance.

These are significant regulations, and despite the lengthy impact assessment, we all know that we do not really know what will happen as a result of both the new scheme and the charges being imposed on both parents. The Government’s aims for these reforms, which were set out clearly in the Green Paper, Strengthening Families, Promoting Parental Responsibility, were twofold: to achieve cost savings for the taxpayer and to create an incentive for parents to work collaboratively to make family-based arrangements rather than enter a statutory scheme.

The Secondary Legislation Scrutiny Committee’s excellent 23rd report of the current Session draws these instruments to the special attention of the House on the grounds that they may imperfectly achieve their policy objectives, so it is important for the Minister to reassure the Committee on this point. Specifically, the Select Committee says:

“we conclude that although the transfer scheme may make savings it may imperfectly achieve the overarching objective of providing financial support to children”.

The committee engaged in a correspondence with the relevant Minister in another place, which eventually drew more information out but in my view was not ultimately satisfactory in providing assurance on that point.

I shall ask the Minister to reassure the Committee on those broad points and then ask some specific questions. First, a number of noble Lords have raised behavioural issues. The impact assessment assumes that fewer cases will enter the statutory scheme as a result of the change, but also suggests that the proportion of arrangements affected will rise from the current 60% to 70%. The assumptions seem to be rather optimistic. The present pattern of compliance in family cases is one thing, but that is not necessarily a guide to what we may expect to see in future. As my honourable friend Kate Green put it in another place, at the moment we have parents who may be choosing positively to co-operate, but in future parents with family arrangements will be those who simply see it as the lesser of two evils. There will therefore be a different set of arrangements going on in family arrangements from those that prevail at the moment, so how confident is the Minister of those figures?

On the cost objective, the Government are clear that they expect to score substantial financial gains from the new scheme being introduced, especially as the result of charging fees. Fees both bring in income and reduce running costs, as parents are deterred from using the system. However, I looked in vain for a parallel level of ambition to increase the amount of child support that would actually reach children, a point made by the noble Lord, Lord Kirkwood. What are the Government’s ambitions in that connection? After all, the point of a child support scheme is not to be efficient. It should be efficient, but its point is in fact to get money from the non-resident parent to the parent with care. Presumably the Government have some ambitions for increasing the amount of maintenance that is going to be transferred to children as a result of the reforms. Could they help us on that point?

I also have some questions about the implementation of the new scheme, some of them touched on by the noble Lord, Lord Kirkwood, and some by the noble Baroness, Lady Howe. This is crucial as the Government always said that they would not introduce fees until phase one of the new system was working well. The Minister told us that the scheme started in November and that they aimed to move people on from next summer. Can he tell us a bit more, as the noble Lord, Lord Kirkwood, also asked, about how the new scheme has been performing so far? I will certainly be interested to hear the answer to the noble Lord’s question about how many cases have been paid in full.

How is the interface with HMRC working? I am particularly interested in self-employed non-resident parents. There is the issue of who is responsible for enforcement. I am assuming that that will lie with the CMS but it would be helpful if the Minister clarified that. A common complaint is when a self-employed NRP declares very low levels of profit on, for the sake of argument, his business but the parent with care believes, or has evidence based on his apparent lifestyle, that in fact a much higher level of income is coming in than might be suggested by the latest set of accounts made available to the taxman. At the moment, if she has that evidence she can go to the CSA and it can investigate that. If that should happen in future, does the CMS have the powers to investigate that or will it be left to HMRC? If the CMS has the powers, will it exercise them? If it is HMRC, what assurances has the Minister had that it will do this and prioritise it over the other workloads placed on its shoulders?

When does the Minister expect to be in a position to publish a full range of statistics on cases being dealt with by the CMS? Will these stats show how many cases transfer from direct pay to collect and pay? See—I have got the jargon. It would be helpful to know what was happening to cases going into the scheme.

By what precise criteria will the Government decide when to commence the full new regime? A Written Answer to my honourable friend Kate Green in another place on 23 January said that the Government will determine when the new scheme is operationally ready for the transfer of cases in accordance with the criteria of,

“the Department for Work and Pensions Project Change Lifecycle Framework”.—[Official Report, Commons, 23/01/14; col. 263W.]

