House of Commons - Work and Pensions

Select Committee on Work and Pensions Written Evidence

Memorandum submitted by One Parent Families (CS 02)

SUMMARY

Problems in getting child maintenance remain a major concern of lone parents, who lack confidence in the Child Support Agency (CSA) as an effective organisation to help them access the money they need to support their children.

One Parent Families backed the radically reformed child support system when it went through Parliament in 2000. However, we made it clear that "the package must ensure that any reductions in child maintenance are balanced by an absolute commitment from the outset to improve collection and enforcement and achieve a marked improvement in compliance levels."

That has yet to happen. IT and telephony problems have dogged the much-needed reforms, leading to substantial delays in implementation. Fewer cases under the new system have been processed than forecast, and compliance levels have not met expectations. Meanwhile, compliance levels for nearly a million parents with care on the existing system remain highly unsatisfactory. Only 54% of cases collected by the CSA are fully compliant, and in a quarter of cases no maintenance is collected at all.

The CSA has extensive powers to ensure compliance and enforce payment of child maintenance, which were extended as a result of the 2000 child support legislation. The problem appears to be that, so far at least, it has failed to make collection (both of current maintenance and arrears) and enforcement a key goal of the business. The Agency itself has identified that there is £783 million outstanding in child maintenance owed to parents with care, which it judges is recoverable. Yet despite plans to develop a debt reduction target for 2004-05, the Agency has started the current year without one.

Self-employed cases represent a small proportion of the CSA case load. But they present intractable problems in terms of non-resident parents seeking to conceal their true income to avoid paying child maintenance. One Parent Families believes more needs by the Inland Revenue and the Child Support Agency working together to bear down on this group, and outlines a number of possible options.

The child support reform package struck a balance: lower payments for most absent parents on the one hand, but higher levels of compliance—brought about by a substantial transfer of staff time from calculating maintenance to pursuing payment. Whilst the CSA can, at this stage, blame IT problems for a failure to achieve expected compliance levels during the first year of the new scheme, a new cloud has appeared on the horizon. In the next two years, the Agency is expected to reduce its staff headcount by 2,600. The danger is that, the gradual "freeing up" of CSA staff time as a result of the new simpler system will not lead to a concerted and energetic focus on ensuring maintenance is paid and debts recovered, but rather to staff cuts. We would regard it as a serious breach of faith on the part of the Government, if this were to happen.

One Parent Families views an effective child support scheme as a vital element in the Government's strategy to eliminate child poverty by 2020, and to achieve its target of 70% lone parent employment by 2010. The DWP's Public Service Agreement target, to increase to 60% the proportion of parents with care on Income Support and income-based Jobseeker's Allowance who receive child maintenance for their children, will only be met if the CSA has the resources and determination to make compliance, arrears collection and enforcement a central priority.

INTRODUCTION

Since its inception in 1918, One Parent Families has been dedicated to campaigning for equality of opportunity for one parent families and tackling the exclusion, poverty and prejudice they so often face. One of our founding objectives that we are still trying to achieve is the establishment of a successful child maintenance system which guarantees regular payments to parents with care and their children.

We supported the Government when, in 1998, it first announced its proposals to radically reform the child support system. Although under the radically simplified child support formula most non-resident parents would pay less, One Parent Families backed the reforms on the basis that lone parents would gain by a speedier assessment and collection service, leading to more lone parents actually receiving child maintenance. That backing was conditional. As we said at the time the legislation for the reformed child support system went through Parliament:

The package must ensure that any reductions in child maintenance are balanced by an absolute commitment from the outset to improve collection and enforcement and achieve a marked improvement in compliance levels.

Six years on, the promise of the reformed system has yet to be fulfilled. The vast majority of parents with care who have applied for child support (around 950,000 "live" cases)[2] remain on the old system, described by the Prime Minister in 1998 as "a mess" and in urgent need of reform.[3] Only 54% of cases collected by the Child Support Agency (CSA) are fully compliant, and in a quarter of cases no maintenance is being paid at all. Implementation of the new scheme, which began in March 2003, has been limited so far to "new" parents with care, and has been dogged with IT and telephony problems. By the end of the first year, only 31,000 parents with care had received payments under the new scheme.[4] No reliable figures are currently available on compliance levels within the new scheme, due to computer problems.

