Child Support (Miscellaneous Amendments) Regulations 2019

Baroness Sherlock Excerpts

Tuesday 2nd July 2019 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, I have just two quick questions. First, where the recipient who is due to make payment is subject to a benefit sanction, what impact does that have on the amounts that are collectable, as proposed in this order? Secondly, the £8.40 can be an amalgam of the collection fee and the maintenance payment. So far as the government accounts are concerned, how is that split and dealt with?

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for her explanation of these regulations, and all noble Lords who have spoken, particularly my noble friend Lord McKenzie; he always comes up with questions I would never have thought to ask, and they are always excellent. I hope the Minister had thought further ahead than I did—although I see someone running to the Box so perhaps she had not.

I very much agree with the points made about child poverty and the role that child support plays in helping to provide a platform on which single parents can build an income which helps lift their children out of poverty. So we do not oppose these regulations. It is important, wherever possible, that both parents should contribute towards the cost of raising a child after a break-up. An adult may leave their partner but they do not get to leave responsibility for their children.

I accept that the regulations are designed to provide a series of changes and clarifications to make it easier to collect arrears and maintenance payments under the Child Maintenance Service scheme. I will concentrate on a few specific points: the proposal to allow deductions for child maintenance to be made from universal credit where a non-resident parent has earnings and meets the criteria to be eligible for the flat rate; the increase in the amount, plus collection charges, that can go towards paying arrears; extending the scope; and the enforcement points.

The proposal to allow deductions of £8.40 from benefits for arrears in cases where the non-resident parent is no longer paying ongoing maintenance seems sensible. I can understand that for someone on a low income, £8.40 is a lot of money, but it is entirely possible that the single parent on a low income could also be on benefits, and both parents may well have suffered from the cut in living standards brought about by the benefits freeze and the other cuts in benefits. That seems to be an element of fairness that has to be addressed.

It is also very important that non-resident parents are clear that they will be chased for any arrears they owe. I ask the Minister for a broader update on this. She mentioned that we debated some child maintenance regulations last November. At that point the key thing the Government did was to write off billions of pounds of arrears from the old CSA system, and the quid pro quo for that, because we pushed them at the time, was that they would promise to pursue enforcement. This really matters because otherwise there is a moral hazard question. If a message goes out to parents: “If you just hold off long enough and don’t pay, in the end the Government will give in and write it off”, clearly that creates a disincentive to pay the money that should be paid for your children. So it is really important that we do not get back into that question. Ministers made the case in those regulations for a clean break with the old system, but that places a huge onus on them to make sure that arrears do not build up again in the new system.

I looked at the latest statistics and I am a bit worried. Since the new Child Maintenance Service began, a total of £259.2 million of child maintenance is unpaid, which should now be paid through the collect and pay service. That is 11% of all child maintenance due to have been paid since the service began. In the last quarter of last year, only 66% of paying parents using that collect and pay system were compliant; and compliant does not mean that they pay all of it but that they are paying some of it. So only two-thirds who were using the actual statutory system of compliance were paying anything at all. I may have misread those figures, but can the Minister confirm whether that is right? If the figures are right, is she happy with them? If she is not happy with them, how much difference does she expect these regulations to make to that performance?

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[Baroness Buscombe]

My Lords, I thank the noble Baronesses, Lady Janke and Lady Sherlock, for their contributions. I am pleased that the noble Baroness, Lady Janke, is supportive of the statutory instrument. We have been working hard since 2012 to ensure that this system is fairer. It is important that, wherever possible, we encourage both parents to support their children.

The noble Baroness, Lady Janke, referred to the two-child limit, which is not actually related to these statutory instruments but I will touch on it very briefly. We are very clear that people should take responsibility and think hard about whether they can afford additional children, in the same way that those who do not rely on the state often make the difficult decision to limit the number of children they have to how many they can afford. It is also important to point out that, although the limit was introduced for children born after April 2017 and the change of policy was notified a good two years earlier, people continue to receive child benefit for as many children as they have.

On the benefit cap, it is very important to note that the cap is lifted when the parents are working a sufficient number of hours. Indeed, a couple with three children have to work only 24 hours a week between them—just 12 hours a week each. The benefit cap is then lifted and they are then in receipt of income equivalent to a net income of £35,000 a year, plus their housing benefit. I think most noble Lords would agree with me that that is generous. This is funded by the taxpayer.

The noble Lord, Lord McKenzie, asked what happens in cases where the parent has a fraud penalty or is sanctioned and is possibly in financial hardship because of the sanction. Some clients will have a fraud penalty or undergo sanctions while claiming benefits and may be eligible to claim a recoverable hardship payment. If a claimant has a fraud penalty or sanction applied to their universal credit award which is equal to or more than 40% of their standard allowance, the only deductions that can be taken at the same time are arrears of housing service charges or rent and fuel. These are to help protect the claimant and their family from being made homeless or having their fuel supply disconnected. All other deductions cease while the fraud penalty or sanction is being applied, so no child maintenance deductions will be taken. From October 2019, the 40% maximum deduction rule will be reduced to 30%.

