Child Support (Management of Payments and Arrears and Fees) (Amendment) Regulations 2023

Monday 18th December 2023 Grand Committee

Considered in Grand Committee

Moved by

[Viscount Younger of Leckie]

That the Grand Committee do consider the Child Support (Management of Payments and Arrears and Fees) (Amendment) Regulations 2023.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, I am pleased to introduce this statutory instrument, which, subject to approval, will help more families to access the vital support that is available through the Child Maintenance Service. It will also ensure that efforts and resources can be focused on taking action to collect unpaid arrears in those cases that will make the biggest difference to children. These changes build on a number of improvements that we have already made and are among the first in a further wave of legislative measures that we plan to bring forward to ensure that the service is more accessible, simpler and speedier and ultimately gets more money to more children more quickly.

Families are the cornerstone of our communities. Each family is unique, but the importance of the bonds that bind them together is universal. When these bonds fray or falter, the impact on children can be significant, including where parents separate. It is therefore right that we continue to take action to promote family cohesion and reduce conflict, so that children grow up with the love and support that they need.

It was an honour to respond to the recent debate on the Love Matters report, commissioned by the most reverend Primates the Archbishop of Canterbury and the Archbishop of York. The report delivered a powerful reminder of why love and support matter and the importance of strengthening and supporting family life, including ensuring that children get the best start in life.

The Child Maintenance Service plays a key part in that endeavour. It is part of a wide-ranging set of programmes and initiatives that my department is leading on. For example, through the reducing parental conflict programme, we are supporting parents to reduce the impact of frequent conflict. Delivered through local authority family services and with local community and faith partners, we are on track to have directly supported 40,000 parents in the last two years. Since we introduced it in 2014, the family test has been guiding policymakers in looking at the potential impact of policies on the family. It is something that I have actively supported in my role and I am committed to promoting it across government. Our new childcare offer has removed one of the biggest barriers to parents working and providing for their family, with a nearly 50% increase in the amount of childcare costs that parents on universal credit can claim back.

I will just highlight a number of other linked programmes happening across government. In addition to the childcare change for parents on universal credit, the Government are also substantially increasing the amount of free childcare that working parents in England can access, with 30 hours of free childcare a week all the way through from nine months up to their child starting school. Our £2.4 billion Supporting Families programme is showing how intervening early can improve outcomes for families in the long run. The Start for Life and family hubs programmes have created a network of centres and extra support for families with children.

I return to the Child Maintenance Service, which I oversee. Alongside the range of help that I have just outlined, it plays a crucial role in securing financial support for children where parents have separated, mandating, and where necessary, enforcing arrangements so that money flows from paying parents to receiving parents. This can benefit children and help to prevent them from falling into poverty. The Child Maintenance Service is currently supporting nearly a million children through maintenance arrangements. Between 2020 and 2022—the latest figures available—160,000 children were kept out of poverty each year because of parents coming to private arrangements and with our interventions through the Child Maintenance Service.

Furthermore, the Government supported two child maintenance Private Members’ Bills, which gained Royal Assent earlier this year. This included the Child Support (Enforcement) Act 2023, which we consulted on in November to seek views on how we accelerate enforcement by replacing the slow and outdated court-based process to obtain a liability order. Once implemented, this will reduce the process from 22 weeks to as low as six weeks, making it quicker to see money flow through for children.

These regulations are intended to further improve access to the Child Maintenance Service for all families and to ensure that it runs effectively to focus on getting more money to children. First, to improve access, the regulations remove the £20 application fee that currently needs to be paid to access the Child Maintenance Service. By way of background, the original rationale for introducing the fee in 2014 was to help parents to think twice before going down the statutory route by default and encourage them to come to their own arrangements. However, as part of an evaluation of the fee and its impact, we found that it has not quite worked as intended.

Research published by my department found that the fee is not a major factor for parents when making decisions about whether to apply to the Child Maintenance Service. Indeed, the evaluation found that families on lower incomes, who we know disproportionately experience conflict and are therefore often in need of support, can find the application fee a financial barrier to accessing the service. It is important to highlight that around 54% of all applicants already pay no fee because of existing waivers, such as victims of domestic abuse and those aged under 19. Therefore, we think it sensible to remove the application fee completely for all, ensuring that those most in need can get support more easily.

