PARLIAMENTARY HANDLING STRATEGY DWP PBL PANEL CLEARANCE

Title Child Maintenance Compliance and Arrears Strategy Legislation

Planned laying date

14th May 2018

Signed off by Minister for Work and Pensions (Lords) – Baroness Buscombe Minister for Family Support, Housing and Child Maintenance – Kit Malthouse

Date

Also approved by

Whips Office, Private Offices

Notes

SUMMARY

What these Regulations do

The purpose of the Child Maintenance system is to ensure that parents no longer living with their children continue to fulfil their obligations to make financial provision for those children. The reformed system, in place since 2012, provides much stronger incentives for parents to work together following separation, and where possible make family-based arrangements for child maintenance. The Child Maintenance Service (CMS) is there for families unable to make a private arrangement.

These regulations make a number of essential amendments to Child Maintenance legislation as part of the Child Maintenance Compliance and Arrears strategy, to:

Ensure complex earners in CMS cases have a fair maintenance assessment by taking into account notional income derived from assets.

Do more to prevent parents in CMS cases from evading their financial obligations to their children by: o Extending our existing ability to deduct maintenance and arrears from bank accounts, to include joint and business accounts o Where all other enforcement action is ineffective, preventing a non-resident parent from holding or obtaining a passport

End the uncertainty for families about how the historic arrears that built up on CSA cases will be treated in future, as the final CSA liabilities are brought to an end during 2018. These regulations will allow:

o Representations to be sought from clients in cases with non-paying CSA debt about whether they would like a last attempt to collect the debt, where the case started on or before 1 November 2008 and the debt is more than £1000, and where the case started after 1 November 2008 and the debt is more than £500. Where no representations are received, or collection of the debt is not possible, the debt may be written off.

o CSA debt in non-paying cases to be written off without seeking representations from clients, where the case started on or before 1 November 2008 and the debt is less than £1000, and where the case started after 1 November 2008 and the debt is less than £500.

o CSA debt under £65 in non-paying cases to be written off without notice to the parties.

Enable debt subject to sequestration (Scottish insolvency) to be written off when the sequestration expires. This technical amendment will apply to both CSA and CMS cases, as this debt becomes legally uncollectable due to the way sequestration operates.

Risks

The public consultation on the above measures was received largely positively, with the measures relating to complex earners being particularly well received. Heidi Allen MP has put forward a Private Members’ Bill along very similar lines to our proposals for complex earners. Much of the content of these regulations responds to the recommendations put forward by the Work and Pensions Select Committee in their recent report on Child Maintenance, so not proceeding would be likely to draw criticism.

Not proceeding with the write-off measures would mean:

There would be no last attempt at arrears collection for those clients that want it. Without the savings which write-off will deliver, we would not be able to support any collection activity on historic debt cases, so this debt would simply be maintained indefinitely with no money going to support families.

The cases would either need to be moved to the CMS computer system, at a cost of around £250m, or held on the CSA computer system at an on-going cost of around £25-30m per year.

TIMELINE - AFFIRMATIVE PROCEDURE

We are working with private office on plans to engage MPs who have an interest in child maintenance.

Response expected: 26th March 2018

If we are unable to proceed with the write-off changes we will need to either continue to fund the CSA IT systems inevitably at a cost of around £25 to £30 million per year, or move all cases onto 2012 scheme IT system at a cost of c.£250m. These options will not get money flowing for children or provide parents with any level of certainty about the future of their arrears.

We are planning a second package of changes to be laid in parliament during December 2018. This package will include changes to deduction from benefit for Child Maintenance and other changes to child maintenance legislation.

