Motion to Approve
That the draft Regulations laid before the House on 9 May be approved.
My Lords, these regulations amend child maintenance legislation to enable the delivery of the child maintenance compliance and arrears strategy. The new child maintenance scheme was launched in 2012. It is underpinned by the key principle of encouraging and supporting parents to take responsibility for their children’s upbringing. We know that children have better outcomes when their parents work together.
Following separation, we want parents to make private, family-based arrangements for child maintenance where feasible, avoiding state intervention altogether if possible. Where parents are unable to make a private arrangement, the Child Maintenance Service can support them. This can be done by calculating a maintenance liability and enforcing payments where appropriate.
Following staged implementation, the Child Maintenance Service is working well and avoiding the widely recognised problems encountered by previous schemes. This Government now want to build on and make further improvements to the Child Maintenance Service.
Last November, this House approved regulations which closed known loopholes, introduced tough new sanctions for those who evade their responsibilities, and addressed the historic arrears built up under the Child Support Agency. This package of regulations would introduce further measures to support the compliance and arrears strategy. It includes provisions to make deductions from benefit more consistent, improve information-gathering processes and address uncollectable debt. This is alongside clarifications to the calculation and fees regulations so that they better reflect the intent of the 2012 reforms.
I will first explain the proposed changes to deductions from benefit payments. This Government believe that all parents should support their children, irrespective of their financial circumstances. Therefore, where a parent is in receipt of benefit, they should continue to contribute to their children in line with their income. This has been a long-standing feature of successive child maintenance schemes.
Under the current scheme, parents receiving certain benefits are liable to pay the flat rate of maintenance. Where a parent does not make payments voluntarily, the CMS can deduct the child maintenance they are liable to pay directly from their benefit payment. The regulations before you today are designed to make these deductions more consistent, as currently there are different rules governing what can be taken for ongoing maintenance and towards child maintenance arrears.
At present, the Child Maintenance Service can make weekly deductions of £8.40—£7 plus £1.40 in collection fees—towards ongoing maintenance from certain benefits and, at the same time, £1.20 towards arrears from a smaller list of benefits. So some parents have deductions of £8.40 per week whereas others contribute a total of £9.60.
The proposed changes to legislation would enable deductions towards arrears to be made from the same benefits from which deductions can be made towards ongoing maintenance. The regulations also ensure that £8.40 per week is the maximum that can be deducted from a parent’s benefit in all cases. This will prevent deductions towards arrears and ongoing maintenance being taken at the same time, as well as ensuring that deductions towards arrears will be taken only after ongoing liability has been satisfied. These changes send a clear message to parents who fail to pay for their children.
Additionally, the Government are proposing changes specific to deductions from universal credit. The Child Maintenance Service can already deduct £8.40 towards ongoing maintenance from universal credit if the paying parent has no income from employment. The new regulations will allow the service to do the same where the paying parent has earnings, in line with other benefits. This will apply only in cases where the paying parent is liable to pay only the flat rate; that is, based on earnings of £100 a week or less. The collection of maintenance and arrears will be more efficient from parents who are in receipt of universal credit and are also in work. At present, deductions would have to be made directly from their earnings if payments are not made voluntarily. This change introduces a more consistent approach to clients with similar financial circumstances.
I will now move on to the proposals surrounding protected trust deeds. A protected trust deed is an arrangement in Scots law between a debtor and their creditors. Scots law provides that child maintenance arrears that are covered by the deed cannot be collected once a parent enters into its terms. Currently, arrears covered by such a deed are permanently suspended on the child maintenance computer systems. Although dividends may be received towards arrears while the deed is in operation, once it expires any arrears covered by the deed are legally uncollectable. These regulations will extend the write-off powers of the CMS to cover arrears that are within the terms of a protected trust deed once the deed has expired. This change stops the CMS from holding on to information about uncollectable arrears at a cost to the taxpayer and keeps our legislation in line with that in Scotland, providing clarity to parents.
We propose changes to regulations relating to the powers of entry used by the CMS to access private properties. Sometimes there is a need for the CMS to enter private properties to gather information. These powers of entry provisions allow CMS to gather information to recover arrears, trace a parent, or make sure that the maintenance calculation is up to date and accurate. In 2012, Parliament passed the Protection of Freedoms Act. This Act placed a requirement on all departments to consider their powers of entry and decide whether they were still necessary, and, if so, whether any additional safeguards could be put in place to protect the public from unnecessary intrusion.
With this in mind, the Government are proposing an additional safeguard. This will mean that an inspector will be required to apply for a judicial warrant where they are refused, or expect to be refused, access to premises, or where they cannot contact the occupier. Although the CMS cannot use its current powers of entry to access a wholly private dwelling, it is my belief that this small change would give reassurance to the public that judicial consideration has been given when inspectors request access to dwellings to request information. We estimate that around 20 judicial warrants will be sought by the CMS each year. The occupiers of these premises will retain all the usual rights of appeal available via either the magistrates’ court in England and Wales, or the sheriff court in Scotland.
The next proposed change that I will explain covers improvements to how we gather information. Where there is a need to trace a parent, to decide on the best enforcement power to use, or to calculate a maintenance liability, mortgage lenders and occupational pension providers can be a valuable source of information. To collect information from such organisations, at present there is a requirement for the CMS to arrange for one of its inspectors to schedule a visit to their premises. This can be time-consuming and intrusive for them and costly for the taxpayer. Repeat visits are often needed as the information is not available on the first. We therefore propose to add mortgage lenders and occupational pension providers to the list of persons required to provide the service with information, in writing, on request.
