Child Support (Deduction Orders and Fees) (Amendment and Modification) Regulations 2016
(Limited Text - Ministerial Extracts only)
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Baroness Altmann
That the Grand Committee do consider the Child Support (Deduction Orders and Fees) (Amendment and Modification) Regulations 2016.
The Minister of State, Department for Work and Pensions (Baroness Altmann) (Con)
My Lords, these regulations were laid before both Houses on 8 February 2016. They enable the department to waive collection and enforcement fees on the 2012 child maintenance scheme for a specific group of cases for a limited period of time. This is to support a process that provides a safety net for parents with care. It will require non-resident parents with a poor history of meeting their child maintenance obligations to demonstrate a change in behaviour and prove that they could reliably be allowed to access the direct pay service on the 2012 scheme rather than having to pay collection fees in the new scheme. We will also introduce minor technical amendments to the existing powers to improve the effectiveness of regular deduction orders and lump sum deduction orders.
A comprehensive reform of the child maintenance system began in 2012 which aims to incentivise parents to collaborate in the best interests of their children and move us away from the idea that state intervention via a statutory child maintenance scheme should be the default option for separated parents. To achieve these aims, a programme to close all existing Child Support Agency cases began in June 2014. Closing cases gives parents the chance to consider which arrangement best suits their circumstances for the future, while access to Child Maintenance Options, a free and impartial service, ensures that they have relevant information available to help inform this important decision.
Where parents believe a statutory solution would be best for them, they can apply to the new 2012 scheme, which is operated by the Child Maintenance Service. New, simplified calculation rules and improved IT systems are delivering better outcomes for parents and children. At the same time, fees and charges are helping to incentivise parents to consider closer collaboration and use a direct pay service, while also providing a contribution towards the cost of running the service. This policy change is predicated on the view that encouraging parents to co-operate when arranging child maintenance payments is likely to lead to less confrontation between parents, and this is ultimately normally in the best interests of the children.
When approaching case closure, we are of course mindful of the need to take careful steps to reduce the risks of child maintenance payments being disrupted, particularly for those cases where money is flowing only as a result of enforcement action being undertaken on the old CSA cases. We want to address concerns raised by stakeholders following the public consultation on case closure undertaken in 2012.
The last segment of cases that we will close—segment 5 —will include those cases where money is flowing as a result of enforcement action. But to try to give clients an opportunity to avoid charges, as well as giving a chance for future co-operation between parents who may have been in conflict previously, we want to introduce a new positive test of compliant behaviour for these previously recalcitrant non-resident parents. This is known as a compliance opportunity. The compliance opportunity will take place during the first six months of the 2012 scheme case for this group. During that time, the non-resident parent is required to pay half of their maintenance liability via the collection service by a non-enforced method of payment such as direct debit.
In order to ensure that the parent with care is protected, we will issue a deduction from earnings order to the non-resident parent’s employer to collect the other half of the ongoing maintenance liability directly from the non-resident parent’s wages, wherever this is possible. This payment safeguard aims to minimise disruption for the parent with care during the compliance opportunity. Where the non-resident parent misses even one payment, they will fail the compliance opportunity and prompt action will be taken to resume collection of the full amount of maintenance by the enforced method of payment already in place, with the collection and enforcement charges applied. Only in circumstances where the non-resident parent is not at fault will an exception be made.
If all payments are made, the non-resident parent will pass the compliance opportunity and have a chance to continue paying child maintenance directly to the parent with care in future. So the outcome of the compliance opportunity will inform a decision over whether a 2012 scheme case should be a direct pay arrangement, which does not attract collection fees, or a collect and pay arrangement, where CMS manages collections and the usual fees are charged.
The initial proposal, outlined by the previous Government, was to offer the compliance opportunity in the final six months of the closing CSA case. It would be offered to all clients regardless of whether they intended to apply to the new 2012 scheme. This would have meant expending resources unnecessarily, including significant investment in the CSA computer systems close to their retirement date. However, it is now our intent to move the compliance opportunity to the first six months of the new case. It will then be offered to those who choose to apply to the 2012 scheme before their CSA case closes and cannot agree between themselves on whether their new case should be managed on the direct pay service or the collect and pay service. We have consulted with stakeholders and they are supportive of this approach.
We will administer cases on the collect and pay service type for the duration of the compliance opportunity, which will allow us to use an enforced method of payment as a payment safeguard. Ordinarily these actions would attract collection and enforcement fees on the 2012 scheme, but we are committed to delivering a compliance opportunity as it protects the interests of the parent with care and can help to maximise the number of effective arrangements on the new 2012 scheme. The fee waiver that will be introduced under this instrument is required in order to be fair to both parents while testing the reliability of the non-enforced payments. That is considered necessary for the successful delivery of this essential measure.