Secondly, the regulations will ensure that the service can more efficiently focus resources on getting larger, more-recoverable unpaid payments flowing to children. We continue to engage with parents who refuse to pay child maintenance and fail to take responsibility for their children, through a range of enforcement powers to collect unpaid amounts. However, in these regulations, we are taking a pragmatic approach to bring forward powers to write off very minimal amounts of £7 or less, in a small number of inactive cases that would otherwise have been closed were it not for this outstanding balance.

We are doing this for two pragmatic reasons. First, the reality is that keeping these cases open requires considerable resource and taking action to recover such small amounts often costs more than the actual value of the debt. Left open, the cost of maintaining them could increase for decades with no greater chance of money being paid to receiving parents. We need to ensure that taxpayers’ money, as well as the time and effort of caseworkers, is being directed effectively, such as by focusing action against parents who owe significantly larger sums and where the impact on children missing out on that money is greater.

Secondly, given that we will close only the cases in which we have stopped calculating child maintenance payments, it is likely that they are longer needed. This could be because the child has become an adult, the parents have reconciled or the absent parent has unfortunately died. It therefore makes sense to close these cases, not least for the certainty and clarity that it would provide for families. As I said, we expect only a small number of cases to qualify and the vast majority are likely to have outstanding arrears of less than £1. The full details of the criteria permitting write-off of a debt are set out in the regulations. As I said, they include cases where maintenance calculations have ceased and no payments have been made in the previous three months. In addition, the Child Support Act 1991 provides that, in order for write-off powers to be exercised, we need to be satisfied that it would be unfair or otherwise inappropriate to enforce liability in respect of the debt.

I believe both these measures to be proportionate common-sense changes that will further improve the Child Maintenance Service. The changes are good for parents, good for the taxpayer and, more important still, good for children. I hope that colleagues will join me in supporting these draft regulations and I commend them to the Committee. I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the Minister for his overview of the whole system. He eventually got to the regulations in front of us, but he gave us a good idea of the various things that the Government are attempting to do; I thank him for that.

I come to the regulations themselves. The Minister will, I am sure, be pleased to know that I and my party agree with the removal of the £20 application fee; it has been my party’s policy in the past couple of manifestos. We would, however, make an additional change: in addition to removing the £20 charge, it is Liberal Democrat party policy to remove the 4% charge for receiving parents using the collect and pay service. I would appreciate his view on the possibility of this.

The Minister pointed out that the Government are trying to be pragmatic in dealing with the rest of the instrument. I welcome the suggestion that up to £7 of arrears could be written off but I hope that the Minister can clarify whether that would be a one-off £7 at the end—with which we would have no problem—or could apply to more than one item of £7. Is this meant to be a generous action or is it to save administration costs, or a bit of both? He did say that it was pragmatic. Who gains and loses on this £7? I read the provision through and was not quite sure—perhaps it is just me—whether the receiving parents loses £7 or that the Child Maintenance Service in some way writes it off internally. I am not calling for it to be increased but does the Minister have any information as to whether an increase in the write-off—let us say it was £10; I am just dealing with the theory of it—would have any administrative effect? Would we save money? If it is meant to save on administration, is £7 an appropriate cut-off? I think that it is, but it is worth asking.

I will move on in dealing with this £7 write-off. My reading of the statutory instrument is that time arrears will be written off in only these limited circumstances: maintenance arrangements have come to an end because the payee parent has requested it; the paying parent has died; the child has died; the child is no longer a child; the parents have been cohabiting for more than six months; a new arrangement has been put in place; or the parent has failed to pay anything for the final three months. Presumably, there would be only one £7 sum of arrears rather than a series of £7 sums that could be written off unless a new arrangement were later put in place—for instance, if the couple got back together, then broke up or the payee parent requested that a new arrangement be put in place—but subsequently ended again. However, that would be some months or years down the track and would not happen too often, I hope. It may seem fairly obvious to the Minister but I have read the SI and it really is not that specific. The ambiguity is such that I would appreciate, for the purposes of Hansard, it being set out.

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for introducing these regulations. I also thank the noble Lord, Lord Palmer of Childs Hill, for his careful questioning on the £7 matter; I shall leave that entirely to him and commend him on getting into the weeds in which I normally pride myself on lurking with these sorts of regulations. I very much welcome him to this space.

I was surprised and delighted to find a Keeling schedule in the Explanatory Memorandum. Can the Minister convey my appreciation of that to those responsible? It is often quite hard to track back the way in which regulations apply, so I am grateful for that.

