The
Committee consisted of the following
Members:Chairman:
Mr.
Eric Martlew †
Cable,
Dr. Vincent (Twickenham)
(LD) †
Clelland,
Mr. David (Tyne Bridge)
(Lab) †
Dunne,
Mr. Philip (Ludlow)
(Con) Greening,
Justine (Putney)
(Con) †
Iddon,
Dr. Brian (Bolton, South-East)
(Lab) †
Keen,
Alan (Feltham and Heston)
(Lab/Co-op) Laws,
Mr. David (Yeovil)
(LD) †
McIntosh,
Miss Anne (Vale of York)
(Con) †
Mactaggart,
Fiona (Slough) (Lab) †
Penrose,
John (Weston-super-Mare)
(Con) †
Plaskitt,
Mr. James (Parliamentary Under-Secretary of State for Work and
Pensions)†
Stringer,
Graham (Manchester, Blackley)
(Lab) †
Stuart,
Ms Gisela (Birmingham, Edgbaston)
(Lab) †
Thornberry,
Emily (Islington, South and Finsbury)
(Lab) Watkinson,
Angela (Upminster)
(Con) †
Watts,
Mr. Dave (Lord Commissioner of Her Majesty's
Treasury)†
Wright,
David (Telford) (Lab) John
Benger, Committee Clerk †
attended the Committee Fourth
Standing Committee on Delegated
LegislationTuesday 20
June
2006[Mr.
Eric Martlew in the
Chair]Draft Contracting Out (Functions Relating to Child Support) Order 20064.30
pm
The
Parliamentary Under-Secretary of State for Work and Pensions (Mr. James
Plaskitt): I beg to
move, That the
Committee has considered the draft Contracting Out (Functions Relating
to Child Support) Order
2006. It is a
pleasure, Mr. Martlew, to serve under your chairmanship.
The order was laid before the
House on 22 May. As the name suggests, it is an enabling piece of
legislation designed to help the Child Support Agency achieve some of
the key short and medium-term objectives set out in the operational
improvement plan. That plan was published by my right hon. Friend the
Secretary of State on 9 February.
The Committee may be aware that
the operational improvement plan sets out the agency's aims and
objectives for the next three years. The overall aim of the plan is to
improve service to clients, to increase the amount of money collected,
to achieve greater compliance from non-resident parents and to provide
a better platform from which to implement future policy.
The plan, this
supporting legislation and the package of negative resolution
regulations that were laid in both Houses on 16 June all recognise that
we owe it to children and their parents to do something to improve
child support performance. It would be wrong for us to sit back and do
nothing while Sir David Henshaw is making his
recommendations—and while we consider and consult on those
recommendations. We will know the outcome of that redesign shortly. In
the meantime, I hope that hon. Members will agree that we should not
pre-empt that in our debate.
In developing
the operational improvement plan, the agency identified a significant
capacity gap. Contracting out certain services will enable the agency
to fillthat gap, delivering the planned improvements
byMarch 2009 and staying within the approved resource levels
and spending limits. However, contracting out is not only about
capacity but about buying in expertise, and learning from the private
sector.
The order
will enable the Child Support Agency to contract out three main areas
of work—the management of clerical cases, a significant amount
of debt recovery and some tracing of non-resident parents. The agency's
computer problems have been well documented and discussed by the House
and by the Work and Pensions Committee; I am pleased to see some
members of that Committee here, and I am sure they will add their
experience and expertise to today's debate.
Because the computer problems
caused cases to stick, about 19,000 cases are being dealt with
clerically, and we expect that number to rise. Those cases take a
disproportionate amount of resources. Contracting out that line of
business will enable those currently working on the activity to be
redeployed within the agency—up to 700 staff will be freed up
for front-line processing, which will contribute significantly to the
agency’s reducing its backlog of new scheme applications. It is
a finite area of work, with all clerical cases expected to be replaced
in the computer system by 2009, once the IT fixes have been delivered.
Given the short lifespan of the proposed contract, this area lends
itself readily to contracting out; it is possible for operations to be
scaled up and down easily; it stands alone and it needs minimal use of
the agency's computer systems. The contractor will be required
to undertake a wide range of activities in delivering the entire
clerical case management process. They will range from initial
information gathering to making assessments and calculations and then
arranging the collection of maintenance. The contractors will therefore
require a wide range of the powers currently used by the agency. As a
result, the order has been drafted widely.