I congratulate the noble Baroness, Lady Sherlock, on her ordination last weekend. That was very good to see, although it has not put her off from taking time out to ask me some difficult questions.

On the question of write-off statistics, up to the end of March 2019 217,500 cases held on the CSA computer systems with non-paying historical debt had the debt adjusted or written off. Some cases on the CMS system with debt below representation thresholds have also had their debt adjusted or written off. Activity on CMS system cases started later than on the CSA system and the data we need to report on them is not available yet. However, the CSA case load continues to reduce: the number of CSA cases held on CSA or CMS IT systems decreased from 809,000 in December 2018 to 674,00 in March 2019. The reduction in case load is mainly due to the closure of cases with government-only debt—a debt owed to parents of less than a thousand pounds. This historic debt continues to reduce, but the CSA has written to 125,200 parents with care to ask if they want a last attempt to be made to try to collect the debt owed to them.

We have not written off any debt without authority. As part of the case closure process, we brought to account some outstanding payments and activities and tidied up details of some cases. A significant number of CSA cases involved moneys being transferred directly between the two parties, and the case records have been adjusted to reflect this.

In July last year, the Government published their new compliance and arrears strategy for the Child Maintenance Service. This sets out how we are tackling the legacy of the failed Child Support Agency and the steps we will take to prevent arrears accruing at such a high rate again. Where it is cost effective and reasonable to do so, we are offering parents the choice of whether they would like us to make one last attempt to collect their debt. Where the collection of the outstanding debt is not possible or appropriate, we are writing it off. It was a difficult decision—we took some time to come to it because we strongly believe in enforcement—but many of the sums involved were very small. At the same time, it was costing the Government—in other words, the taxpayer—a lot of money to maintain this system and the debt within it. We prioritised the collection of maintenance for today’s children over historic debt where no child stands to benefit. The majority of the historic debt was owed to parents, not the taxpayer.

There was another question on how many parents on “collect and pay” actually pay. In the quarter ending March 2019, 67% of paying parents using the collect and pay service were compliant, up from 60% for the same period in 2018. This includes parents who transferred from the direct pay service having failed to pay their liabilities.

The noble Baroness also asked whether parents would be encouraged to be non-compliant, as they have seen outstanding CSA debt being written off. The write-off of CSA arrears is a one-off exercise and the regulations allowed us to do this only for debt accrued on the CSA schemes. These were historical arrears and this was in recognition that the majority of the CSA debt could not be collected, given its age and the circumstances of the parents. Where there is a possibility of successful collection at a reasonable cost to the taxpayer, we continue to do that. Looking forward, we believe that we are building a better CMS. In this package of regulations, we are making further provision to collect payments and stop arrears like this building up again.

Have we made use of the new enforcement powers? We have started to use the powers from the previous package of regulations, which allow us to deduct from joint and business accounts and disqualify a parent from holding a passport. In these early stages, the new enforcement powers are proving successful, and we continue to monitor their implementation. Where a parent fails to pay on time or in full, we aim to take immediate action to re-establish compliance before enforcement action is needed, but new powers introduced in the 2018 regulations enable disqualification from holding or obtaining a UK passport and deductions from joint and business bank accounts.

Moving on, we are proposing to change our power of entry process so that inspectors must seek a judicial warrant to access premises where they have previously been refused entry or may apply for a warrant to enter premises at which they expect to be refused. Inspectors will also be able to apply for a warrant authorising entry if they are unable to contact the occupier of the premises in advance. A judicial warrant is a safeguard, which will allow occupiers to make representation before a magistrate as to why an inspector should not be allowed to enter, but we expect this to be quite a low-impact change, with the Child Maintenance Service expected to apply for fewer than 20 judicial warrants a year. This change brings us into line with the Protection of Freedoms Act 2012, and we believe that it adds a modest protection in a very small number of cases.

Deductions from universal credit will come into force on the day after the day these regulations are made.

I think that I have covered most of the questions. The fee for an application to the Child Maintenance Service is £20. This is intended to encourage parents to consider whether they really need a statutory scheme case, but it is not so high that it creates an obstacle to entering the scheme. Where an applicant has experienced domestic abuse or is under the age of 19, they are exempt from paying the application fee. It is not our intent to create a barrier of any sort for vulnerable claimants.

These regulations build on our earlier changes as part of the child maintenance compliance and arrears strategy. They will make deductions from benefit more consistent, allow writing-off of unenforceable debts suspended on the CMS systems, improve our information-gathering processes and update the CMS calculation and fees regulations. I commend this statutory instrument—

[Baroness Sherlock]

My Lords, before the Minister sits down I want to thank her for her kind words. I should perhaps have reminded the House of a now rather historic interest, as a former board member of the Child Maintenance and Enforcement Commission. Can I press her on a couple of questions which I think she did not pick up?

In one question, I was asking whether the Minister was happy with the compliance rate. I think we agree broadly what it is, at 66% or 67% of those paying something. That seemed quite low to me. I wondered whether the Government were satisfied with that and, if not, what difference these regulations might make. The other question I asked was about the proportion of parents who currently have an effective child maintenance arrangement in place, and how that compares to before when there was a more widespread statutory system. Is she able to comment on either of those points?