Child Maintenance And Other Payments Bill - continued          House of Commons

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SUMMARY OF THE REGULATORY IMPACT ASSESSMENT

Child Maintenance

525.     A full Regulatory Impact Assessment is published alongside the Bill. Copies are available from the Vote Office as well as from the Department for Work and Pensions Website (www.dwp.gov.uk).

Administration costs of proposed reforms

The costs set out below represent the estimated implementation and administration costs associated with the reforms set out in the Bill, and include costs to the Department for Work and Pensions, other Government Departments, and Business.

Costs and benefits to individuals

The reforms as set out in the Bill are expected to have the following impact on individuals:

  • Parents with care in receipt of prescribed benefits would be given the choice on how to make their own maintenance arrangements.

  • The Commission will be given powers to develop a charging regime which could incur fees for parents using its services.

  • Measures aimed at simplifying and speeding up the calculation process, and new enforcement measures including the Commission being able to take administrative action, are expected to result in a quicker and more efficient process for parents who use the services of the Commission.

  • New debt recovery measures in the Bill are designed to enable more persons with care to receive the maintenance to which they are entitled.

Gender impact

526.     The measures in this Bill are intended to improve income flows and support for children. Although most non-resident parents are men and most persons with care are women, the changes are not likely to alter this dynamic or advantage or disadvantage either gender group.

Race impact

527.     Research shows that lone parents from ethnic minority groups tend to have a low awareness of CSA and what it delivers, and so are less likely to approach CSA for help. The information and support service, and improvements to how child support maintenance is arranged, are expected to result in more people, including those of ethnic minority groups, receiving the maintenance to which they are entitled.

Disability impact

528.     One in every twenty parents with care claim a disability premium within Income Support. The information and support service will help ensure that disabled persons with care are informed about how to make effective maintenance arrangements.

Impact on business

529.     The proposal to use deduction from earnings orders as the initial method of collecting maintenance will increase the burden on business. The intention is to pilot this measure and consult closely with employers throughout the pilot to ensure a minimal impact on business.

530.     Obtaining income data directly from HMRC will lessen the need to contact the employer of a non-resident parent, thus reducing the administrative burden on business.

531.     Current account and lump sum deduction orders can apply to self employed non-resident parents, where deduction from earnings orders usually prove ineffective. Around 7 per cent of non-resident parents who use the CSA are self employed, and it is estimated that around 50 per cent of self employed men aged between 30 and 50 have a bank account in their own name. Based on these statistics, it is estimated that where male non-resident parents fail to pay maintenance, around 8,500 per year could become subject to a deduction order.

532.     Proposals to disclose certain qualifying information about some non-resident parents to credit reference agencies are expected to benefit credit reference agencies and lenders in gaining a more accurate picture of the financial obligations of their client base.

533.     The Commission will take over any existing contracts from the CSA and will have full autonomy regarding to make decisions regarding future contracts and how best to deliver its services, within the framework agreed by Parliament.

Impacts on small firms and competition

534.     Small firms often have few resources available to deliver day to day running of their operations. Therefore using HMRC data to calculate maintenance rather than contact the employer is likely to benefit small business proportionately more than large employers.

535.     Increased information on creditworthiness of non-resident parents will enable lending strategies of firms to be more accurate. Small lenders are less likely to be able to deal with bad debts than larger lenders, and enabling them to make more accurate decisions could reduce the amount of bad debt that they accrue.

536.     The proposal to use deduction from earnings orders as the initial method of collection could increase the administrative burden of small businesses. The intention is to pilot this measure and consult closely with employers of all sizes throughout the pilot to ensure a minimal impact on small firms.

537.     There will be negligible impact on competition from the proposed measures in the Bill.

Impact on the public sector

Encouraging parents to make their own arrangements

538.     The repeal of section 6 of the Child Support Act 1991 (the requirement for parents with care in receipt of prescribed benefits to be treated as applying for maintenance) will directly impact on a number of Government Departments and Agencies.

539.     It is estimated that the number of maintenance calculations made would fall from 130,000 each year with the CSA to 100,000 each year with the Commission once section 6 is repealed. Parents with care in receipt of prescribed benefits and non-resident parents will have more choice about how to arrange child maintenance and it is likely that less parents will use the statutory scheme.