I apologise that I am not immediately able to translate that for the Committee, but perhaps the Minister can do it for me. What does that mean and how will it be applied?

17:00

The noble and learned Lord, Lord Mackay, gave us the benefit of his wisdom, gained over many years, about what happens to divorcing couples and the challenges that will be faced in dealing with family-based arrangements. That point was taken up by the noble Lord, Lord Kirkwood. I, too, worry that the Government are being overly optimistic about how easy those parents will find it to make family-based arrangements. I have seen a copy of a joint letter to the Government from Gingerbread and Families Need Fathers, which says that 13% to 14% of parents describe their relationship with the other parent as “not friendly” and more than 40% of parents in the current scheme have no contact with one another at all. That is a pretty big standing start, to go from no contact to being able to agree a familial arrangement. I am very interested to know what kind of support will be available to people in that situation to help them to do it. The noble Lord, Lord Kirkwood, also raised this important point.

The Government have said previously that their aim was to offer an integrated model of family support services but, as the noble Lord, Lord Kirkwood, pointed out, the pilots are getting up and running only now and some are not due to start until May. Can the Government explain how they are holding together their plans to move some of the longer-standing cases, where the parents are least likely to be in contact, on to the new scheme early with the kind of provision of help they will need to enable them to do this?

Turning to the question of fees, I would be grateful if the Minister could clarify the purpose of introducing the fees. Is it to bring in money to offset the costs of running the scheme, or is it to try to disincentivise parents from using the scheme? It would be helpful to the Committee if the Minister could make that clear. If it is the latter, either solely or in part, what thought have the Government given to the kinds of parents who may be deterred? The Government’s own statistics show that a third of new CSA applicants have already experienced a broken private arrangement; more than half have experienced violence or abuse from the non-resident parent; and almost six in 10 have poor or non-existent relations with the other parent, as we have just discussed. So there will be some—possibly many—parents with care who have good reason to want to use the statutory scheme, and the Government need to think carefully about the consequences if the fee regime was used to deter them.

I would also like to understand the role the fees are playing. The noble Lord, Lord Kirkwood, has been busy with Written Questions, and he drew out from the Government not just the fee income that is predicted but the cost saving that the service is anticipating over the next 10 years—not just in the current scheme but the additional costs that will have to be invested. Does the DWP want to encourage parents to use the statutory scheme to pay fees so that it can use the money to offset its costs, or does it want to deter them from using the scheme because that way the running costs will be lower? Given that, what steer has been given to parents?

The noble and learned Lord, Lord Mackay of Clashfern, expressed very clear concerns about the fact that a parent with care faces a collection charge, despite the fact that she is able to access the scheme only if it has already been established—and not by her—that the non-resident parent is unlikely to pay. The Minister mentioned behavioural incentives. Can he explain what the behavioural incentive is for the parent with care in those circumstances? If she is able to access the scheme only when it has become clear that the non-resident parent will not pay, what should she do differently?

The noble Lord, Lord Kirkwood, has raised the question of appeals so I do not need to revisit that, but I will listen with interest to the Minister’s response. I have a couple of other small points. One concerns domestic violence. I very much welcome the decision not to charge application fees in cases of domestic violence. The Minister will be aware that even where domestic violence has been alleged or indeed admitted, the non-resident parent can still use the direct payment option. He will also be aware that voluntary organisations, including Gingerbread, are concerned about what impact that might have on the safety and security of the parent with care in those circumstances.

In the impact assessment, the Government have recognised the need for some sort of money transfer option, which would enable the parent with care to prevent any contact information being shared; for example, normal bank sort codes will reveal geographical information about where she is located, and she may have gone to another part of the country to protect herself and her children from a violent former partner. I believe that the Government are looking at trying to find some kind of bank account which would have non-geographical data attached to it. Can the Minister update the Committee on that? Can he also assure us that, unless and until a parent with care is able to have that kind of safe mechanism, she will not be expected to accept payment directly from the non-resident parent, with the consequences that that brings?