As we have heard, these regulations do two things: they remove the £20 upfront fee payable to all those who are not exempt; and they waive arrears below £7 in certain circumstances, as described by the noble Lord, Lord Palmer. The Government introduced both this upfront fee and the ongoing fees after they reformed the child support system in 2012. The ongoing fees are to be retained, but these regulations remove the upfront fee at a cost of roughly between £1 million and £2 million a year. I should say at the outset that we also support these changes. However, I want to ask some questions, particularly about the charging point.

16:00

The Explanatory Memorandum notes that

“applications to the statutory scheme have been lower than anticipated”

at the time of the 2012 reforms. The EM references the NAO report issued last year, which made interesting, if worrying, reading. More parents are now making their own arrangements and fewer parents are using the statutory child maintenance system, presumably because of the fees. As the NAO notes, and the Minister reminded us, that was the aim. The DWP wanted to reduce the number of families who use the statutory system and get more people to make their own arrangements. Look at what happened: private arrangements have increased as expected, but the take-up of the statutory scheme has plummeted. It was expected to fall from 46% of parents in 2011-12 to 33% by 2019 but, instead, it went down to just 18% of separated families using the CMS in 2019-20. That is a collapse of demand for the state system.

Meanwhile, the estimated proportion of separated families with no arrangement at all increased from 25% in 2011-12 to 44% in 2019-20. If the Government were trying to put people off getting child support, it worked. The numbers are edging up a little now, but the latest figure I could find was that cited by the EM, which says that:

“The proportion of separated families with CMS arrangements stood at 19% in 2021/22”.

The memorandum suggests that:

“Removal of the application fee would remove a barrier to parents having a successful arrangement which will ensure that children will receive money through CMS”.

While welcoming this, I ask: what is the evidence that the upfront fee is the primary barrier putting people off, as opposed, say, to ongoing fees or other matters?

I will give the Committee some background. When the Government proposed to introduce fees for using the Child Maintenance Service, it was controversial. As I have been in this brief for a long time, I remember the much-missed Lord Mackay of Clashfern trying to amend the Government’s legislation on this very point. In the end, the Government resisted, but he drew them out and the Government were very clear: the upfront fee was meant to deter parents and get them to make their own arrangements, instead of using the state system; the ongoing charges were designed to get them to consider whether they could arrange payments between themselves, through direct pay rather than by using collect and pay. At the time, many concerns were raised that the fees would deter parents from using the state system at all, so the Government agreed to do a review 30 months after charging was introduced.

The 30-month review, as it was imaginatively called, used independent survey information, along with official statistics and other feedback from representative groups, to look at the impact of the charges. The survey work was solid—it was done by the National Centre for Social Research—and the 30-month review said:

“Evidence from the NatCen surveys tells us that some parents, particularly those on low incomes, can find the application fee difficult to afford, but we do not have any evidence that this is preventing these families from making an application. The research does not allow us to assess the relative impact of the application fee compared to other factors that parents consider when deciding whether to apply to the statutory scheme”.

Remember, that was 30 months after the fees were introduced back then—a decade ago.

What research has been done since to allow the department to understand fully the impact of the various charges, in the way that it was not able to do at the 30-month point? This is important, because the NAO says that the DWP’s

“research does not fully explain why take-up of the CMS is lower than it expected”.

Worryingly, lower-income households and some ethnic groups, including black parents, appear less likely to use the statutory scheme. The NAO says that

“the Department has not conducted research into why this might be”.

A year has elapsed, and I find it hard to believe that that is still the case, so can the Minister tell the Committee what research the department has done since last year, when the NAO pointed this out, to look into those factors?

The NAO made a number of recommendations. They included that the DWP should use survey data

“to monitor the number of effective arrangements across society”.

How often is this being done and does it look at the characteristics of those families who use the CMS? The NAO also suggested that the department should

“research ways in which more people who do not have effective arrangements can be encouraged to use”

the CMS and its services. Is that happening?

The NAO noted that around half of new direct pay arrangements either are not sustained or are not effective, and that the DWP does not monitor whether payments are being made. The NAO therefore recommended that the DWP should

“continue to regularly survey separated families with Direct Pay arrangements and publish a regular estimate of the effectiveness of the arrangements and whether the arrangements continue; and set out how … it will continuously improve its communication with Direct Pay customers to help them report missed payments, help prevent Direct Pay arrangements from failing, or … to promote faster transfers to Collect & Pay arrangements where appropriate”.