The second
area of contracting out will be debt recovery. We all know from our
postbags that that is another problem area for the agency. Nearly one
in three non-resident parents who have been assessed and are due to
make a payment fail to pay for their children. Debt accrued since 1993
as a result of non-resident parents' failure to pay now exceeds
£3 billion. That is why the operational improvement plan has
increased enforcement at its heart. We agreed funding
of£30 million to allow the agency to employ external
debt collection agencies to recover in excess of £100 million of
outstanding debt. The
contractors will enhance the agency's debt reduction capacity by
undertaking a wide range of activities to recover individual debts.
They will be encouraged to be innovative, within existing legislation,
in order to recover what is due or establish promptly a satisfactory
repayment arrangement. They will have specialist expertise and in many
cases local knowledge. They will be able to concentrate on a narrower
range of duties than the agency is required to perform, and the
contractors will not be paid if they fail to
deliver. In England
and Wales, contractors will enforce the payment of debt through the
magistrates courts and the county court as appropriate. That will
include the obtaining of county court judgments, liability orders,
third-party debt orders and charging orders. Contractors operating in
Scotland will fulfil the same role using the appropriate Scottish
legislation.
It is
important to stress two things. First, there will be no reduction in
the child support maintenance received by individual parents as a
result of using contractors. Secondly, using contractors will
supplement not replace the agency’s own in-house enforcement.
The cost of employing the contractors will be borne by the
agency. We also
intend to allow private-sector contractors to use their tracing
expertise to find non-resident parents who are avoiding the agency.
Just under 70,000 cases have not yet been assessed under the old
scheme, largely because non-resident parents could not be traced by the
agency. I know from my own constituents and from the cases I am called
to deal with in the House, that a number of non-resident parents find
extraordinary ways deliberately to avoid dealing with the
agency—for example, by refusing to answer calls
and letters, frequently moving or deliberately providing incorrect
information. Such behaviour prevents the establishment of regular child
support maintenance payments, so if the agency has failed to find the
non-resident parent, it will ask the contractor to locate the
non-resident parent and to conduct interviews to capture all the
information to enable maintenance assessments and calculations and/or
enforcement action to be undertaken. As I said earlier, it was
necessary to draft the order widely. The three areas that we wish to
contract out cover most of the functions carried out by the agency, but
we have excluded some statutory functions from the order. Section 71 of
the Deregulation and Contracting Out Act 1994 precludes certain
functions from being contracted out. They include rights of entry and
seizure, and seeking committal to prison or disqualification from
driving. However, that does not mean that cases referred to contractors
can escape those actions. When necessary, contractors will return cases
to the agency for them to be progressed.
Contractors will be doing a
sensitive job, so it is right that we deal only with the most
reputable. The agency intends to use an existing departmental
procurement framework to appoint contractors for debt collection and
tracing activity. That framework was established following a
competitive tendering process. A different procurement route is being
taken for clerical case management. Contractors will be selected
following a competitive tendering exercise, and will be expected to
demonstrate a proven track record in that area of work along with the
business and financial capacity to deliver.
Although we have been clear
about the cost of the debt contract, negotiations over clerical cases
are at such a stage that I cannot give precise figures on the costs.
However, I assure the Committee that we would not let any contract that
would cost more than keeping the work in-house. All successful
contractors will be subject to strict codes of practice and will be
required to adhere to all relevant legislation such as child support,
human rights and data protection legislation.
The order underpins our
commitment to ensuring that the child support system works—both
for parents and their children. I assure hon. Members that none of the
measures will add to the burdens on the agency, nor will they require
further IT changes. I
am satisfied that the order is compatible with the European convention
on human rights. It reflects the Government's commitment to the fair
and effective operation of the child support system, and I commend it
to the
Committee. 4.40
pm Miss
Anne McIntosh (Vale of York) (Con): It is a great
pleasure, Mr. Martlew, to appear before you this afternoon. On behalf
of the Opposition, I welcome the order, which we broadly support. We
hope that the Henshaw review will report sooner rather than later.
Perhaps the Minister will take the opportunity to tell the Committee
when he expects it to report—and confirm that the Secretary of
State is expected to make a statement before the House rises for the
summer recess. That would be most welcome.
I wish to raise a number of
practical matters ofsome moment; indeed, I am delighted to
have the opportunity to do so, and I hope that we receive satisfactory
replies so that the legislation can proceed. I note one omission in
what the Minister said; he did not mention the role of
mediation—and I do not mean only for future cases. The CSA
operates an adversarial system, and we would like to see more reference
to mediation. I am slightly disappointed that the Minister did not take
the opportunity to say that cases need not be referred or contracted
out but that there is scope for them to be dealt with through mediation
by the private agreement of the parties concerned.