The instrument will also make some technical amendments to clarify the existing rules governing regular deduction orders and lump sum deduction orders to allow them to include collection and enforcement charges. RDOs and LSDOs are enforced orders that are used to secure child maintenance liabilities by deducting money directly from non-resident parents’ bank accounts. The provisions in these regulations will put beyond doubt that we are able to collect the fees and charges associated with the new 2012 scheme, as well as the maintenance liability, and collect CSA arrears that have been moved to the 2012 system. This is in line with existing policy, and these provisions aim to put the legal position beyond doubt.
I am satisfied that the instrument is compatible with the European Convention on Human Rights, and I commend it to the Grand Committee.
Baroness Manzoor (LD)
My Lords, I have a couple of questions for the Minister. First, there is no mention of CSA arrears in the new compliance opportunity in these 2016 regulations. Will the Minister expand on how those cases will be dealt with? Secondly, what does the Government’s analysis show about subsequent child maintenance outcomes where cases involving children have closed, particularly as the Minister has mentioned that IT systems were providing much better outcomes?
Baroness Altmann
My Lords, I thank the noble Baronesses, Lady Manzoor and Lady Sherlock, for their questions. I will try to offer reassurance and some responses.
Both noble Baronesses mentioned the issue of arrears. The aim of this compliance opportunity is to test behaviour. Once the compliance opportunity has been either passed or not passed, if the case moves on to direct pay, the parents will be able to agree among themselves how to deal with the arrears; if the compliance opportunity is failed, it is clear that we will need the collect and pay service to collect arrears as well. We are moving the segment 5 cases on to the new scheme before the arrears have been cleansed, so the arrears relating to such cases will still be being assessed and cleansed in order to be accurate while the parents are moved on to the 2012 scheme.
We are not offering the compliance opportunity on the previous scheme, as the previous Government originally suggested, partly because that would mean that we would be offering every parent the compliance opportunity, while not all parents will transfer to the 2012 scheme. From an efficiency point of view, that would not be optimal. Also, the cost of upgrading the old IT systems and the amendments that would need to be made to them to accommodate the compliance opportunity on the old system would be significant, so moving everyone on to the 2012 scheme is much more efficient and cost-effective from the taxpayer or funding perspective. We will also focus on those parents who will use the 2012 scheme rather than include all those who may have no intention of doing so.
I welcome the fact that the noble Baroness, Lady Sherlock, has no objection in principle to these changes. I will just refer to her question of clarification about the RDOs and the LSDOs, which I specifically tried to answer in the last part of my opening speech. It is not a policy change; this is merely to try to ensure beyond doubt that there is the ability to collect not just the maintenance and the arrears on the 2012 scheme but the fees and charges that are associated with the 2012 scheme. Obviously, I apologise if that was not clear, but I hope that I have now made it clear.
The 2012 scheme will still be statutory. If people are on the 2012 scheme, it is no longer merely a voluntary scheme—they will have paid their fee to be on it and it will be statutory.
As regards the tools for enforcement for self-employed people, which is an important issue, the vast majority of cases have earnings, but for those where there is self-employment the compliance opportunity will consist of allowing the non-resident parent to pay 100%, rather than 50%, by a non-enforced method. However, after any payment is missed, the usual enforcement action will be taken. Part of the issue here is that we are moving people on to the 2012 scheme—it is not reactive, where they have requested to come across. As I understand it, we are trying to make sure, in response to stakeholder representations, that we do not impose collection charges before giving people at least some chance to prove that they can be trusted to make the payments reliably.
On the question of the numbers and the timings, which the noble Baroness, Lady Sherlock, requested, given the range of data that the noble Baroness has asked for, I will write to her to confirm these points.
As regards the collection of arrears and why the compliance opportunity does not include payment towards the legacy arrears, as I have said, this compliance opportunity is primarily a measure of behaviour and is designed to give the non-resident parent the chance to show that they can proactively manage their child maintenance obligations. This is based on the belief that, the more parents we can encourage to agree among themselves arrangements such as maintenance, the better this is in the interests of the children.
So it is not a question of trying to force people, or cajole them against their will, with no purpose. The purpose of the exercise is to try to encourage more parents not to rely on a statutory scheme to enforce the collection of child maintenance but to have the ability to agree among themselves, while obviously, as the noble Baroness says, giving them this behavioural nudge and indeed the financial incentive to do more to come together, in the interests of their children, to arrange child maintenance. The noble Baroness is right that the Government are committed to this scheme in the interests of the children. That is the overriding and most important element of our efforts in this area.
I was asked how successful the new scheme is. It is too early to provide that analysis, but we will be completing the 30-month review by the end of 2016, and we are currently testing, assessing and investigating what is happening on the scheme. We have commissioned research that is being undertaken to identify the kinds of questions that the noble Baroness has rightly asked. The noble Baroness, Lady Manzoor, also asked for that assurance. I assure both noble Baronesses that we are investigating how the system is working and what is happening to the families who do not come across to the 2012 scheme, as well as what is happening to the families who do. However, it is early days.
