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24 July 2006 : Column 597

Child Support Redesign

3.33 pm

The Secretary of State for Work and Pensions (Mr. John Hutton): With permission, Mr. Speaker, I should like to make a statement on the Government's plans for reform of the child support system.

Parents, whether they live together or not, have a moral as well as a legal responsibility to support their children. Relationships end, but responsibilities do not. Government and society have a clear interest in ensuring that those responsibilities are honoured. That was the foundation on which the Child Support Act 1991 rested, and I believe that those are the right foundations on which to build any future system of child support. But as we know, despite the best efforts of its staff the overall performance of the Child Support Agency has fallen well short of expectations. When we came to office the agency cost more to run than it collected in maintenance, and it has been taking longer to process claims than the court arrangements that it replaced.

The Child Support, Pensions and Social Security Act 2000 made important changes, simplifying maintenance calculations and allowing parents with care on benefit to keep up to £10 of any maintenance received. Since 1997, the agency has nearly doubled the number of cases receiving maintenance payments. However, as we all know, problems have persisted. Only a minority of cases handled by the CSA receive any maintenance at all. There is a backlog of around 300,000 cases. Debts of over £3 billion have built up, with limited prospects of recovery. There is a net cost to the taxpayer of around £200 million per year. Levels of customer service, although they have improved recently, have never reached the standards of quality and consistency that the public are entitled to expect.

The need for radical overhaul is clear, but I do not believe that the continuing problems are due to a failing on the part of the staff of the agency. Rather, I believe that they are due to a failing of the policy framework, and of the system that the staff are being asked to run. That is why, in February, I asked Sir David Henshaw to redesign our system of child support. He has now presented his recommendations to me. Copies are available in the Vote Office and on my Department's website, together with the Government's response.

Sir David has recommended an entirely new system for child support that will be simpler to use and administer, will be tougher on parents who do not face up to their responsibilities and will make a bigger impact on the reduction in child poverty, while delivering value for money for the taxpayer. His recommendations have four main elements.

First, Sir David believes that the system should focus on tackling child poverty by ensuring that parents with care keep more of the maintenance owed to them. He recommends that lone parents on benefit should be allowed to keep more maintenance through a significant increase in the extent to which child maintenance is disregarded in income-related benefits.

Secondly, Sir David believes that a new system should promote greater personal responsibility by ensuring that, wherever possible, we help parents reach their own financial arrangements for the maintenance
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of their children. That means reconfiguring advice services to improve the quality and accessibility of information and guidance for parents. Sir David also believes that the Government should remove the requirement that parents with care on benefits make an application for child maintenance through the CSA even when a perfectly satisfactory private arrangement already exists. As a first step towards getting maintenance flowing to children, Sir David recommends that, with up to a fifth of potential child support cases not having their fathers’ names on their birth certificates, we should consider the joint registration of births.

When parents cannot reach an amicable agreement, the parents with care need to be confident that the enforcement arrangements will be effective. The third element of Sir David's recommendations is the introduction of new, tougher enforcement powers, including the withdrawal of passports. He also recommends exploring the potential to make better use of existing financial penalties.

Fourthly, Sir David proposes that there should be a clean break with the past. He believes that the delivery of child support requires a fresh start with a new organisation. He believes that there should be no automatic conversion of cases from the two existing schemes to the new redesigned system. Instead, parents wishing to use the new system should be able to reapply. He recommends that there should be a separate residuary body to “manage down” and enforce old debt, and that we should consider how best to give the new organisation power to charge clients for using the new system.

Sir David has consulted widely in producing his recommendations. I am grateful to him for his work, and grateful to all who have contributed to it. As his report shows, tougher enforcement and a substantially higher disregard could increase the number of children receiving maintenance to about 1.75 million, compared with just 1.1 million today. The changes will lift many more children out of poverty, and a smaller, more focused agency that deals with significantly fewer cases will deliver better value to the taxpayer, with administrative costs substantially lower over the long run. Although there is still a great deal of detail to be dealt with, I think it right that the Government should signal their view of the way ahead.

We have decided to accept the principal recommendations. We will therefore bring forward legislation at the earliest opportunity to remove the requirement that all parents with care claiming benefit are treated as applying for child maintenance. We agree with Sir David’s recommendation that there should be a higher disregard, but that must ensure a fair deal for taxpayers and avoid sending any signal that families might be better off apart than together, so we intend significantly to increase the level of the current disregard of £10. Details will be confirmed later this year.