540.     Jobcentre Plus currently process applications for parents with care in receipt of prescribed benefits who are treated as applying for child support maintenance under section 6 of the Child Support Act 1991. The repeal of section will remove this requirement. Jobcentre Plus will however play a role in sign posting parents towards information and support services.

541.     The proposed repeal of section 6 may marginally increase the inflow into the judicial system, by up to approximately 10,000 each year. The Department for Work and Pensions will transfer money to the Ministry of Justice to fund this increase.

542.     The Department for Work and Pensions and the Department for Education and Skills will work closely together to ensure that relevant, up to date information and support about child support maintenance is provided to parents, to ensure a joined up approach about all aspects of parenthood and family separation.

Delivering child support maintenance in a new way

543.     When functions currently carried out by the Secretary of State are transferred to the Commission, CSA staff will also be transferred. They will retain the same terms and conditions as now; in particular they will continue to have access to the Principal Civil Service Pension Scheme.

Simplifying and improving the child support maintenance calculation process

544.     The Commission will rely on information held by HMRC and provided to the Commission for the purpose of calculating child support maintenance. It is envisaged that this will speed up the calculation process by 20% and enable maintenance to flow to families faster.

Tougher enforcement and improvements in the collection and recovery of debt

545.     Removing the requirement to apply to the courts to obtain a liability order is expected to reduce the courts' caseload by up to 23,000 per year. Appeals made to courts as a result of new enforcement measures, such as the current and lump sum deduction orders, is expected to increase the courts' caseload by around 8,000 per year. It is therefore expected that the Ministry of Justice and the Scottish Executive is likely to experience an increased caseload of around 15,000 per year.

546.     The use of curfew orders will be monitored electronically and new and existing contracts with firms providing electronic monitoring services can be used. The impact on the Home Office is expected to be negligible.

Increasing efforts to collect and reduce debt

547.     Increased collection of debt will result in more maintenance that is owed to the Secretary of State being recovered.

Impact on the third sector (charities and voluntary groups)

548.     While it will be the responsibility of the Commission to provide a dedicated information and support service to parents, there will be an increased role for the voluntary sector, working with the Commission to provide information and support to persons with care and signposting parents towards it wherever possible. The Commission will draw on best practice from the public, private and third sectors in order to deliver its services.

Mesothelioma

549.     A full Regulatory Impact Assessment is published alongside the Bill. Copies are available from the Vote Office as well as from the Department for Work and Pensions Website (www.dwp.gov.uk). The proposal provides early access to a lump-sum payment of compensation, until any point when a claim for compensation under civil law is successful, at which time the Government payment will be recovered from the compensator prior to the civil compensation being received by the sufferer of mesothelioma or the dependants of a deceased person with mesothelioma.

Administration costs of proposed reforms

550.     These are estimated as:

  • Government: £95,000

  • Business: £1,300

Costs and benefits to individuals

551.     Those with mesothelioma can wait an average of twelve to twenty four months for a compensation settlement under civil law. The proposed new scheme will ensure a lump sum payment within six weeks of claiming, which will then be recovered from any compensation award following a civil action claim.

552.     Of those receiving a payment under the new scheme, it is thought that 360 will not receive a payment of compensation under civil action law, so they will keep the Government scheme payment, which is estimated at £6,000 during the first year of the operation of the new scheme.

553.     Compensation recovery generally means that insurers and employers will no longer be able to deduct payments under the 1979 Act from their awards of civil compensation. Occasionally, this may not happen and the individual is compensated twice. In these few cases the individual would, in future, lose that double compensation. There are no other costs to individuals.

Gender impact

554.     Under the 1979 Act, those people suffering from certain dust related diseases, including mesothelioma, who can not find a former employer to sue, may receive a one-off lump sum payment from the Government. The majority of people who make a claim are men (85%) and this is likely to be because the occupations which occasioned asbestos exposure (asbestos fibres cause mesothelioma), for example shipbuilding and construction, were largely male dominated.

555.     The proposed new scheme will extend payment to all people suffering from mesothelioma: including those who have been environmentally exposed to asbestos, for example they lived close to a factory which expelled asbestos fibres into the atmosphere; and those who have had 'para-occupational' exposure to asbestos, for example they were exposed to asbestos fibres when they washed the working clothes of their husbands who worked with asbestos. Without these proposals this group, which includes a significant number of women, would be unlikely to get any compensation unless they could successfully sue a former employer of their husband's.