I will now move on to outline a technical change to the regulations, concerning the way in which expenses are taken into account within the maintenance calculation. When calculating child maintenance, the CMS aims to produce a reasonable reflection of what is affordable for the paying parent. Usually, this figure is drawn from the taxable income provided by HMRC. Currently, the income figure given to the Child Maintenance Service by HMRC is supplied after any deductions for pension contributions are made, but before any deductions for non-taxable allowable expenses are made. This means that parents need to notify the service directly to get these non-taxable expenses deducted from their income figure. I am proposing this change to make it clear in law that the income figure that is used to calculate maintenance must be used after deductions for allowable expenses have been made.
In 2014, the CMS introduced collection fees for cases where parents could not agree the transfer of maintenance payments between themselves. These are aimed at incentivising collaboration, and can accrue alongside ongoing maintenance. As with the maintenance liability, they can also accumulate when left unpaid. Collection of these outstanding collection fees can be enforced as if they were unpaid child maintenance. When a parent does not pay their child maintenance liability, and the CMS is unable to collect the debt using its administrative powers, the CMS can apply to court for a liability order.
During a recent liability order application in a Scottish court, the way the sheriff interpreted the regulations meant that the liability order was granted, but did not include the collection fees. In this interpretation, fees would be included in the liability order only where some maintenance payment had previously been made, but would not be included where no maintenance had ever been paid. This creates a clear incentive for greater non-compliance, and is not in line with the intention of the policy. As such, I am proposing a change aimed at clarifying the policy intent. This change will provide the courts with a clear direction on fees when a liability order is sought. In addition, this will support the use of collection fees, helping to incentivise parents to work together where possible.
These regulations are designed to build on the continuing success of the child maintenance reforms. They improve collection measures and information-gathering powers further, and help make child maintenance fairer for all separated parents. In short, these amendments to the regulations ensure that the commitments in the compliance and arrears strategy are fully realised. I commend this instrument to the House.
My Lords, clearly, we are in favour of all measures to ensure that children are getting the financial support they need. A large part of this is making sure that both parents contribute to the raising of a child, through official child support or otherwise. According to the charity Gingerbread, child maintenance alone lifts a fifth of low-income single parents out of poverty. Where parents are unequal in income, as is often the case after a separation, it is right that suitable payments for child maintenance are made. It is good to hear of the proposed changes to the Child Maintenance Service scheme, which has been a long, infamous project, causing disastrous circumstances for children and families and costing a great deal in time and resources for all involved, including the Government.
Although we are generally wary over giving powers of enforcement, we are in favour of the proposed changes to inspection. Requesting information from mortgage lenders will cut down on the number and intrusiveness of current inspections. It is important that both parents support their children; the cost of bringing up a child is considerable and generally falls on the mother, who is more likely to be in low-paid, insecure employment. Some 90% of single parents are women, and they are twice as likely to be in poverty as any other group.
However, in recognising and enforcing payments for child support, the Government need to recognise and act on the issues that drive child poverty. For example, the two-child limit, which restricts support to a family’s first two children, is one of the key factors of child poverty, as demonstrated by many recent reports. The benefit cap also hurts families and households with multiple children, or those who live in expensive areas.
I draw the Minister’s attention to the report published last week, All Kids Count: The Impact of the Two-Child Limit After Two Years, produced jointly by the Church of England and the Child Poverty Action Group. This presents detailed and disturbing evidence of this policy’s impact after two years. It is based on interviews with more than 430 families. I urge the Minister and all Members of your Lordships’ House to give the report careful consideration, and the Government to take action on its findings.
I would welcome a new approach by the Government towards child poverty, which is widely acknowledged to be growing. Having said that, I broadly support this statutory instrument.
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?
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?
The Minister mentioned the Government’s preference for parents making a private arrangement. We have been here before. Mrs Thatcher—as she was then—originally set up the CSA precisely because money was not being paid for children. People were leaving relationships and not paying money for their kids, so it really matters that the system works. Can the Minister tell the House what proportion of separated parents have a functioning child maintenance arrangement in place now, compared with before the reforms the Government brought in? I am worried that making people pay to use the system is going to be a disincentive, and that those who have to pay will struggle to afford it.
I have a few more specific questions. Can the Minister confirm when the deductions from universal credit proposed in these regulations will take place? It was originally intended that they would be introduced only when universal credit was fully rolled out. However, since that day seems to become ever more distant, can the Minister say if this is still the case? I see that during the consultation, at least one respondent suggested that the Government should not wait until universal credit was fully rolled out to bring in these deductions, but should start sooner. In their response, the Government said that they were considering it. Where are we up to on that? I cannot see from the regulations what the start date for that will be.
The other changes seem mainly technical or procedural. I will not pursue those, but I want to say a brief word about the proposal to amend the CMS’s powers of entry by allowing an inspector to apply to the relevant court for a warrant. Can the Minister help me on this? The department has used the 2012 Act to review whether they think the powers are being used appropriately, and whether they are needed. Clearly it thinks they are needed, but the only change being made is that inspectors will be able to seek a warrant to enter premises where they have previously been refused entry. However, in paragraph 7.12 of the Explanatory Memorandum, it seems not only that they may seek a warrant but that they must seek one, if they have been previously refused entry. I realise that we are firmly into geek territory here, but can the Minister say why we are going for “must” and not “may”? Why not leave it to the discretion of the inspector?
Can the Minister also say what evidence there is that this change is needed? What is the problem to which this is a solution? Have there been any complaints about these powers, or is it just that having used the 2012 Act, this was the only thing the Government could find to offer up in light of that recommendation? I look forward to hearing the Minister’s reply.
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—
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?
I would like to take both comments away because those are quite useful questions to ask. Perhaps the noble Baroness and I could pursue them beyond your Lordships’ House, in our continuing to review the system as it is. Thank you.