In a letter to the noble Lord, Lord Goodlad, dated 17 September, the honourable Steve Webb, Minister in another place, said:

“We also plan to run a media campaign from early 2014 to make CSA clients aware of the changes”.

Can the Minister update the Committee on that?

Finally, a number of noble Lords have mentioned the 30-month review, which was the concession that the Government made when the Welfare Reform Act was passing through this House. I assume—the Minister may correct me—that that review is likely to be too soon to take advantage of the data coming out of the longitudinal study to which the Government have committed. Given that, can the Minister give the Committee some assurance about what the review will be like? What format will it take? Will it commission proper research evidence? What kind of evidence will it expect to gather for that?

We are left with a good many questions here. I hope that the Minister can answer them all today—if he cannot, perhaps he will write to us. If he finds that he is unable to answer them, I wonder whether he might think again. In particular, I very much hope to hear the Government tell me that I have missed, which I may well have done, the fact that they have set themselves an overriding objective to increase the flow of maintenance to children as their principal policy aim. If they do that, a number of the other questions may come out in the wash.

[Lord Freud]

I thank noble Lords for a set of very interesting contributions to this debate. It is clear that a lot of thought has gone into this area and it has provided a very constructive approach, not just today but over a considerable time. I therefore need to respond to as many of those issues as I can.

As I said initially, and as the statement read out by my noble and learned friend Lord Mackay confirmed, we have consulted on these two sets of regulations and taken views into account. We have changed our initial proposals on fees and on the sequence in which cases will close.

I want to reflect initially on the contributions that my noble and learned friend Lord Mackay has made to the development of these policies. He has made a series of suggestions, both publicly and privately to us, aimed at improving the scheme and helping children. We have listened very carefully to his representations and taken action to reduce the strain on the parent with care. Although my noble and learned friend has made clear his view that the balance is still tilted towards the taxpayer at the expense of the parent with care, I hope that there is agreement that this is a question of striking the right balance and that it is appropriate that we do that by considering actual behaviour.

First, as a result of the consultation, we have amended our proposals for case closure by putting back those cases where parents within the statutory service have most to lose. We have put to the end of the case closure process those cases where money is flowing, which often follows hard-fought compliance, and the flow is maintained only by enforced collections. We have done this to ensure that money keeps flowing and compliance continues. These cases are most likely to fall into the category that my noble and learned friend is most concerned about, where parents with care find themselves unable to establish workable direct payment arrangements regardless of their willingness to do so.

Secondly, the 30-month review allows us to consider actual behaviour, to check that the impact of the reforms is as expected and to provide an indication of whether there are any unintended consequences for clients or the taxpayer. We intend to evaluate the overall impact of the child maintenance reforms in wider society, including the impact on overall maintenance outcomes. Our approach to the review is to use existing survey and administrative data sources where possible, combining these with internally and externally commissioned quantitative and qualitative research where necessary.

Our aim is that the child maintenance system in Great Britain should work better. We are going to focus on the impact on children of these changes. A key criterion for success of our reforms, which will be tested in the 30-month review, would be to increase the number of children benefiting from maintenance. Our estimates suggest that this number should rise, and we look forward to having this confirmed by the review—a point that the noble Baroness, Lady Sherlock, was particularly interested in. If there are fewer children receiving child maintenance as a result of our charging regime, this will be made clear by the 30-month review and we could consider what changes might be required. By that time, we will know how people will behave and refinements to the system, along the lines that my noble and learned friend Lord Mackay has recommended to us in the past—in other words, segmenting the caseload into “can make direct pay arrangements” and “cannot make direct pay arrangements”—can be considered on a more informed basis. To introduce this complexity at this stage would add delay to bringing the benefits of the new system to parents and further complicate the Child Maintenance Service’s processes.

Pressing ahead with the reforms will mean that more children will be better off, as our estimates suggest that there will be an increase in the proportion of positive outcomes for clients on the statutory scheme. This is due to more availability of data and more updating of maintenance liabilities, together with a significant increase in the number of effective family-based arrangements. In the statutory scheme, the effect of the annual review coupled with direct interfaces with Jobcentre Plus and HMRC should mean that in future fewer cases are nil-assessed, meaning that more money could flow. We estimate that the percentage of nil-assessed cases will fall from the current 23% to around 6% of all arrangements in the longer term; I hope that this answers the questions asked by the noble Baroness, Lady Sherlock.