Policy Development Submission to PBL 2 March 2019

Laying the SI in draft 14 May 2018

Probable date of debate/approval/CIF – mid-June/July

Alternative None

Other

PARLIAMENTARY HANDLING STRATEGY Template for statutory instruments INTRODUCTION

Title: Child Maintenance Compliance and Arrears Strategy Legislation

Planned laying date: 14th May 2018 Minister responsible: Kit Malthouse

RISK AND CONTROVERSY

Summarise the debate on the power/issue covered by the power in the two Houses during the parent Act or subsequent debates and questions. Include any useful Hansard references. Has there been any parliamentary interest in the parent Act in the last 2 or 3 years.

This regulatory package makes amendments to existing child maintenance regulations which are needed in order to implement the new Child Maintenance Compliance and Arrears Strategy. Some of the powers are negative, and some affirmative. In order to make all of the amendments needed in a single S.I. the affirmative Parliamentary procedure must be adopted. The amendment regulations are made under the following sections of the Child Support Act 1991 as amended:

Paragraph 4(1) of Schedule 4B to the Child Support Act 1991 is an affirmative power which enables the Secretary to State to make regulations prescribing cases in which a variation can be made to a maintenance calculation. We are using this power to enable certain assets valued at more the £2500 to be taken into account for the purposes of increasing maintenance liability. Non-resident parents (NRPs) in possession of these assets will be treated as having additional income.

The following powers were included in the Child Maintenance and Other Payments Act 2008 that amended the Child Support Act 1991, during the passage of this Act there was little appetite for debate on these issues. There has not been any other significant interest in the powers since their introduction:

Section 27 of the Child Maintenance and Other Payments Act 2008 makes provisions for new sections 39B to 39G to be inserted into the Child Support Act 1991. These provisions will allow the Secretary of State to apply to the court for an order to disqualify parents who wilfully refuse to pay child maintenance from holding or obtaining a UK passport for up to two years. A separate Commencement Order will need to be made (prior to making the regulations) to give effect to these provisions. These regulations set out more detailed provisions in respect of passport disqualification.

Sections 14, 32A, 32B, 32C, 32D, 51 and 52 (with s32 - as amended by the Child Maintenance and Other Payment Act 2008). These sections provide for the making of regular deductions of child maintenance from a joint and unlimited partnership account for which a liable non-resident parent is an account-holder. Our regulations will set out how these provisions will be applied.

Sections 14, 32E, 32F, 32I, 32J, 32K, 51 and 52. These sections provide for the making of lump sum deductions of child maintenance from a joint and unlimited partnership account for which a liable non-resident parent is an account-holder. Our regulations will set out how these provisions will be applied.

The Child Maintenance and Other Payments Act 2008 inserted Section 41E into the Child Support Act 1991. It provides the Secretary of State a discretion to write off arrears only if he considers that it would be unfair or inappropriate to enforce the liability and the circumstances of the case are specified in regulations. These circumstances are set out in the Child Support (Management of Payments and Arrears) Regulations 2009.

This package of regulations seeks to amend the Child Support (Management of Payments and Arrears) Regulations 2009 by extending our powers to write off non-paying debt that built up under the 1993 and 2003 Child Support Agency schemes in certain specific circumstances.

These regulations will also include the power to write off arrears which relate to debt which is subject to sequestration (insolvency) in Scotland for a 1993, 2003 or 2012 scheme case, once the trustee administering the sequestration has paid out any dividends to creditors and the period of sequestration has been discharged.

Although the write-off changes may appear controversial, our consultation on all the above changes has now closed, and we received minimal objection from major stakeholders. It is understood that collection of historic debt is not possible, and that the only pragmatic solution is to draw a line under the past, to enable us to focus our efforts and resources on collecting maintenance for the children of today.

Introducing the power to write off historic debt will enable us to make a last attempt at collection where clients want this, and it is cost effective and appropriate to do so. We would not otherwise be able to do this, and simply continuing to maintain the debt indefinitely would lead to no money being collected for clients, but would incur a significant cost to the taxpayer.

There is a possibility that some MPs and peers may still criticise the write-off changes, but many will be keen to introduce the strengthened collection and enforcement powers in this package, particularly those related to including non-standard sources of income in the child maintenance calculation.