Both those changes will help more families to receive more maintenance and reduce the risk of child poverty. They reflect both the rights of children to be properly maintained by their parents and the right of society to ensure that parental responsibilities are properly discharged. We also agree that the delivery of child support requires a fresh start. We will therefore create a
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new organisation to replace the CSA and we will strengthen enforcement powers.

We intend to go even further and seek legislation to strengthen the powers available to the agency to recover maintenance from those who repeatedly fail to pay, including through the imposition of curfews as well as the suspension of passports. We will explore publicising successful prosecutions, including the feasibility of naming those who have been prosecuted. We will continue the CSA’s current operational improvement plan, which is already improving our capacity to trace people who owe maintenance and which should see the CSA collecting a further £250 million in unpaid maintenance.

There is still a great deal of detail in Sir David’s report that should now properly be the subject of fuller consultation and debate. In particular, we want to consult on the best way to allow existing claimants either to move to private arrangements or to make a claim to the new system. We must ensure that, where people currently receive maintenance through the CSA, they continue to do so, if they wish, under the new system, without disrupting the payment of child maintenance.

We should consult on how best to deal with the legacy of debt that is left, while protecting the interests of both families and the taxpayer. We should also consult on the appropriate role for the courts in the new approach, how to improve parental responsibility from birth—including the possibility of compulsory registration for fathers—and how we can further simplify and improve the current assessment, collection and enforcement processes. We will also consult on the details of any new charging regime.

In advance of legislation, I intend to publish a White Paper later this year, which will set out in greater detail the way forward in all of these areas. In the meantime, I have asked Sir David to report to me on the policy and implementation issues that arise from his first report. During the process of change, agency staff are entitled to expect the full support of my Department, and they will have it. In particular, we will do all we can to help and support staff through the transition to the new organisation and in their efforts to ensure that children and families receive the maintenance to which they are properly entitled.

The original proposals for child support had a wide and broad measure of support in the House, but the consensus on aims was never translated into a consensus on means: we must not repeat the same mistake. That is why I want the new arrangements now be established to command the broadest possible measure of agreement. I believe that there is a clear sense, both in the House and outside it, that our system of child support needs radical change. It must offer better value for money for the taxpayer, enforce the rights of children and the responsibilities of parents more successfully and ensure that families and children in particular do not slide into poverty when parents split up.

I believe that the proposals I have set out today can help us better to achieve those vital objectives, which is why I commend the statement to the House.

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Mr. Philip Hammond (Runnymede and Weybridge) (Con): I thank the Secretary of State for his courtesy in letting me have a copy of the statement in advance, although he will understand that we have not yet had a chance to absorb the details of Sir David’s report.

I am sorry to tell the Secretary of State that his statement will be a disappointment to the 1.5 million families trapped in the shambles of the Child Support Agency, particularly the 900,000 who are trapped in the old system. The statistics are familiar to the House and the Secretary of State recited them again today, so I shall not repeat them, but what those people wanted to hear today was, above all, a timetable for moving them on to a new system of assessment. What they have got is yet another delay for further reports and more consultation, so they will feel let down once again.

The Government have invested half a billion pounds of taxpayers’ money in their redesign of the CSA system and now propose to turn their back on that investment and start again. The headline in press releases this morning is “CSA to be scrapped”, but the reality is that the existing, failing CSA will be rebranded and left with its difficult case load while the political spotlight will be shifted to a new body with low costs, no legacy and a carefully controlled onflow of suitable new cases.

We share the Government’s stated determination to maintain the obligation on both parents to contribute to the upbringing and support of a child. We also share the view that, where those arrangements can be made voluntarily, they should be. But in the real world, that will often not be the case, and it is not obvious what the incentive of a high benefit disregard will achieve in those cases that are not settled voluntarily. If a CSA application is made, we are back in exactly the position that we are now. If a CSA application is not made, we are back in exactly the position that we are now, with the difference that there will not even be a theoretical accrual of liability by the absent parent to offset the state’s payments to support the lone parent and her children. The absent parent will be totally off the hook, so what price the Government’s commitment to both parents contributing to their children’s support?

Any advantage that the proposed change will bring lies solely in the cases where voluntary arrangements are made. Does the Secretary of State have any evidence about the proportion of benefit cases that that might involve? I note that, when he first referred to Sir David’s recommendation to remove the requirement that parents on benefits with care must make a CSA application, he used the phrase,

But when he went on to announce that the Government would legislate to remove the requirement, there was no reference to the qualifying condition. So perhaps he can clarify whether the requirement will be removed in all cases, or only in cases where there is evidence that a satisfactory voluntary private agreement exists.