The substantial delay in implementing the much-needed reforms is largely due to the serious technical difficulties in introducing a new IT system. These are deeply frustrating for all concerned, and have inevitably had knock-on consequences for the overall performance of the Child Support Agency. At this stage, much of the data to fully appraise the current performance of the Agency is simply not available. The Agency's Annual Report will not be published until July, and the most recent child support statistics date from November 2003. Our submission is based on the most recent information available, but also raises questions on various aspects of performance, where the data is not yet publicly available—although it might be made accessible to the Committee. We concentrate on the issues the Committee has indicated as being of particular interest.

THE IMPORTANCE OF CHILD MAINTENANCE

One Parent Families views an effective child support scheme as a vital element in the Government's strategy to eliminate child poverty by 2020 and to achieve its target of 70% lone parent employment by 2010. Child maintenance adds to lone parent's existing income from earnings and in-work benefits and, if paid regularly, can make a real difference to family income—making it viable to take paid work. Under the new child support system, even the poorest lone parent families—those on Income Support—stand to be better off by up to £10 per week if in receipt of regular child maintenance. It is notable that the Department of Work and Pensions has as one of its key Public Service Agreement Targets to "double the proportion of parents with care on Income Support and income-based Jobseekers Allowance who receive maintenance for their children to 60% by March 2006."[5]

Current Concerns of Lone Parents Reported to One Parent Families

Earlier this year, One Parent Families consulted its members to decide its future policy priorities. In addition to giving members a list of policy options to choose from, we also asked for specific comments. It is significant that by far the biggest subject for comment was child support, with the majority of respondents expressing frustration at the failure of the Child Support Agency to effectively pursue non-resident parents. For example:

My experience is that former spouses/partners can fail to pay/reduce payments with impunity.

Abolish the CSA—give responsibility back to the courts—the CSA are totally ineffectual, useless and non-responsive!

The CSA should be quicker and tougher with fathers—they are too lax.

CSA—ensure they can follow through quickly and not keep people waiting a year. Ensure enforcement.

More vigorous pursuit of non-contributing absent fathers by CSA

These are very familiar complaints. However, they underline the extent to which problems in getting child maintenance remain a major concern of lone parents, and the lack of confidence which many lone parents still feel in the Child Support Agency as an effective organisation to help them access the money they need to support their children.

RUNNING TWO CHILD SUPPORT SYSTEMS SIMULTANEOUSLY

During the past year, the Child Support Agency has sought simultaneously to maintain its service to its existing clients assessed under the "old" child support formula, and implement the new rules for new clients using a new computer system. In all, the Agency is holding over one million cases within two systems.[6] The pressure of running two systems simultaneously has been seriously exacerbated by the IT and telephony problems which have led to many cases being stuck in the system; cases disappearing from caseworker screens; calls routed inappropriately; and no effective management information system. In addition, there is the continued uncertainty as to how long the situation will continue before the two systems can begin to be merged.

The new child support scheme

The new, simpler formula for assessing child support promised lone parents faster assessments with fewer mistakes, with a much greater emphasis on getting maintenance flowing and ensuring compliance. In fact, problems with the new computer system have led to the number of cases with maintenance calculations, as well as compliance levels, to be lower than forecasted.[7]

The simpler formula has made it easier for staff to collect and non-resident parents to provide the information necessary to do a full calculation. As a result, the Agency looks likely to meet and even exceed its target of a 23% improvement in full new maintenance assessments (to 53%) on new cases.[8] It also appears to have been successful in increasing the proportion of applications which move to a calculation, rather than being closed from a 4:6 ratio under the existing scheme, to a 6:4 ratio under the new.[9]

Unknown at this stage is how successful the Agency has been in improving the accuracy of maintenance calculations. In its fourth report, the Agency's Standards Committee concluded that "to meet the stretching 90% [accuracy] target for 2003-04, the Agency will require a performance shift." [10]By February 2004 the Agency was achieving accuracy levels of 83% against the 90% target. [11]At that point, the Chief Executive was expecting to see the target reached by the end of the year as further improvements were made to the computer support and staff became more familiar with the new scheme.

One puzzle is the lower number of applications being made each month than anticipated. When the new arrangements were introduced, it was expected that the Agency would be accepting around 30,000 applications each month to which the new rules would apply. [12]In fact, the numbers received each month have been consistently lower—averaging 24,700 over the 13 months since the scheme began on 3 March 2003. [13]This may simply reflect a drop in the number of parents with care applying to the Agency, or, more worryingly, it might reflect a delay in the transmission of completed applications from lone parents claiming Income Support from Jobcentre Plus to the CSA. Certainly, the One Parent Family Advice Line reports complaints from lone parents about delays in the non-resident parent being contacted, which would be consistent with a delay in the Agency receiving the application.