What is the scope for debate? (Consider the most controversial issues that could arise)

Attack

The Child Support Agency (CSA) arrears stand at around £3.7bn. Of this’ around £2.5bn is unpaid maintenance owed to persons with care or qualifying children and £1.2bn is money owed to government. The government is washing its hands of the debt owed to parents, children and taxpayers.

Defence

Our approach delivers certainty, including a final attempt to collect where clients want it and it is likely to be cost effective for the tax payer.

To attempt to collect all of the outstanding CSA debt would cost around £1.5bn, and we would only be able to recover between £0.1bn and £0.6bn.

The majority of the debt relates to qualifying children who are now adults.

A trial in 2016 showed that 32% of parents to whom debt was owed wanted it written off.

Much of the debt is made up of very small amounts. 3% of CSA historic arrears cases have debt of under £10. 14% have debt under £65.

Attack

By deducting maintenance and arrears from jointly held accounts, funds belonging to the other account holder could be deducted to pay for the non-resident parent’s child maintenance.

The introduction of this measure will close a known loophole and mean approximately £570,000 more child maintenance is collected per year.

We will only make deductions from joint accounts if we are unable to make deductions from a sole account.

A number of safeguards have been put in place to ensure we don’t deduct funds that belong to the other party to the account. Detailed checks will be made to establish ownership of the funds.

All parties to the account will have the opportunity to make representations in relation to the deduction order.

Attack

Why haven’t you reintroduced variations to the maintenance calculation on the basis that the non-resident parent’s lifestyle is inconsistent with their declared income?

Defence

This was a feature of the Child Support Agency schemes, and proved to be ineffective. It was therefore deliberately excluded from the Child Maintenance Service scheme. In many cases the non-resident parent’s lifestyle was supported by credit or by a new partner.

In circumstances where there is an identifiable income stream, this will already be taken into account under our existing powers.

Where a parent has assets, but is living off capital or has no identifiable income stream then determining a notional income based on those assets provides a more efficient way of calculating income than lifestyle inconsistent.

Attack

Why have deductions from joint accounts not been implemented already?

Defence

We wanted to implement deductions from solely held accounts, and allow the basic process to become established before looking to extend it to joint accounts.

It is now an appropriate time to bring into force wider deduction order powers, in order to maximise the effectiveness of these powers as a collection measure and a deterrent.

Attack

There is a risk to businesses if deductions from business accounts are introduced.

Defence

Safeguards have been put in place to ensure a minimum of £2000 is left in unlimited partnership business accounts to ensure the business has enough cash flow to continue running.

The introduction of this measure will close a loophole and help collect approximately £270,000 more in unpaid maintenance per year.

This measure will only be used when non-resident parents fail to make payments, and we are unable to make deductions from a sole or joint account.

All parties to the account will have the opportunity to make representations in relation to the deduction order.

Attack

Removing passports is an infringement of a person’s human rights.

Defence

This measure will help target a group of non-residents for whom the existing available sanctions are ineffective in achieving compliance.

It will only be used as a last resort, where all other enforcement actions have been found to be inappropriate or ineffective.

We only anticipate using it in a small number of cases, but we expect it to have a deterrent effect, encouraging compliance in a larger number of cases.

Attack

Why didn’t the government commence the power to remove passports sooner?

Defence

Implementing this power is a complex process, requiring the involvement and cooperation of other government departments.

We wanted to allow time for the Child Maintenance Service to be fully rolled out, and for use of our existing enforcement powers within the CMS to be well established before introducing new powers.

Has this policy area attracted any parliamentary activity e.g. PQs, Early Day Motions, debates or Lords oral questions?

We consulted on the compliance and arrears strategy between 14 December 2017 and 8 February 2018. The consultation was well received.