Over the 20-year period considered in the impact assessment published in 2013, including case closure, charging and the overall reform package, the assessment consistently gives a higher proportion of effective arrangements for parents who would have used or will use the statutory scheme than if the 2012 scheme was introduced on its own. As noble Lords have pointed out, we estimate that these reforms are likely to increase the proportion of effective arrangements from 60% to 70%.

There were a large number of questions, and I will try to go through as many as I possibly can. The noble Baroness, Lady Howe, asked how we will know if the arrangements are working for parents. We will be using data from the Understanding Society longitudinal study to assess progress on family-based arrangements across the whole population. She and the noble Baroness, Lady Sherlock, also mentioned the Secondary Legislation Scrutiny Committee. This was responded to by the Minister for Pensions subsequently and that response has now been published.

17:15

One of the many questions of my noble friend Lord Kirkwood was why the non-resident collection fee was higher than the parent with care collection fee. That is to provide a greater incentive for the non-resident parent to collaborate and to pay directly, outside the collection service.

How will we decide who is unlikely to pay? We believe that in general it is fair to allow non-resident parents the opportunity to pay by the direct pay option. However, we are conscious that they should not be given the opportunity to avoid their responsibilities. Where there is a disagreement between the two parents, the Secretary of State must decide whether the non-resident parent is unlikely to pay. There will be a set of predetermined criteria as a starting point.

My noble friend talked about the experience of charging in the 1990s. The difference is that parents will now have the option of avoiding the charges in most cases. Where charges are levied they are designed to be a fair contribution to a system that remains highly subsidised. We have already tested the basic system. We will not charge until we know it is working well. Sadly, those precautions were not necessarily taken in 1993.

With regard to the right to appeal where the waiver is refused, applicants can make an internal complaint, a complaint to the independent case examiner, a complaint—in cases of maladministration—to the Parliamentary Ombudsman, or they can appeal to the court for judicial review.

Who will explain to the parent with care? We will do that, and the rationale for the decision will be recorded and explained to both parents at the time of the decision. If the parent with care does not agree, they can complain to the bodies I have referred to. Will the charging regime drive people apart? Our operational experience is that the older cases—the ones that my noble friend cited—are more compliant than new cases. These older cases often find it easier to work together; perhaps some of the immediate passions have died down. Will charging support collaboration and what is the evidence for that? Our research shows that over half of parents could come to a private arrangement if given support, and the fees regulations provide a nudge towards this step.

My noble friend asked about the postponement of case closure until we are confident of an effective support infrastructure. The sector already provides support for separated parents, and this support will be crucial in helping separated parents through case closure. A programme of work has been running since before the introduction of the Child Maintenance Service, to provide the sector with training and information materials to enable these organisations to provide effective support to separated parents.

On the question from my noble friend and the noble Baroness, Lady Sherlock, on what proportion of current child maintenance cases are being paid, that will become available in April 2014 when we have some management information. On the question from my noble friend about what drives us—revenue versus helping parents—I repeat that the aim of this reform is to help children. The whole point of having the full review is so that Parliament can test if we have achieved this.

The noble Baroness, Lady Sherlock, asked a question on the 60% to 70% rise. We estimate that around 50,000 cases could move from being nil-assessed to being positively assessed should a new application be made to the Child Maintenance Service. The calculations made under the scheme are based on the non-resident parent’s gross taxable annual income, which we can source from HMRC directly, and we can review annually. Those are the two main reasons why we believe that those outcomes will increase in the way we are anticipating.

The noble Baroness, Lady Sherlock, asked a question on what we mean by “working well”. We mean that the system is stable and there are no major periods of unplanned outage or long periods with long response times; and operations colleagues are happy that the system is working as intended, with full application volumes so that they are able to progress work to the planned timeframe—so it is a practical, working system.