I am sure that the Minister
will be familiar with the centre in the south of York. It is used by a
number of practitioners; at their own cost, the parents submit
themselves to the mediation process. It is very much in the interests
of the child for whom the support is intended, but it also gives the
parents a much more accessible and agreeable approach. Is there a
particular reason why the enabling order makes no mention of
that? I am slightly
concerned that the order seems to proceed on the basis of awards that
have already been made, yet we know that at present it is often the
variation of orders that gives rise to most problems. I wonder whether
it will complicate matters if the work is contracted and subsequent
variations are made in awards of child support.
Article 2 states that
“any function of the Secretary of
State relating to child support”
other than sections 15 and 35
of the Child SupportAct 1991 may be exercised by persons
authorised by him. I understand that sections 29 and 32 are
particularly relevant in that regard.
I shall not read out the very
helpful explanatory memorandum as I am sure the Minister and his team
are extremely well versed in the matter, but I wonder whether, for the
sake of clarity, he can help the Committee. It refers specifically to a
wide range of activities. Would the Minister be good enough to tell us
what precisely those activities will be? He gave us the three broad
heads, but we want to know what specific activities there will be under
those heads.
I also want
to know what parliamentary scrutiny there will be of the contracting
out arrangements. The agency is already one step removed from the
Department, and although we broadly support the contracting out
arrangements, it will make more difficult the necessary parliamentary
scrutiny, which is conducted by the relevant Select Committee—a
number of my hon. Friends serve on it with distinction and
enthusiasm—the ministerial team and the shadow team, who would
relish the opportunity to observe and scrutinise the arrangements. I
would like to know what the parliamentary procedures will be.
The Minister referred to the
setting up arrangements, but I am not sure whether he said what the
costs will be or how they will be met and from what budget. He
said—the explanatory memorandum confirms it—that the
contracting out arrangements will free a maximum of 700 staff, but he
did not say what those staff would be doing other than devoting their
time to the new cases. Our understanding is that the old cases are
taking most of the Department’s time.
I wonder why the old
cases, those that have been waiting the longest, are not being
highlighted. The explanatory memorandum says that £3.3 billion
is outstanding, so dealing with the backlog of old cases would
obviously release those resources to go to child support. It would be
helpful if the Minister were to say what the cost of contracting out
would be, how those costs are to be met and whether the Department
intends to allocate an additional budget for the purpose.
On debt collection, the
explanatory memorandum states that in certain circumstances contractors
will “return cases to
the Agency where they consider such measures would represent the most
effective method of collecting a debt and where other attempts at
enforcement have proved unsuccessful or are considered
inappropriate.” It would
be extremely helpful to the Committee and to potential contractors to
be a little more clear about the specific circumstances in which such
cases are expected to be returned to the contractors. It would avoid
any possible doubt. It would also be helpful to know how many cases
fall into the category of clerical case management—it is
referred to graphically in the explanatory memorandum—and for
how long those cases have been in that category.
It is said that the CSA has a
capacity gap owing to what is described in paragraph 4 of annex A to
the explanatory memorandum as a “temporary surge in
demand”. I wonder why that is. Under the section headed
“Operational Improvement Plan” it
states: “In
effect, the Agency has a capacity gap. The agency therefore proposes to
meet some of this temporary surge in demand through contracting out
certain elements of its core business to the private
sector.” I am intrigued
to know why the gap is deemed to be temporary and for how long it
thinks the surge will be last.
The right hon. Member for
Birkenhead (Mr. Field) has been rather critical of the contracting out
arrangements. He was reported in The Guardian of6
February as saying:
“If the Government goes
ahead with employing private debt collectors, this should make it
possible for thousands more fathers to be forced to pay
up.” An alternative view
was put by the Child Poverty Action Group, which asked
“What methods will
private firms use, how will they be regulated and how much of the debt
they collect will be kept as
profit?” That goes back
to my earlier question about how contracting out will be funded and
what budget the Government have in
mind. I am sure that
all hon. Members have been contacted by the Credit Services
Association. At least one newspaper has reported the
association’s interest in taking up that work. Its executive
director
said: “We would
be very keen to take this job on and believe that we can be effective,
and single mothers and children will benefit. We would not collect
money in cases that have gone to appeal and95 per cent. of
cases get handled in an office and are pursued with correspondence and
telephone calls. In very few cases would it go to doorstep
collection.”