I also assume that the higher level of disregard will apply to all payments, not just those made voluntarily. If that is the case, while that disregard may have a significant impact on tackling child poverty in lone parent families, it will not operate as an incentive to
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agree voluntary arrangements, which I understood to be the Secretary of State’s original motivation for using the higher disregard in those cases only.

We have heard nothing of how parents not on benefit will be encouraged to make voluntary arrangements—other than vague reference to a threat to charge for the new agency’s services. I suspect that on an otherwise rather dismal day that may be the only thought that raises some merriment in single parent households that are trapped in the CSA bureaucracy at the moment.

Most importantly, the Secretary of State failed to deal with the key issue: the robustness of the assessment process, which was the focus of the 2000 Act reforms—sacrificing precision for simplicity—that are now acknowledged to have failed. Is the right hon. Gentleman really proposing to set up a new body attempting to assess and constantly reassess a payment that is due on the basis of fluctuating or uncertain in-year income? Unless the assessment process is made robust for those difficult cases, no system of collection will be effective. If the value of the claim cannot be accurately assessed on a real-time basis, no enforcement system, however draconian, will work.

There is no reason to suppose that the new agency will be any more successful than the old if it is constantly struggling to establish and maintain an accurate basis of assessment. When the right hon. Gentleman described Sir David’s remit as a redesign of the system, I understood that he was prepared to tackle this issue, but there is nothing in the statement on it—nothing, as the product of the past six months’ work, except a reference to it as something that requires further consultation and debate. There is no recognition of the fundamental importance of the assessment tool to a robust system of child maintenance.

We will look carefully at Sir David’s report and its implications. In the meantime, I have a couple of specific questions for the right hon. Gentleman. Can he give the House an estimate of the cost of the proposals? Obviously, the £200 million that the CSA is collecting for the Exchequer as a contribution to the agency’s costs will be lost. In fact, far from scrapping the agency, there will be the cost of maintaining two separate bodies, so can he tell us what the overall cost will be?

Can the Secretary of State also tell us what the programme will be for migration from the existing system to the new system, and over what period that will take place? Presumably, some people will have to remain with the residual agency, as access to the new system will have to be rationed at the outset in order to prevent it from being swamped. How will the Secretary of State deliver a perception of fairness in that migration process, as being on the new system will bring a huge financial benefit but it seems inevitable that that will have to be rationed over a number of years?

Can the Secretary of State give us a bit more of a feel about the level of the disregard? If he cannot give the exact amount of that, can he at least give some indication of it, because it is very difficult to understand the proposals without that? In his comments, he recognised that there is a risk that introducing a large disregard might create a perverse
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incentive for struggling families to give up and split up. What work has he done to establish to his own satisfaction that that will not result from the changes that he has announced today? Finally, can he tell us who will run this new body? Will they be the same people who run and staff the existing CSA?

We are disappointed by this statement, as will be hundreds of thousands of lone parents. It is mightily thin on substance. It consists of a rebranding exercise with no change to the substantive arrangements in, I suspect, a majority of cases, and that is not a solution for the families involved. We recognise that there is a need to make the system more effective, and to be more pragmatic about ways to increase the flow of maintenance, without losing sight of the underlying principles. Unfortunately however, it is not clear that the proposals address the fundamental flaws in the system. Having just poured half a billion pounds down the drain in respect of the CS2 system, the Government cannot safely move on and start again without being 100 per cent. sure that the real underlying causes of the problem have been identified and fixed.

Mr. Hutton: It is unclear to me—and I suspect to most of my hon. Friends—what the hon. Gentleman’s view is of Sir David Henshaw’s report, and whether the hon. Gentleman will be able to give any indication today as to whether any of the proposals in it attract his interest or support. I find it bizarre in the extreme that he seems to want us to continue with the existing arrangements, as most of us, irrespective of which party we belong to, know that that would serve only to trap people inside a failing system that is not delivering for parents. [Hon. Members: “That is what the Government are doing.”] I note the comments from Conservative Members, so I think that I should send a copy of the statement to the hon. Gentleman again so that he can have another look at it, along with Sir David’s report.

These are undoubtedly the most radical reforms to the child support system that any Minister has brought before this House since the establishment of the Child Support Agency. I ask the hon. Gentleman to take a little more time to study the detail of the statement and of Sir David’s report. These reforms will address the fundamental flaws in the current system. We are encouraging parents to reach their own agreements—I would have thought, given all the ideological baggage that the Conservative party is keen to lose at the moment, that that at least would be one thing that they would want to support today. But, sadly, we did not hear such words of support.

Mrs. Theresa May (Maidenhead) (Con): Yes, you did.

Mr. Hutton: Well, I do not think any Labour Members heard such words of support for that fundamental change.

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