Again consistent with lone parents' complaints about delay, is the fact that, during the first year of the new scheme, only 47% of applications received by the Agency were actually "cleared" ie, either closed, or proceeding to a maintenance calculation. This figure did improve as the year went on, with 62% of applications cleared in the last quarter. [14]However, the figures do suggest that backlogs of applications may be building up—with the processing of application not keeping pace with input. Only 91,429 maintenance calculations have been made during the first year, just over a third—34%—had resulted in a first payment made through the Agency. [15]The target set for the Agency in 2003-04 was to establish payment arrangements for new scheme cases within six weeks on average. On these figures, it looks unlikely that this important target has been met.

Just 31,115 parents with care who have applied to the Agency during the course of the year have received a first payment through the Agency. Only 17,048 parents with care on Income Support were receiving the new £10 maintenance premium payment. [16]The extent to which this is due to delay on the part of the Agency in processing applications or to non-resident parents' failure to pay needs to be established.

The existing child support system

The existing child support system continues to apply to nearly a million cases. Whilst there have been some improvements in recent years in cash compliance, case compliance and accuracy, we agree with the Government which, in 1998 accepted that the Agency's efficiency was increasing, but concluded:

Under the current rules, we doubt that the CSA's performance can ever be good enough.

The pressing main issue for lone parents remains non-payment of maintenance by non-resident parents and lack of enforcement by the Agency. This is discussed in more detail below.

THE PROGRESS OF CASE MIGRATION FROM THE OLD TO THE NEW SCHEME

In addition to running the "old" and new systems side by side, a third strand of work due to take place in 2003-04 was the transfer of all [JA1] existing cases to the new computer system by early autumn 2003. These "old" cases would still be determined under the "old" rules, pending the Ministerial go-ahead convert them to the new system, but would be held on the new system.

It would appear that, due to IT difficulties, this transfer of cases has still to be completed. The latest statistics show that, in November 2003, only 120,000 old scheme cases were being administered on the new IT system. The scale of the task in physically moving all customers' documents from the old system to the new system should not be underestimated, and in itself will create a very large element of extra work for staff.

The bigger question is when families on the existing scheme will be converted to the new formula. This obviously depends on the achievement of a satisfactory computer system and confirmation that the new arrangements are producing the simpler, speedier, more effective delivery of maintenance which was promised. Not only is the delay disappointing for lone parents, but the continued uncertainty in itself must have an effect on performance outcomes, as staff prepare for yet a further phase of additional activity, which will involve the reconfiguration of assessments and their phased introduction, as well considerable communication with parents as to how the new system will work.

THE AGENCY'S COMPLIANCE AND ENFORCEMENT REGIME

The Committee has asked how the compliance rate of non-resident parents might be improved, and what measures could be taken to improve enforcement of maintenance assessments.

Existing cases

It should be noted that, in recent years, a number of steps have been taken which were intended to improve compliance and enforcement. They include:

— in 2001, the introduction of new sanctions including a new offence of providing false or misleading information to the CSA and the power, via the Magistrates Court, to withdraw a driving licences for failure to cooperate with the CSA;

— also in 2001, improved links with the Inland Revenue to check the income of a non-resident parent;

There is certainly some evidence that compliance and enforcement has improved in recent years, with case compliance rising from 71.3% in 2000-01 to 75.7% in 2003-04, and cash compliance from 69.9% to 73.1% during the same period. [21]Nevertheless, we regard a situation where only 54% of accounts (regular payment and arrears accounts) paid through the Agency's collection service are paid in full, and 24.6% not at all[22] as highly unsatisfactory.

Whilst it is pleasing to note that in the year 2004-05, the Agency expects to see dividends from its enforcement review carried out two years earlier, [23]it is disappointing that, for existing cases, it appears to be taking so long to get to grips with this area, and commit the resources necessary to make a real difference. The problem appears to be, not that the Agency lacks to tools to improve compliance and enforcement, but that, so far, it has so far failed to make collection and enforcement a key goal of the business.