We have had a number of meetings with our main stakeholders Gingerbread and Families Need Fathers which have been positive and have not resulted in them raising any major concerns about the content of the consultation.

We have had a small amount of press interest from the following newspapers.

The Sunday Post

The Sun Scotland

The Independence; and

The Times.

A number of MPs have been lobbying for changes to the child maintenance calculation process via correspondence, debates and PQs. Some MPs have also pushed for the introduction of passports and joint accounts.

Heidi Allen MP has introduced a Private Members Bill seeking to change the way that complex and non-standard income streams are taken into account as part of the child maintenance calculation. The proposals put forward in her Bill are largely similar to the changes we are seeking to make with these regulations.

HANDLING

How will this affect the devolved administrations? How might MPs representing constituencies in Scotland, Wales and Northern Ireland react to it?

All the changes will apply to Scotland, Wales and Northern Ireland, apart from the change to remove passports will not be extended to Northern Ireland. This is because Northern Ireland residents are eligible to apply for an Irish passport.

We have received some negative press interest, from the Scottish newspapers The Sunday Post and The Sun Scotland. We are also aware of a negative article written by Fife Gingerbread (this group is not affiliated with the national stakeholder Gingerbread). The article criticises plans to write off debt built up under the CSA, questions the effectiveness of the CMS and accuses the government of trying to hide the consultation. None of the criticisms are around devolved policies.

We are aware that Marion Fellows MP (SNP, Motherwell and Wishaw) has an interest in child maintenance and secured a Westminster Hall debate in April 2017. Although she may be against proposals to write off CSA debt, she is likely to be in favour of the changes to the calculation process and new collections measures.

Angela Crawley MP (SNP, Lanark & Hamilton East) also has an interest in Child Maintenance although her concerns are around charging victims of domestic violence collections fees when their case is being managed in the collect and pay service. This is not linked to any of the measures in this package of regulations.

Do you expect this SI to be certified as EVEL (English Votes for English Laws)?

No

Meetings with MPs and peers (add additional rows as applicable) – check which MPs/peers supported and opposed the delegated powers in the passage of the Bill

Who and why When

Early MP engagement

33 MPs have asked PQs regarding child maintenance over the past two years. Of these, many were not relevant to these regulations, or to the arrears and compliance strategy. Information below relates to the MPs most likely to be interested in these regulations. We are working with private office to arrange meetings with our minister to ensure these and any other interested MPs are engaged on this matter.

TBC

Heidi Allen MP (Con): Put forward a Private Members Bill seeking changes designed to improve the accuracy of assessments and the effectiveness of the enforcement process for self-employed non-resident parents in order to bring the collection rate into line with the collection rate for employed parents. The proposals included in our package of changes largely addresses these issues. She is also a member of the Work and Pensions Select Committee, and was involved in their recent report on child maintenance, which called for the Department to end the on-going uncertainly for parents by setting out a clear strategy for how it will handle historic arrears.

This Bill was signed by:

Antoinette Sandbach (Con)

Ranil Jayawardena (Con) - Member of the International Trade Committee.

Stephen McPartland (Con)

Suella Fernandes (Con)

Cheryl Gillan (Con).

Kevin Hollinrake (Con) – Member of the Communities and Local Government committee.

Cheryl Gillan (Con)

Frank Field (Lab) – Chair of Work and Pensions Select Committee

Steve Reed (Lab)

Layla Moran (Lib Dem)

Neil Gray (SNP)

Only Antoinette Sandbach and Neil Gray have asked PQs regarding Child Maintenance. Neil Gray’s were not relevant to these regulations.

Private Members Bill raised on 28th November 2017, second reading has been scheduled for late April 2018

Antoinette Sandbach MP (Con): Raised concerns on a number of occasions relating to the child maintenance calculation and non-resident parents who try to hide their income. Our planned changes to the calculation process to take account of notional income and plans to increase our operational resource in our financial investigations unit (FIU) should largely address these concerns. She has also asked a number of PQs attached below.