Is the department following these recommendations? What else is being done to make direct pay more effective? I look forward to the Minister’s reply.

[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Lord, Lord Palmer of Childs Hill, and the noble Baroness, Lady Sherlock, for their general support for these regulations. Certainly, the noble Lord, Lord Palmer, was fully in agreement with what we are doing with the £20 application fee. I appreciate the noble Baroness’s very complimentary remarks about the regulations. We work hard to get them right and I will certainly pass her remarks on. I thank both Members for their valuable contributions during this short debate.

Providing for our children is a fundamental responsibility. Most people can independently reach agreement about arrangements under the Child Maintenance Service, but there will always be circumstances where this does not happen or is not possible, as I said. Sometimes relationships are complicated and conflicted and, of course, there are reasons due to domestic abuse. That is why the work of the Child Maintenance Service is so vital. To add to what I said in opening, it provides that safe service for parents who specifically face safety concerns, and it ensures that both parents actively play their part to support their children, whether they live with them or not.

I will answer the questions of the noble Lord, Lord Palmer, about writing off £7 arrears. This legislation will permit the Child Maintenance Service to write off small volumes of very low-value debt in cases that meet certain criteria and that would otherwise have closed if it were not for that outstanding balance. Writing off low-level debt will be permitted only in cases where it would be unfair or otherwise inappropriate to enforce liability in respect of the arrears. I will explain more in a moment but, broadly speaking, it applies where a maintenance calculation has ceased, under specific provisions of the Child Support Act 1991 and where no payments have been made towards the arrears in the last three months.

We believe that setting the threshold higher, which I think was the gist of the noble Lord’s question, would give the wrong message to paying parents about their obligations. As the flat rate for child maintenance—the minimum amount a parent is expected to pay to meet their statutory duty to maintain their children—is £7 per week, we consider setting the threshold just below that amount the best way to strike that difficult balance. I hope that helps to explain our rationale behind the policy.

The noble Lord, Lord Palmer, asked why we are removing the application fee, why it was not removed sooner and whether we are doing this for the benefit of the customers. As I set out, the application fee was introduced partly to provide an incentive for separated parents to make collaborative family-based arrangements to facilitate better outcomes for children. In removing the fee, we first needed to allow enough time to properly evaluate the impact of this measure. As part of this evaluation, evidence published by my department has shown that the fee is not a significant factor when making decisions, as mentioned earlier. Most importantly, evidence has also found that families on lower incomes disproportionately experience conflict and are less able to make a family-based arrangement. Therefore, the fee could act as a financial barrier to those families accessing the service. The removal of the fee is expected to lead to a relatively modest loss of income of around £1 million to £2 million per annum. Looking at this, we think that, on balance, this is the right thing to do.

The noble Lord, Lord Palmer, asked about collection charges. They are applied to all Child Maintenance Service collect and pay cases. Our research suggests that this encourages some parents to use direct pay. The charges are 20%, as he knows, on top of the liability for the paying parent, and—the gist of his question—4% of the maintenance received by the receiving parent. Charges such as the application fee were originally introduced to provide both parents with an incentive to collaborate. Running the collect and pay service incurs costs for the taxpayer, especially where collection and enforcement action is required to secure payments. Therefore, it is reasonable for most parents to contribute towards running such a service. In a survey conducted between 2017 and 2019, 44% of receiving parents said that collect and pay charges influenced their decision to use direct pay. To answer the question directly, the Government continue to keep the other Child Maintenance Service measures, including the 4%, under review. No decision is being made, but we are keeping it under review.

[Lord Palmer of Childs Hill (LD)]

Can that be changed without it coming back? It cannot, can it? The Government are missing an opportunity. The Minister said £7 per week. Is that what he meant?

[Viscount Younger of Leckie (Con)]

No, I did not mean £7 per week. I should have said £7 arrears. On the £4, I understand that we have to use legislation to take that forward, should we wish. However, it is not on the agenda and we are keeping that under review.

The noble Baroness, Lady Sherlock, raised a number of questions. I shall first address the points made about the NAO. The Government also thank the NAO for conducting such a thorough report on the value for money audit of the CMS. The Government’s response partially and fully accepted a number of the NAO’s recommendations, as the noble Baroness probably knows, including investigating why fewer people are taking up the CMS than expected, tackling any inappropriate barriers that prevent families using its services and improving the effectiveness of direct pay and collect and pay arrangements.