Compliance and enforcement under the new system

From One Parent Families' perspective, the most pressing question is the extent to which the new system has managed to improve the levels of compliance of non-resident parents. Under the old system 90% of staff time is spent on calculating the assessment and keeping case up to date, leaving only 10% for ensuring that maintenance is actually paid. [24]Baroness Hollis told the then Social Security Committee in 1999 that she hoped, under the new system, to reverse this ratio. [25]The intention was to "free up" staff, so that their time could be devoted to a greater emphasis on compliance and enforcement.

In the end, the success of the new system will stand or fall by whether the new simpler formula actually results in more non-resident parents paying all, rather than part, or none, of what they owe. This, after all, was the quid pro quo for introducing a formula likely to lead to many lone parents receiving lower amounts of maintenance. So far, due to IT failure, the Agency is unable to produce management information on compliance levels. Already it is clear that compliance has not improved as expected due to the Agency's computer and telephony problems. We trust that, by the time the Agency gives evidence to the Committee, it will be in a better position to give information on this important subject.

The self-employed

Self-employed cases represent only 5% of the CSA case load. But these cases present intractable problems in terms of non-resident parents seeking to conceal their true income. They represent a disproportionate number of the child support cases dealt with by our Advice Line. There are a number of options which could be considered to better tackle the issue.

One possibility would be to introduce a concept that already exists in social security law—the concept of "deprivation of income". Where someone deliberately ties up income (for example, in companies, trusts or as capital) in order to minimise their liability for child maintenance, they could be treated as though they still possessed the income.

A second option would to introduce measures to allow the CSA to provide information to the Inland Revenue to trigger an investigation into accepted accounts. Where there is evidence of a lifestyle inconsistent with declared income, the CSA could pass this on to the Inland Revenue. There would need to be wider powers to disclose income details, and closer working that at present between the two agencies. There may also need to be an analysis of current law to examine certain accounting practices (currently acceptable for tax purposes) to see whether income should be treated differently for child maintenance purposes. Examples might include the ability to tie up income as capital, and the payment of company loans and bonuses which are not counted as income.

Finally, we suggest that "shell" companies should be investigated if it can reasonably be assumed that they have been set up to avoid child maintenance liability. The CSA or Inland Revenue would need powers to investigate and assume an income from such companies where a partner, friend or child turn out to be directors.

DEBT REDUCTION

At the end of March 2003, amounts outstanding from non-resident parents and considered recoverable amounted to £783 million. [26]This is child maintenance due to one parent families, which if recovered could make a real difference to their lives. Unbelievably, at present, there appears to be no debt reduction target. We draw the Committee's attention to the Agency's 2003-04 target to produce targets on debts reduction: to develop and introduce an internal debt reduction target for 2003-04 and a Secretary of State target for 2004-05." [27]There is some evidence from the Agency's latest Business Plan that the development of a debt reduction target may have slipped to October 2004. If the Agency is to be seen to be taking debt reduction seriously, a stretching target would seem to be a fairly urgent necessity.

STAFFING ISSUES AND JOB LOSSES

The Chief Executive of the CSA has admitted that staff morale has taken a knock in the past year due to the difficulties caused by the new computer system. In 2002-03, the Agency failed to meet its sickness absence reduction target. [28]It would be unsurprising, given the considerable pressures staff have been under in the last year, if the latest (and tougher) sickness absence target is not met.

We draw the Committee's attention to the "efficiency challenge" faced by the CSA in being required to reduce its staff headcount from 10,600 in April 2004 to 8000 by April 2006. [29]The danger is that, the "freeing up" of CSA staff as a result of the new simpler system will not lead to a concerted and energetic focus on ensuring maintenance is paid and debts recovered, but rather to staff cuts. We would regard it as a serious breach of faith on the part of the Government, if this were to happen.

CONCLUSION

Problems with the new computer and telephony systems have dealt a serious blow to the implementation of the child support reforms, and the promise it offered to lone parents of quicker, more reliable maintenance where the poorest stood to gain financially. The Department for Work and Pension's PSA target is a recognition of the importance of child maintenance in the fight to eradicate child poverty. In March 2003, the proportion of parents with care on Income Support and income-based Jobseeker's Allowance who receive maintenance for their children, compared to all such parents for whom a maintenance calculation was in place, stood at 25%.[30] The goal of raising that proportion to 60% by 2006 will only be possible if the Agency has the resources and determination to make compliance, enforcement and the collection of arrears a central priority.

Janet Allbeson

14 June 2004