On the question of the number of cases that are coming across, the migration of cases on to the 2012 scheme is being very carefully managed and assessed. Cases do not move over in large numbers until we are satisfied that the particular segment that is being moved over is doing so successfully. That is really important, given the experiences that we had with previous schemes, where there was perhaps a little too much hurry in managing large numbers of cases without ensuring that all the underlying systems and processes were in place to make sure that they would be handled successfully.
That is where we currently are. We are moving across and, so far as we can tell, the programme is going very successfully. It is being carefully handled and managed. We are also ensuring, as much as we can, that the order in which we are transferring cases across also helps to ensure that those who move on to the 2012 scheme are likely to have a more positive experience. That certainly seems to be the case: the number of complaints and queries is much lower than we might have expected.
The Child Maintenance Options service seems to be helping families to come together in the interests of their children and to understand more what needs to happen in order for them to be able to make a successful agreement. Child Maintenance Options has a calculator to help parents to work out how much maintenance needs to be paid; previously, they would often have been unaware of that, or would have had to have gone to court or have gone through some other procedure in order to assess it, but they can now do that themselves. Two out of three parents using the new Child Maintenance Service are already opting not to rely on the state to collect and pay maintenance on their behalf, so again the new system’s aim of significantly reducing the numbers of parents for whose child maintenance the state is responsible seems to be being achieved.
Baroness Sherlock
I thank the Minister for answering some of my questions but I confess to disappointment that she was not able to provide any figures at all, given that I gave her office a few hours’ notice that I would be asking for that information, which ought to be in the public domain. However, I shall look forward to the letter expressing the figures in detail.
There are two questions which either the Minister did not answer or I expressed poorly—I take full responsibility for her answering a different question from the one I asked. The first question was on the timing of the compliance opportunity. I was not trying to ask her—I apologise if I did—why she was not doing the compliance opportunity on the existing scheme, as opposed to the CMS. What I was asking was: why did the Government not delay the compliance opportunity until the arrears had been moved across as well as the ongoing maintenance, so that the compliance opportunity could then be done on the entire liability of both ongoing maintenance and arrears? She said that it was testing behaviour, but that tests only the willingness to pay a small amount of that, and the arrears may be significant.
As to the second question, I did not quite understand what the Minister said about why the Government did not want to use the compliance tools available to them on self-employed non-resident parents. What is the reason for assuming that they do not need enforcement in the way that employed parents do? She could, I presume, use deduction orders as they are used now. She did not explain why that would not be the case.
Baroness Altmann
I will try to be a little more forthcoming with some figures, but, as I say, I will write to the noble Baroness with a more detailed reply. So far, 700,000 to 800,000 segment 3 and 4 cases have been moved across. When all cases are finished, there will be 800,000 to 900,000 cases expected to come over on to the 2012 scheme. I apologise to the noble Baroness that I may have omitted to answer the two specific questions that she asked me. It is not that she was not clear; it is that I was unable to keep up with all the questions.
The timing of the compliance opportunity is partly to ensure that we can successfully complete the migration of the old cases on to the new system in time to be able to close the existing IT systems before they run out of their usable life. There is a timing issue of requiring to get on with the compliance opportunity for segment 5 so that we can meet the end deadline for closing the 1993 and 2003 IT systems without incurring significant extra cost. If we were to delay until all the arrears had been cleansed on the old system, that might well take us beyond the period. By moving segment 5 across slowly now, we are trying to test how this compliance opportunity is working in a small number of cases, as I described earlier, and how the new system is working for those cases before we ramp up with these significant additional thousands of cases that still need to come across and meet the end deadline. This migration and the new system are being very carefully managed. It is a massive undertaking. We know the problems we have had with IT systems in the past, and we do not want those to happen with the new system.
Also, we would have had to either let everyone have direct pay or charge everyone for their ongoing maintenance. That is why we have not used the tools for the self-employed people. We are giving them the opportunity that we believe we have to give them. We cannot collect arrears until they have not paid. As I understand it, the deduction orders and the lump sum deduction orders will help us collect arrears but we cannot consider arrears from the old scheme as arrears in the new scheme, so we would either have to deem all the self-employed as unreliable payers, and therefore we could then enforce collection and charges, or give them the opportunity to prove that they are unreliable before we then take the fees for the collection and charges.
If further clarification is required, I will write to the noble Baroness. However, as I understand it, those are the bare bones of the issue. We can expand on that.
I thank noble Lords for their contributions to the debate and for their constructive approach to today’s proceedings. This Government are committed to ensuring that those parents who choose to apply to the statutory 2012 child maintenance scheme benefit from a successful and stable arrangement for payments in the interests of their children. Introducing a compliance opportunity will ensure that non-resident parents with a history of non-compliance should not access the direct pay service unless they have demonstrated a change of behaviour. This aims to help parents with care have confidence that their new arrangement will suit their circumstances and work in the best interests of supporting their children. I commend this instrument to the Grand Committee.