Race impact

556.     The industries mainly associated with exposure to asbestos were typically the heavy industries of ship building and construction. Because of the long latency of mesothelioma, people being diagnosed now are likely to have been exposed to asbestos during the 1950s, 1960s, or 1970s. The number of people from ethnic minorities who worked within these industries during the decades stated is not available. However, figures for 1979 show that one per cent of people working in ship building and marine engineering were from ethnic minorities, and one per cent of people working in construction were from ethnic minorities. The majority of people who will benefit from the new scheme therefore are not expected to come from ethnic minorities. Overall, around six hundred people per year are thought likely to benefit from the new scheme, with fewer than six of these being from ethnic minorities.

Impact on employers

557.     The proposals will impact largely on the insurance industry, but also on other Government Departments who have a liability for paying compensation for diseases caught by the 1979 Act, of about £12 million per year. As at 2005, the cost occasioned by the proposed new scheme over ten years is £100 million. In context, the Employers' Liability Compulsory Insurance costs are around £1 billion per year.

558.     The Association of British Insurers are aware of the proposals and have indicated that the legislative timetable should provide their members with time to make any necessary adjustments to pricing.

559.     Although 1979 Act payments would not normally be made where an employer is in existence, there may be occasions when an employer can come to light after a 1979 Act payment has been made, and in these circumstances the employer or their insurer will be asked to meet their full legal liability. Some large businesses are likely to self-insure against their liability to pay compensation (although no records are held to show how many), and so compensation recovery will have the same impact on them as self-insurers as it would have on the insurance industry.

560.     There are no additional information requirements as businesses are already required to notify the Department for Work and Pensions of any claims and settlements for industrial accidents/diseases for the purposes of Industrial Injuries Disablement Benefit compensation recovery.

Impact on small firms and competition

561.     The main impact on business of the proposals will be on the insurance industry. As all employers must have Employers' Liability Compulsory Insurance, and small firms tend not to self-insure, any liability for compensation related to mesothelioma would be met by a small firm's insurers.

562.     Theoretically there may be claims arising from the employees of small businesses that did not have insurance pre-1972, but which are still trading as small businesses. The numbers are likely to be very small, but we are just asking them to meet their legal liability.

563.     The proposal may affect the competitiveness of the small number of insurers who underwrite for asbestos liabilities. This relates to differential effects, i.e. about issues of competitiveness (the ability of firms to compete relative to each other) rather than the degree of competition in the market as a whole.

EUROPEAN CONVENTION ON HUMAN RIGHTS

564.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The Secretary of State for Work and Pensions, John Hutton, has made the following statement:

    "In my view the provisions of the Child Maintenance and Other Payments Bill are compatible with the Convention rights."

565.     The following issues have been given particular consideration:

Child maintenance

  • Whether the ability of the Commission to contract out its functions (clause 8) would put the Government in breach of obligations under Articles 1 and 13 ECHR (giving effective protection to Convention rights and providing effective remedies for breach) if contractors were not "public authorities" within the meaning of the Human Rights Act. The Government is satisfied that adequate protection is in place. The Commission will fall within the definition and be obliged to exercise its functions in a way which is compatible with the ECHR including exercise of its power to contract out its functions. We anticipate that the Commission will include provision in any contracts with third parties to ensure that contractors also act in a way which is compatible, as the Department currently does. As the Commission will have ultimate responsibility for their contractors' acts, a person who considers that their human rights have been breached by the way in which a contracted-out function has been exercised will be able to complain against the Commission.

  • Whether the use of deduction from earnings orders as the initial method of collection of payments (clause 19) breaches Article 8 (right to private and family life) as the non-resident parent's employer will become aware of their dealings with the Commission when the order is made. The Government is satisfied that the provisions are justified. Appropriate safeguards have been included: the Commission must consider whether there is a good reason not to make a deduction from earnings order, and the Secretary of State has power to specify the circumstances in which good reason must be regarded as existing. In addition, the proposals will be piloted to test whether they will improve compliance rates and the speed of maintenance payments before being introduced.

