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13 Dec 2006 : Column 873

Child Maintenance

12.31 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 future of the child maintenance system.

The Child Support Agency was set up to tackle a failing system of court-administered child maintenance. However, despite the best efforts of its staff, the CSA has never properly fulfilled its mission and its failings have been obvious and apparent for some time. That is why, earlier this year, I asked Sir David Henshaw to advise on a fundamental redesign of the child maintenance system. In July, we accepted the broad thrust of his recommendations for an entirely new approach.

Today’s White Paper makes proposals in five key areas. First, we will remove the barriers that prevent parents from reaching private settlements. Secondly, we will create a simpler and more efficient system for assessing and processing child maintenance liability. Thirdly, we will replace the existing Child Support Agency with a new non-departmental public body—the child maintenance and enforcement commission. Fourthly, we will significantly strengthen the enforcement regime. Finally, we intend to do more to promote joint parental responsibilities.

Let me take each of these measures in turn. The new system of child maintenance will promote parental responsibility and tackle child poverty. Too often, once parents break up, the current system works against both. The requirement for parents with care in receipt of benefits to use the CSA leads to the overturning of mutually agreed maintenance arrangements and undermines parental responsibility.

Prioritising the recovery of benefit expenditure creates the incentive for many non-resident parents to refuse to pay maintenance because their payments go to the Government rather than to their children. Following legislation, from 2008 we will remove the requirement that all parents with care claiming benefit must use the child maintenance system. At the same time, where maintenance is being paid, we will extend the £10 per week benefit disregard to cases on the original scheme, thus helping around 55,000 children and 40,000 parents with care.

Moreover, from 2010—when we expect a new system of assessment to be in place—we will introduce a significantly higher maintenance disregard for all benefit claimants, so that more children benefit from the maintenance that parents pay. I believe that those changes will help encourage more parents to reach their own maintenance agreements.

I also believe that we can do much more to reduce the bureaucracy of the assessment process. We will take new powers to make fixed-term awards for child maintenance based on the latest tax year information, unless current income differs by at least 25 per cent. Those awards will last for a year. We will use gross income, rather than net. As a result, only three pieces of information will be required to determine maintenance liability in the new system: gross income, the number of qualifying children and the number of children living with the non-resident parent. The assessment process will no longer be frustrated by a
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non-resident parent refusing to give information on their earnings; we will have obtained it from Her Majesty’s Revenue and Customs.

Changes to policy alone, however, will not, I believe, be enough. Sir David argued that the existing Child Support Agency was not equipped to administer the new system. He recommended a clean break with the past. We agree. A new non-departmental public body: the child maintenance and enforcement commission, or C-MEC, will therefore be established, and will be led by a child maintenance commissioner. C-MEC will have primary responsibility for all aspects of operational policy and delivery, overcoming one of the flaws in the existing division of responsibilities.

The commission will be given extra powers to recover maintenance from those who repeatedly fail to pay. That will include the imposition of new curfews and surrendering of passports; piloting the mandatory withholding of wages as the first means of collecting maintenance; and exploring with the financial services sector new powers to collect maintenance from accounts held by financial institutions. We will remove the requirement to apply to the courts for a liability order before taking enforcement action, and we will take powers to recover debt from deceased estates. In future, I expect that C-MEC will charge the non-resident parent for its services and that we will publicise the names of non-resident parents who are successfully prosecuted or have a successful application made against them in court.

About 7 per cent. of births in the United Kingdom are registered solely to the mother, yet in about half those cases mothers continue to have significant contact with the father following the birth. The law currently automatically assumes that married couples will be jointly registered, whereas unmarried parents both have to agree before a father’s name can appear on the birth certificate. As a result, the CSA has to close nearly a tenth of cases simply because the father cannot be successfully traced.

The Government have concluded that more should be done to promote joint birth registration. Current legislation should be changed to require both parents’ names to be registered following the birth of their child, unless it would be unreasonable to do so. I think that is an area where it is right to consult in more detail and to legislate only once we are sure that robust safeguards can be put in place to protect the welfare of children and vulnerable mothers.

Two further issues will, I know, be of particular interest to many Members on both sides of the House: first, the management of existing debt and, secondly, the transition to the new system. The CSA has accumulated about £3.5 billion-worth of debt—approximately half is owed to parents with care. In his report, Sir David suggested that the Government consider taking a power to write off that debt.

I have decided against any general write-off power. I believe that parents have a right to expect that the Child Support Agency and its successor body will use every power available to recover that debt. There are some limited cases where we will need to deal with completely irrecoverable debt: for example, where the parent with care or the non-resident parent is dead, or where the parent with care has asked for cessation
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of recovery activity—often following a mutual reconciliation. In total, I do not expect those debts to exceed £50 million.