Another question the noble Baroness asked was about what evidence the department has relating to the drivers of the fall in usage of the statutory system. Having a maintenance arrangement is not right for all parents. We know that many who do not have one want one. The department is investigating existing research and data to understand why some parents chose not to have a child maintenance arrangement and to improve its knowledge of customers who use its service. This is work in progress and the noble Baroness raised an important question. It is also important to note that, since the conclusion of the value for money audit, we have already seen greater take-up from parents wanting to use the service, so that perhaps helps to answer the question.

The noble Baroness also asked whether there is any more information that we can share with her about what we are doing to improve the effectiveness of the arrangements. Over the past few years, the Child Maintenance Service has developed and delivered significant improvements to its online services. These services make it easier and quicker for parents to engage with the service and the majority of applications are now made online. We are also continuing to work towards implementing the recommendations on improving the effectiveness of direct pay and collect and pay arrangements. Customers on direct pay can now report missed payments via their online account. In addition, the CMS developed an email campaign in 2022 to prompt direct pay customers to get in contact if their direct pay case was not working for them. This capability will be considered for future campaigns to communicate better with parents. For collect and pay cases, the department has set out its fast enforcement plan, which includes specific test and learn campaigns and greater use of risk and intelligence to drive compliance. As part of this regulations package, we will be extending our write-off powers for arrears of less than £7 when, as I said, certain circumstances are met. This aligns with the NAO’s recommendation to review the approach to managing arrears. The Committee will also be aware of our plans to improve and accelerate our enforcement of CMS, as outlined earlier, and our plans to consult more broadly on the service types.

The noble Baroness, Lady Sherlock, was also concerned about take-up more broadly. I am sure she will appreciate that these regulations will make it easier for people to access the CMS.

There is a lot more that we could be doing. There is a major programme in my department on using AI and making it effective for not just this service but others within the department. I think the noble Baroness is aware of that from the Question I answered not so long ago. I make the point that human contact is incredibly important. In the various products that we have, we are all the time dealing with some of the most vulnerable customers in the country, as she will be aware.

16:15

The noble Baroness, Lady Sherlock, also asked what evidence there was to underlie the measures for the changes. A growing evidence base suggests that the application fee is not having the desired effect, as I said earlier. Research published by the department found that the application fee is not an overwhelming factor. The Government consulted on our plans to extinguish low levels of debt in the Child Maintenance Service, modernising and improving it. There was a general agreement with plans to extinguish low levels of debt in prescribed cases, and our consultation response addressed concerns about writing off arrears of larger amounts to clarify that only amounts below £7 were in scope of this change.

The noble Baroness also asked about increasing the number of effective child maintenance arrangements. Perhaps I can answer this by saying that the Government are committed to supporting as many people as possible to get effective arrangements in place. Research shows that nearly 60% of separated parents have a child maintenance arrangement, either privately or through the statutory scheme. Surveys conducted with separated parents show that around half of receiving parents without an arrangement do not actually want one. For those who want an arrangement, parents can use the new digital service “Get Help Arranging Child Maintenance” to get unbiased advice and support. Since 2022, applications to the CMS have been increasing. As mentioned, the Committee will be aware of our broader plans to improve and accelerate our enforcement powers, and we have announced a consultation to improve the ways in which we can collect funds.

I will certainly want to read Hansard to check that I have answered all the questions—and I mean all the questions—asked. The regulations will deliver a fairer, faster service for more families, particularly the poorest. As we approach the end of the year, I am pleased to say that the regulations are not just for Christmas—they herald the start of our longer-term legislative plans to improve the Child Maintenance Service, which I am looking forward very much to progressing in the new year and in the months ahead.

[Baroness Sherlock (Lab)]

I do not know whether it is too historic, but I possibly should have drawn the Committee’s attention to the fact that I have a historic pecuniary interest as a former director of the Child Maintenance and Enforcement Commission; I just want to place that on record.

I am grateful for and appreciate the Minister’s thorough response. He mentioned that the Government are doing more research. Will that be published? He also mentioned an email campaign in relation to direct pay. How is that going?

[Viscount Younger of Leckie (Con)]

On the latter point, which is a good one, I shall certainly need to write to the noble Baroness. On the former one, it is fair to say that we will write as well. Those will be added to a number of other questions that I may have to answer.

Motion agreed.