PQs A

Sandbach.docx

Asked PQs between April 2016 and January 2017

Marion Fellows MP (SNP): Secured a Westminster Hall debate on child maintenance. The debate largely focussed on issues with the child maintenance assessment process, charging and fees. She has also asked a number of PQs (attached below).

Marion Fellows

PQs.docx

April 2017 (Westminster Hall debate)

Asked PQs between 2016 to October 2017

Steve McCabe MP (Lab): Has asked a number of PQs (attached below) relating to arrears and case closure over the past couple of years. He is also a member of the Work and Pensions Select Committee and was involved in their recent report into Child Maintenance. The report urged the Department to end the on-going uncertainly for parents by setting out a clear strategy for how it will handle historic arrears.

Steve McCabe

PQs.docx

Between February 2016 and November 2016

Angela Crawley MP (SNP): Against the use of collection fees for victims of domestic violence. She has also asked some PQs, attached below.

Angela Crawley

PQs.docx

Asked PQs between January 2017 and February 2018

John Trickett MP (Labour): Has asked PQs about the number of NRPs in rent arrears as a result of them making Child Maintenance payments.

PQs Jon Trickett.docx

Asked PQs in December 2017

Mobilising external stakeholders (add additional rows as applicable)

Who and why When

Gingerbread:

Gingerbread are the leading stakeholder representing single parent families. They have strong relationships with many MPs and peers, and are therefore very influential in this area.

Caroline Dinenage held a meeting with Gingerbread to introduce the compliance and arrears consultation. The aim of the meeting was to engage with them at an early stage of the consultation period and gauge their initial reaction to our proposals and address any questions. The outcome of the meeting was positive. Gingerbread understood our approach to historic debt built up on the CSA, and the rationale for this. They were also supportive of our proposals to improve the child maintenance assessment and introduce tougher collections measures. They also suggested we work with HMRC to improve our information sharing which we agreed to take forward.

A meeting between officials and Gingerbread was also held to go through details of the consultation and identify any potential concerns Gingerbread might have. This meeting was also largely positive. The majority of the issues they raised were about the details of how the process would be implemented, and how this would be reflected in operational procedures and client communications.

We have regular monthly meetings with Gingerbread where we will have further opportunities to discuss their consultation responses and how we plan to address them.

20th December 2017

16th January 2018 On-going

Families Need Fathers (FNF)

FNF are the make stakeholder group representing non-resident parents.

Caroline Dinenage and officials met with representatives of FNF to discuss the consultation. The meeting was constructive. FNF are supportive of write-off proposals and agree that this is the only practical way of dealing with the historic debt.

FNF are not so supportive of the compliance proposals in the consultation as these are not felt to encourage and improve shared parenting and active involvement of fathers in raising child. They felt that the consultation along with the narrative used in Parliament by Heidi Allen risks alienating fathers by branding them as “deadbeat”.

FNF claimed that the consultation places itself in the a wider context of a system biased in favour of mothers that alienates and isolates fathers who are reduced to simply paying maintenance and are not integrated in the lives of children.

Officials met with FNF to discuss issues raised at the previous meeting. FNF raised concerns around the affordability of maintenance and the current allowances within the statutory scheme for shared care – this is not related to anything in the consultation. We have work on-going on these issues and have a further meeting planned for 21 February 2018.

We have monthly meetings with FNF where we will have the opportunity to discuss their consultation responses and how we plan to address them.

21st December 2017

24th January 2018

On-going

Are there any concessions you could make ahead of laying which could ease the Parliamentary passage?

We consulted on the Child Maintenance and arrears strategy between 14th December and 8th February. The consultation was well received. Some of our main stakeholders have made a number of suggestions that we are currently considering.

The majority of the suggestions relate to operational processes and procedures, and client communications, so are not directly related to the content of the regulations. Of these, most of them are things that we are already planning to do, such as making the best use of our current powers, and using trace tools to ensure we write to clients at the correct address.