I agree with Sir David’s suggestion that the CSA and its successor body should be able to negotiate offers to settle debt, including factoring debt, but I want to make it clear that where the debt is owed to the parent with care, any decision to factor debt or to accept less than the full amount will be taken only with their full agreement. I believe that we should revalue punitive interim maintenance assessments so that they more realistically reflect a parent’s actual liability. That will provide a stronger basis for the CSA and its successor body to chase down those debts and get money flowing to parents with care.

Let me turn, finally, to the issue of transition. Unrealistic expectations about moving from one system to another have blighted previous attempts to reform child maintenance. In moving to a new system we will need to strike a balance between providing a clean break for the C-MEC organisation and ensuring that maintenance payments that are flowing can easily continue. Following legislation later this Session, we aim to establish C-MEC in 2008. It will prepare and procure for the new system of assessment and delivery to be in place within two years.

Existing cases will either be able to make private arrangements or, if they prefer, move to the new system over a three-year period or take advantage of a simple cash transfer service. The cash transfer service will, where both parents agree, minimise disruption by continuing to move maintenance payments between parents based on their current maintenance award. The final details of the transition process will be worked through by C-MEC, but I am confident that the approach set out in the White Paper will effectively balance the interests of existing as well as new clients.

The White Paper sets out a fundamental redesign of the system of child maintenance. I am confident that it provides a proper foundation for a much more effective and efficient system. It will realign policy in this area with the reality on the ground. It will help address child poverty much more directly. I commend these proposals to the House.

Mr. Philip Hammond (Runnymede and Weybridge) (Con): We have not yet had a chance fully to digest the White Paper, as we received a copy only a few minutes ago, but I welcome the Secretary of State’s confirmation of the decision to scrap the Child Support Agency and to move to a more robust form of assessment based on previous years’ income and using Inland Revenue records. That is the conclusion that we have come to over the summer as the best way to build a strong foundation for effective collection and enforcement.

The Secretary of State’s proposals for the creation of a new streamlined agency depend on a significant reduction in expected case load, which in turns depends on the promotion of private arrangements between parents, the ending of automatic claims by those on benefits and a significant increase in the child maintenance disregard level within the benefits system. Can the Secretary of State tell the House how much
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money will be available to support voluntary organisations that seek to support parents in reaching voluntary agreements? Can he also explain why he is not able to tell us what the level of the increased disregard will be, as on 24 July he promised to do so, “later this year”? There are only a few days of this year left. Is it not the case that the Chancellor will not agree to the right hon. Gentleman’s proposals for a substantial increase in the disregard, or, indeed, to any other of his proposals? Is it not another example of the squabbling between Cabinet Ministers getting in the way of the process of constructive and effective government?

Millions of families trapped in the chaos of the CSA will, like Conservative Members, be bitterly disappointed by this announcement, particularly in respect of the time scale that the right hon. Gentleman outlined. The Child Support, Pensions and Social Security Act 2000 was supposed to solve the problem, but £500 million and six years later, the National Audit Office says that the new system is performing no better than its predecessor. The Secretary of State tells us today that it will be 2010 before the new system effectively kicks in and then there will be a further delay of up to three years in converting existing cases to the new basis of assessment. What he is saying to families in the system is that it could be 2013 before they see any relief.

Let me tell the Secretary of State that previous years’ income data is available now and a more robust system of assessments could be introduced on the basis of that data now, so why does he not seek to use that basis of assessment for existing CSA cases now, rather than wait another four or five years before bringing relief to families? If that requires legislation, I can tell him that Conservative Members would support the fast-tracking of any such legislation specifically designed to achieve that objective. Will he also explain why he is not able to extend the £10 disregard to benefit claimants on the old system now rather than delaying it until 2008?

The Secretary of State said that he would not assume a general power to write off debt, but can he confirm that the revaluation of interim maintenance assessments, of which he spoke, will actually mean a big write-off of the debt on the CSA’s balance sheet? Will he consider the case for creating a power for parents to pursue debts owed to them by virtue of an assessment made by the CSA through the civil courts, where the CSA has failed to collect those amounts? What will be the funding arrangements for setting up the new system? Will the funding for the new agency have to come in the form of a reduction in the funding available to the CSA in the period 2008 to 2010?

I turn finally to the Secretary of State’s proposals on enforcement powers. As he would recognise, enforcement can work only if based on robust assessments—we are pleased that we are now moving in that direction—but once that part of the system is working, there is clearly a role for greater enforcement powers for the new agency. We will support enforcement powers that are meaningful and effective and that will be used. In short, we will support real enforcement powers, not gimmicks designed to grab tomorrow’s headlines. I remind the Secretary of State that, last year, not a single absent parent had his or her driving licence confiscated. However, I ask the
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Secretary of State to look again at the idea of using deduction from earnings as a routine means of collection. It seems to us that there needs to be a distinction between compliant and non-compliant parents, and we should maintain that.

We welcome the main elements of the proposed new system that has been outlined today. We will now study the White Paper carefully. However, we cannot stand by and watch the Government turn their back on the immediate needs of the 1.4 million families trapped in the current system, and we will want to challenge the timetable that the Secretary of State has set out today, because those people need help now, not in 2013.