I am told that concerns were expressed
about doorstep collection during the consultation.
I understand that the agency
consulted Citizens Advice about the contracting out proposals. The
latter’s main concern was the potential for private debt
collectors inappropriately to use aggressive tactics. It suggested that
its own debt specialists should work with the agency to ensure that
that problem was addressed. What will the modus operandi be of the
contractors in that regard? Can the Minister satisfy the Committee that
heavy-handed tactics will not be used and that Citizens Advice concerns
will be
met? The
agency failed to consult employers and representatives of payroll
administration companies at a recent meeting. The employers expressed
concern that the contracted debt collection agencies might take them to
court to recover their employees’ maintenance arrears if, for
entirely legitimate reasons, a deduction from earnings order was not
implemented. Can the Minister satisfy us that that will not happen?
What enforcement measures will the contracting organisations be able to
use if a deduction from earnings order is not to be
used? The Minister
will be aware of the criticisms of the CSA. I admire the CSA staff, who
work in extremely difficult circumstances, and anything that we can do
to assist them in meeting their and the CSA’s obligations and
responsibilities would be good for the agency and for the
parents—good for all concerned. I wonder why the agency has not
used many enforcement orders. What guidance will be given to the
contractors on enforcing deduction from earnings orders that have been
made? Further
concern was expressed by employers about their ability to recognise as
legitimate those deductions from earnings orders issued by contracted
organisations rather than the agency. How will the Government address
that point? Can the Minister satisfy me that such orders will not be
open to fraud? I know of one case of identity fraud in my constituency,
and I fear that this type of order could be open to such
abuse. I understand
that the agency will be responsible for contacting the non-resident
parent two weeks before referring cases to the contractor. It will
offer the non-resident parent the opportunity to make an agreement to
make regular payments prior to that referral. If it is an arbitrary
two-week period, at what point is the case handed over to the
contractors, and is there an opportunity for mediation
then? I return to the
concerns expressed by the Credit Services Association. It understands
that working for the agency will be fraught with difficulties, not
least because of the need to ensure that debts are certified before
being sent to the contractors. The association asks that that specific
point be addressed. It also wants to ensure that customers have a
single source of information, and that their right of appeal and
complaint is not compromised. Those questions go to the heart of the
difficulties currently being encountered by agency staff, and by
resident parents with care and non-resident parents. How will the
Minister address that
matter? The
Credit Services Association, which confusingly is also the CSA for
short, has also told the Government that its members will be able to
carry out the task. It has specifically said that specialist training
is required and
will be given, particularly as debts being passed could apply to
sensitive cases. What training is envisaged and what specific budget
have the Government set aside for it? The Credit Services Association
gives the figure of £3.3 billion as being the amount currently
owed. It has asked that the Child Support Agency hold discussions with
the industry on how the order will be implemented. I am concerned that
no discussions have been held so far. Will the Minister issue a
direction to the Child Support Agency to hold discussions, and if so
when does he expect them to take
place? The Minister
will know from the nature of the concerns that I have raised that they
go to the heart of how the order will operate. Although we support the
potential for contracting out in principle, we are reluctant to let it
happen until we have in place some mechanism for parliamentary scrutiny
and an answer to the real concerns that have been
raised. 4.57
pm Dr.
Vincent Cable (Twickenham) (LD): Like the Conservative
spokesman, I have no quarrel with the basic principle behind the order.
It is surely right that we try to achieve high levels of collection for
the benefit of children in the circumstances involved, and I have no
ideological problem with the principle of contracting out. However, we
know from painful practical experience in central and local government
that contracting out is full of hazards. Whether it is a matter of
collecting dustbins or sophisticated contracts with the London
underground, it requires a public agency to be competent and
sophisticated, with a good understanding of the business so that it can
pitch its contracts in the right way and assess risk and cost in a way
that represents value for the
taxpayer. The sad
history of the Child Support Agency and the scathing comments that it
has received from many of us and, more recently, from the Select
Committee, does not fill me with confidence that it is the best body to
negotiate sophisticated contracts, but let us hope. My other source of
apprehension is the debt-collecting function. Like every Member, I have
had a lot of casework associated with both the CSA and debt collectors,
much of which has been horrendous. A typical case is a household that
has run up enormous bills with BT because of a telephone scam and is
not paying it for good reasons. The householders then find a debt
collector on their back, hundreds of pounds of costs payable and
bailiffs appearing at their door. Other people run into difficulty with
a parking fine that they were not aware of or are disputing, and a debt
collector is involved with a bill of hundreds of pounds, and a great
deal of difficulty flows from that.
