Child Support (Deduction Orders and Fees) (Amendment and Modification) Regulations 2016

Baroness Manzoor Excerpts

Monday 14th March 2016 Grand Committee

[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 Sherlock (Lab)]

My Lords, I thank the Minister for her explanation of the draft order. I remind the Committee of my historic interest as a former non-executive member of the board of the Child Maintenance and Enforcement Commission, and my decidedly historic interest as a long-distant chief executive of the National Council for One Parent Families. I am going to raise points very similar to those raised by the noble Baroness, Lady Manzoor, although, I fear, in rather less concise a manner, so the Minister is warned now.

As I understand it from what the Minister said, these regulations are aimed at non-resident parents in segment 5—people whose cases are facing closure on a legacy system but who are the subject of some CSA enforcement action. The idea is that they will get this compliance opportunity, or chance to show willing. These are people for whom, in the past, we have had to use enforcement, but they will now be able to show that they will do it. Their success in doing so will decide whether or not they end up on direct pay or on what is known as collect and pay under the CMS. I can see the Minister nodding, so I know that I have got that much right. I gather this came about because concerns were expressed about the Government’s original plans to move people on to direct pay; this is a way of testing it out. That seems a sensible idea and we have no objections in principle. However, I do have a number of questions.

The first is a really simple question. I found it impossible from the draft regulations or the memorandum to understand what regulation 2 does. It may be that the last paragraph of the Minister’s opening remarks told me that, but I wonder whether she could clarify it. The EM says of regulation 2 that,

“These provisions are likely to attract minimal public interest”.

That may well be because nobody, myself included, has the slightest idea what the regulations are doing, so it would be helpful if the Minister could clarify that. In particular, will the Minister set out for the record what powers the regulation will give the Government that they do not have now and in what circumstances they envisage using them? If the answer is in her last paragraph, she can point to that. Secondly, will the Minister confirm that all the cases covered by these regulations will still have statutory maintenance arrangements, not voluntary or family-based arrangements?

Next, I want to pick up the point raised by the noble Baroness, Lady Manzoor, about arrears under the legacy system. I understand that there is going to be a cleansing process to make sure that any arrears liability that is transferred across to the CMS is solid and accurately recorded. The intention is to move the ongoing liability across first and then to cleanse the arrears; once they have been verified, the arrears will follow. However, the Minister mentioned that the Government have decided to delay the compliance opportunity until the end of the process rather than have it at the start. Therefore, I am worried about whether the Government have considered what will happen. Under the compliance opportunity, the non-resident parent who has previously shown him or herself not to be able to pay without enforcement action will be tested only on their ability and willingness to pay ongoing maintenance liability as determined by the CMS system. Therefore, they will not have been tested on their ability and willingness to pay arrears, which they may or may not be happy to do. Why did the Government make that decision in the light of that? Would it not have been better to leave it right until the end so that, by the time the compliance opportunity came along, the arrears would have gone across and it could then be applied to both? Can the Minister explain that some more?

Will the Minister tell the Committee whether any arrears still within the CSA which are awaiting transfer across at the end of the cleansing process will continue to be collected by the same enforcement method, whatever may be going on with the compliance opportunity? In other words, will that be enforced in the way that it was under the CSA?

If an NRP passed the compliance test, it seems that they could opt to use direct pay to pay any arrears, as well as any CMS maintenance due. Is that correct? However, given that we do not know that they would be willing to pay CMS, would it not have made more sense, when the arrears do come across, for them simply to carry on with the same enforcement mechanism in the new system as was there in the old system? Since there are no fees for the parent with care for arrears collection anyway, that would not have had any implications for him or her.

On a separate point, will the Minister explain what enforcement methods will be used during the compliance opportunity for the bit that is being enforced alongside the voluntary partial payments? She mentioned using deduction from earnings orders, but there would be cases, such as self-employed non-resident parents, where a DEO was not appropriate. What other tools will be used for the enforcement part of that payment if a DEO is not appropriate? For example, will deduction orders or freezing orders or setting aside of disposition orders be available during the compliance period?

This is the first opportunity we have had to question the Minister about the progress of transition to the new system, so I would like to ask her some questions about how that is going. Can she tell the Committee how many cases have been closed in each segment so far? When does she expect to complete the bulk closure of segments 3 and 4? Can she tell us when the programme of closing all the CSA live cases is now expected to finish?

To come on to the point raised by the noble Baroness, Lady Manzoor, about child maintenance outcomes, will the Minister tell us how many parents affected by CSA case closure have transferred to CMS or made a private family-based arrangement or made no arrangement? This is crucial information. We want to be sure not only that people have decided not to move across but that they have some maintenance being paid. The figures in the public domain suggest that, up until the end of December 2015, around a quarter of a million CSA cases had received final notice of the ending of their CSA case. However, figures between January 2015—when the case closure started—to August 2015 showed that during that time only 22,000 applications had been made to the CMS from cases affected by proactive case closure, plus another 6,800 from reactive closure. That means that only 28,800 CMS cases had been started from January to August, when around a quarter of a million had had notice of the ending of their CSA case. I hope very much that does not mean that hardly anybody is using the new service, but the noble Baroness will understand why we would like to know that.