Of the suggestions that relate to the regulations, we are looking at the suggestion by NACSA to shorten the representation period for write-off from the proposed 60 days to 42 days.

We are also considering suggestions by Gingerbread to increase the amount of information provided in the write-off letters, and expand the category of clients who will receive letters. In deciding whether and in what form to take on board these suggestions, we need to consider the impact on different types of clients, and the cost to the taxpayer.

What alternatives/non-legislative options could you consider if you are not able to secure approval for the SI in its current form?

Changes to the calculation process

We intend to raise awareness of the ability to apply a variation for unearned income from the point an application is made. The ability to do this is covered by existing legislation. Work in this area will include developing communications with clients both prior to application through the Child Maintenance Options service and during the application process within the Child Maintenance Service.

Write-off measures

Our existing write-off powers are limited and do not allow us to address the £3.7 billion arrears accumulated under the CSA. Alternative options that don’t involve legislative change represent significant costs and legal risks. In addition they do nothing to increase the amount of money flowing to children and create prolonged uncertainty for both parents as to what, if any, further enforcement steps may be taken and when this might be.

Some of the options we have considered include:

Maintaining the historic debt on CSA IT systems. This would incur significant technology costs of around £25 to £30 million per year – an annual cost potentially lasting for decades.

Moving all the debt to the CMS system. This would cost around £230 million, requiring a check of the debt balance for each case before it is moved to ensure it is correct.

Moving all the cases with CSA debt to an extensible archive on the CMS IT system and not doing any further work on them. This approach exposes the department to a high risk of successful legal challenge on the basis that is would be de facto write-off without introducing new regulations.

Deductions from Joint and unlimited partnership business accounts

There are no non-legislative options availble to allow us to make deductions from joint or business accounts. Not introducing these changes will mean we are prevented from being able to collect around £840,000 more in child maintenance from joint and unlimited partnership accounts and non-resident parents will be able to continue to take advantage of loopholes that exist in the system by moving their funds into these types of accounts.

Passports

Without legislative change we will not be able to remove passports from a group of non-resident parents for whom the existing available sanctions are ineffective in achieving compliance. Without this power we will be unable to make an estimated 400 applications for passport disqualification each year, many of which will result in a suspended sentence reliant upon payments of unpaid Child Maintenance being made.

LINES TO TAKE

Please list the top three defensive Q&A you anticipate using in Parliamentary debates

1. Q: Why don’t you just try to collect all the outstanding debt?

A: Our proposal includes making a final attempt at collection in cases where clients want this, and it is cost effective and appropriate to do so.

To attempt to collect all of the £3.7bn CSA debt would cost around £1.5bn, and we might be able to collect between £0.1bn and £0.6bn. The likely low levels of collection are due to out of date information making it hard to trace paying parents, as well as parents simply not having the resources to pay these debts.

Attempting to collect in every case would therefore not be reasonable or cost effective, and it would divert resources from managing current cases where there are children who stand to benefit.

2. Q: Won’t writing off this debt send a message to paying parents that if they avoid paying for long enough then eventually their debt will be written off?

A: This would be a one off exercise, and it will only apply to debt accrued on the CSA schemes. We do not intend for the write-off powers proposed in this consultation to be used on an on-going basis, or for them to be applied to debt accrued on CMS cases. We are also introducing new tougher measures to collect debt on CMS.

3. Q: You are writing off vast amounts of debt on the basis that the children are now adults. How can you justify this when single parents will have spent years struggling to get by without the money that was due to them?

A: We have been open about the shortcomings of the CSA and are pleased with the improved service that the CMS is offering to clients. We have calculated that attempting to collect all our historic debt would cost £1.5bn and would only realise a small proportion of the money owed for any family irrespective of the current age of their children. At this point we believe resources would be better spent on ensuring these past mistakes are not repeated.