The historical lack of
competence of the CSA and the inherent and often unpleasant
difficulties associated with commercial debt collecting together
present serious potential problems. I quote, as did the hon. Member for
Vale of York (Miss McIntosh), the Child Poverty Action Group, which
asked the right
questions: “What
methods will private firms use, how will they be regulated and how much
of the debt they collect will be kept as
profit?” I shall focus on
each of those three questions in turn.
On how the firms will be
regulated, the Minister said that they will be governed by a strict
code of conduct. I do not know the industry in detail, and it is
possible that it is formally regulated by the Financial Services
Authority and the Department of Trade and Industry, but I do not think
so. The Minister may be referring to self-regulation by the industry,
but if I am wrong I am sure that he will correct me. If it is
self-regulation, what safeguards do we have? The Minister has served on
the Treasury Committee for years, and he knows the history of
self-regulation in financial services. He knows how unsatisfactory it
has been, and that it has had to be supplemented by Government action.
Will he make a clear statement about the status of that strict code of
conduct? Is it self-regulation, or is it something
more? Secondly, I turn
to methods of collection. Again, the hon. Lady was right. A good deal
of difficulty can arise as a result of doorstep collection methods,
particularly in cases like this. For instance, the second family from
whom the proceeds are being collected may be guiltless. The man may
have abandoned his first family—he may be at fault, and may need
to be pursued—but the family that he now lives with may be
guiltless. Such families often have to deal at first hand with
aggressive debt collectors. Has the Minister made a rough assessment of
the proportion of cases that would proceed beyond the office to
doorstep
collection? Thirdly, I
ask about the cost. The Minister gave a specific assurance that the
fees that the Child Support Agency would pay to the debt collectors
would not exceed the costs of administrative collection by the agency.
He said that there would be no extra cost to the taxpayer. He also gave
a categorical assurance that payments to families would not be
affected. How will the debt collectors make their money? They are not
charitable organisations. They have to satisfy the interests of their
shareholders. Where does the margin come from? It can come only from
the family from whom the money is being extracted. In some cases, that
may be justified. How
will the process be managed? Let us suppose that someone has an
outstanding bill of £1,000. The collection costs will be
£300 or £400. What is to stop debt collectors asking for
£2,000 or even £5,000? Is the process to be managed? How
will the debt collectors make their margin? Who will oversee them to
ensure that they do not operate in a highly exorbitant, irregular and
unsatisfactory
manner? Although the
measures may be desirable or even necessary, they do not address some
of the fundamental problems of the Child Support Agency; indeed, in
some respects, they may aggravate them. As the Minister knows, one of
the central problems is that the agency makes numerous errors. I
understand that the figures for 2004-05 show an increase in errors in
its calculations of something in the order of 70 per cent. What will
happen if subcontracted account payment demands are sent in error? The
hon. Lady asked whether the payment orders will be certified? Will
there be an additional audit of those accounts before they are sent
out, or do we run the risk of there being a30 per cent. error
rate, the average on agency
accounts? How will the
change affect the large element of outstanding payments that is
described as uncollectable. I understand that that sum has risen
from £1 billion in the mid-1990s to more than£3
billion. For that reason, that part of the agency’s accounts has
never been properly audited; those large sums cannot properly be
explained. Much of that money is officially described as unaccountable.
Some people refuse to pay, and some may have emigrated, but others find
themselves in long-term unemployment. There may be good reasons for the
money being uncollectable. Will the debt collection agencies be given
the task of collecting money from people who cannot pay, as well as
from those who will not pay? Will a distinction be made between failure
to pay and money that is uncollectable? How does the order sit
alongside other recent Government proposals to tighten up payments by
the Child Support Agency? I understand that, some time ago, they were
recommending that defaulters should be subject to the withdrawal of
driving licences. Has that happened? What is the experience of that? Is
that a first step before debt collectors are called in or a second
step? Is it still in play? Similarly, there was a proposal that
defaulters should be tagged. Is that still a live proposal or has it
been
dropped? On
financing such measures, the Minister responsible has said that, as a
result of this exercise, the Government hope to realise an additional
net sum of £100 million. If that happens, it will represent
positive payments from defaulters to families. Will the Minister say
something about the status of that £100 million? If this were a
Treasury document, it would be accompanied by a regulatory impact
assessment with some independent validation of that sum. Will the
Minister say where the sum comes from, what the margin of error is and
whether it has been independently
assessed? 5.6
pm
| 