On the noble Baroness’s question on information, clearly one of the differences is that there is direct access to HMRC, which does not happen in the older systems. Therefore it is not a question of getting more up to date; the information will be up to date, or up to each year. That issue of being up to date is therefore dealt with. Where there is less than full declaration to HMRC—in other words, misinformation going both to HMRC and to the other parent—that is, of course, tax fraud, which is obviously much more difficult to deal with.

There will be an option within direct pay for the parent with care to receive payments direct from the non-resident parent without having to reveal their location or other contact details. We are confident that provisions will be in place to ensure that every client is able to use that safely and securely. I think that I have dealt with all the questions.

[Baroness Sherlock]

I thank the Minister for going through all those questions—I am very grateful. I still have a couple which perhaps he missed out.

The Minister has explained to us that the Government believe that there will be more children in receipt of maintenance and more effective arrangements. However, he did not pick up on the amount of money that will change hands. For example, it would be perfectly possible for someone who was currently getting the full statutory amount through the statutory system to have in future a family-based arrangement in which they agree to take half of that amount to keep each other happy. Will the Government also be monitoring, and set a target for, the amount of child maintenance that is changing hands, and will they monitor in particular whether the amounts for individual families go down? In other words, one could see a change in the mean—by, for example, people who are currently nil-assessed joining the system—but that might disguise a fall in other cases. How well would that be monitored?

I think that I asked a question about the media campaign that Steve Webb had promised in early 2014. Does the Minister have any information on that?

There is a piece of nuance for which I apologise from this side as a pedant. On the question of domestic violence, the Minister said that he is confident that a non-geographic option will be available. Could he reassure the Committee that where domestic violence is alleged or admitted, a parent with care will not be required to accept direct pay unless and until such a scheme is available to them?

Lastly, I want to be sure that I understood his question about enforcement and HMRC. I think that he is saying that it will become more difficult for a parent with care to raise the question of where they believe earnings have been underdeclared. HMRC may deal with the general question of whether enough tax has been paid but at the moment, as I understand it, and I would be grateful if he would tell me whether or not I am right, a parent with care can go to the CSA with evidence showing that the non-resident parent has higher income than has been declared to the CSA—for example, if the lifestyle in terms of a house, a car or money spent would not appear to tally with the relatively small amount of income declared—and it can investigate and address that. Is he saying that that will not happen unless HMRC decides in general terms to conduct a tax investigation?

[Lord Freud]

On the question of the amount of maintenance, our estimate at this stage is that more children will get maintenance. That is what I have said. How much that maintenance is in money terms is less clear at this stage. It is one of the things that we will find out. I need to remind noble Lords that assistance may take many forms to children—more shared care—so the question is not just about money. It is about the level of support. That is an area that we will be looking at closely.

On bank accounts, the parent with care will be able to dictate to which account the non-resident parent must pay. If that fails to happen, it will result in a return to the collection service, which I think in practice deals with the noble Baroness’s question.

At the moment, the CSA gets a complaint from the parent with care. The place where it goes to check is HMRC. That main checking area becomes irrelevant when there is a direct feed. Where she is suspicious—it is a suspicion—of, effectively, tax fraud, that is what we are talking about.

[Baroness Sherlock]

So the CSA does no investigating of its own? I am sorry; I must have misunderstood that point.

[Lord Freud]

No. Currently the CSA checks with HMRC. As now, it will be able to provide information to support its suspicions that all might not be well. This is a difficult issue more generally.

On the question about the campaign, we are planning a media campaign using social media and paid-for channels such as radio. We are still finalising those details. The intention is to raise awareness of case closure and to promote parental responsibility. We will get more details of that out in coming months.

With all the issues dealt with—perhaps not to everyone’s absolute satisfaction—I will commit to continuing to provide transparency in the delivery of this programme of reforms. We published a strategy for the publication of information about the 2012 scheme on 18 July last year. We plan to release official statistics once we are assured of the appropriate quality of the data; we expect this to be after April 2014, as I said. Ahead of this, we have used the management information that is available to release limited relevant data on a one-off experimental basis, published on 25 November last year. As I mentioned earlier, we will review the effects of the fees and regulations, and lay a report before Parliament following 30 months of operation. I commend the regulations to the Grand Committee.

Motion agreed.