  • Whether the powers to make an order to deduct amounts of regular maintenance or arrears directly from a non-resident parent's current account (clause 21) or to deduct a lump sum to meet arrears from their savings account (clause 22) breaches Article 8. These powers are justified and proportionate. The measure is designed to ensure that children receive maintenance more quickly where non-resident parents are not compliant. Regulations will stipulate a protected amount, as a maximum percentage of money which can be taken. The deduction orders will be subject to appeal to a magistrates' court or sheriff, and non-resident parents will be able to make a request that the Commission review the order if it, for example, it will cause hardship.

  • Whether the Commission's power to make an administrative liability order against a non-resident parent who fails to pay child support maintenance (clause 23) breaches Article 6 (right to a fair hearing). The Government is satisfied that the provisions do not breach article 6. The making of a liability order will be subject to an appeal to an independent tribunal, and where an appeal is made, the order will be suspended until the outcome is known.

  • Whether the Commission's power to make an administrative decision to disqualify a non-resident parent from holding a travel authorisation if they fail to pay child maintenance (clause 25) breaches Article 6, Article 8 or Article 1 of the First Protocol (protection of property). Insofar as Article 6 is engaged, the Government is satisfied that there is no breach. There will be a full right of appeal to a magistrates' court or sheriff, and the order will be suspended until the outcome of the appeal is known. Insofar as Article 8 and Article 1 of Protocol 1 are concerned, the Government considers any interference to be justified and proportionate. The measure will only be implemented where the non-resident parent has shown wilful refusal or culpable neglect regarding the payment of child support maintenance, and it is intended that other lesser measures to ensure compliance will be used first. In addition, the Commission must give consideration to whether exercising the power in a case will impede the ability of the non-resident parent to pay by affecting their means of making a living.

  • Whether the power to apply for a curfew order against a non-resident parent who fails to pay child support maintenance (Clause 26) breaches Article 8. The Government is satisfied that any such interference can be justified. The provision is intended to be used where there has been persistent or serious non-compliance. Powers are already available to commit a non-resident parent to prison for non payment. A curfew order should be seen as a less severe and intermediate measure.

  • Whether the power to disclose information to credit reference agencies (Clause 35) breaches Article 8. The Government is satisfied that any interference is justified and proportionate. The measure is aimed at increasing compliance with child maintenance responsibilities. Information will only be disclosed where consent of the non-resident parent has been sought, unless they are subject to a liability order. Credit reference agencies will only be able to use the information disclosed to them to inform the financial standing of an individual, they will not be able to sell it on for marketing purposes.

Other Payments

  • Whether the introduction of a new scheme to make payments to sufferers of mesothelioma where an occupational link to asbestos exposure can not be established breaches Article 14 in conjunction with Article 1 of the First Protocol on the basis that it may result in different treatment for different types of claimants as between (i) those suffering from mesothelioma and those suffering from other diseases, (ii) mesothelioma sufferers who can show an occupational link and those who can not, (iii) those who claim before a certain date. There is also a potential Article 1 of Protocol 1 issue in relation to the decision to recover lump sum payments made pre-commencement. The Government is satisfied that, even if these features of the legislation fall within the ambit of Article 1 of the First Protocol, any difference in treatment is justified and proportionate. Mesothelioma is qualitatively different from other asbestos-related diseases. Mesothelioma sufferers who are able to establish an occupational link will have met conditions which are harder to satisfy than those who have not. While those who claim earlier are likely to be paid a lower amount than those who claim later (as there will be less money available at the outset) the practical alternative would have been not to make any payments until a fund has built up from amounts recovered under the 1997 scheme. On balance, it is considered better to start making payments to claimants as soon as possible. As regards the decision to recover lump sum payments made pre-commencement of the new scheme from compensation paid post commencement, the Government considers that this is justified as it is intended to prevent double-payment and the net figure that the claimant receives will generally be unaffected.

TRANSPOSITION NOTES

566.     None of the measures in this Bill have any effect on or are affected by any European Directive.

COMMENCEMENT

567.     The following provisions will come into force on Royal Assent:

  • clause 50;

  • subsection (7) of clause 54;

  • clause 56; and

  • clause 58.

568.     The remaining provisions come into force on such days as the Secretary of State may by order appoint.

 
 
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Prepared: 7 June 2007