Mr. Hutton: I start by at least welcoming those parts of the hon. Gentleman’s comments where he indicated his support for the general direction of travel, and I am grateful to him for that. It is true that, when the previous Government set up the CSA, they had the benefit of a cross-party consensus, and it is certainly my intention to try, wherever possible, to sustain that as we take these reforms forward.

The hon. Gentleman asked me specifically about the role of the voluntary sector. It is true that, in future, we want to see stronger advice and support, and yes—I do not want to use this word; it is not particularly politically correct, but it is important—some counselling in the system when parents contemplate splitting up. That is a proper role for the voluntary sector to discharge. I do not think, if I can be blunt, that that is a proper role for the state or the arms of the state.

Mr. Philip Hammond: But you will have to fund it.

Mr. Hutton: Yes, to ensure that there is a proper service, it must be properly resourced. That aspect of the system will not come in until 2010, and I must accommodate all the expense and cost of that from within my comprehensive spending review settlement. I am confident that I can do so. The details of exactly how much support is available will need to be fixed nearer the time.

The hon. Gentleman’s principal concern was with the time scale for the transition, and I understand the point that he has made. I am sure that other hon. Members will seek to make the same point, so to all of them who are thinking of making that point, I offer a general response: we must be realistic and honest and straight with people. It would be dishonest to pretend that there is somehow a magic bullet that I can fire or a lever that I can crank in the Department to speed up the transition to the new system. If there is one thing that we should be wary of doing it is to assume that people such as me, who have responsibility at the moment, should overrule the advice that I have received from the experts who advise me and impose my judgment about a faster time scale. [ Interruption. ] Look, without labouring the point, that would be the real betrayal.

If the hon. Gentleman thinks that he can do it faster, we look forward to hearing his advice. If it comes to a choice between the experts and the hon. Gentleman, I am afraid that I will go for the experts every day of the week. If he thinks that we can go faster, we will certainly look at his proposals and study them in detail, but we should not repeat the mistakes of the past, and the time scale seeks to reflect that properly. It is quite
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wrong to say that nothing will happen until 2013, as it is wrong to say that we are turning our back on the cases that are trapped in the current system—that is not true. The main aspects of the reforms will begin to come through in 2008. That is when we will be able to offer the ending of compulsion for benefit claimants and the availability of the new £10 disregard. We can do that in 2008, because new software is required to make that payment. It will not come from the CSA; the maintenance disregard will be reflected in an adjustment in benefits, so Jobcentre Plus will do that.

The hon. Gentleman asks me about the interim maintenance assessment revaluation. That is a genuinely tough call. Again, we would do a disservice to our constituents if we did not acknowledge that there is a genuine problem that needs to be addressed. It is worth pointing out that those cases stopped in 2001, because we realised that the measure was ineffective. The dropping of IMAs was done by common consent across the parties—a shared agreement. We replaced the measure with a new criminal sanction of withholding information from the CSA. The original intent was that an interim maintenance assessment would act as a punitive encouragement to the non-resident parent who was not paying to fork out the cash. It spectacularly failed to do that. In cases where we revisited interim maintenance assessments, we found that, in view of the total debt in the system, the likelihood of money getting to the parent with care was about 30 per cent.

We have to make a choice. There is no point in pretending. Let me be honest: I know what will happen. If I try to pursue the whole debt, the hon. Gentleman and his colleagues, and perhaps some of my hon. Friends too, will say, “Hang on. This is unfair. You are asking the non-resident parent to pay back too much.” We have to prioritise and make a simple, clear choice. I want to get as much of that money back into the hands, pockets and purses of the parents with care as I can. That is going to be my priority. I think that I can recover about £500 million of that money. I am being honest and straight with the House: I do not believe that all of that £1.3 billion is now recoverable. If I have a choice between investing resource in the new organisation and debt recovery, I am going to follow the money that I can recover cost-effectively and not waste the time of the agency, or anyone else, in trying to recover debt that, frankly, is not recoverable. If that is what he is proposing, he is making a mistake.

Finally, the hon. Gentleman wants me to reconsider deduction of earnings orders. Let me be clear: the White Paper proposes that we take a power to pilot that as one aspect of the system. I am sorry if I did not make that clear. That is what we are doing. I want to make one other point clear, too. If we are to incentivise the reaching of voluntary agreements, we have to make parents who are thinking of holding up the proverbial two fingers to us again and saying, “I can play the system. I can string this out and it is going to be fine. I will wriggle out of my responsibilities,” aware that that is not going to happen. I have to make the system as unpleasant, tough and harsh as possible for the non-compliant parents. That is what this potential new power could do. I want to charge the non-resident parents, as well—

Mr. Speaker: Order.

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Mr. David Laws (Yeovil) (LD): Before we come to the Secretary of State’s future plans, will he confirm what is in the White Paper: namely, that the CSA currently has £3.5 billion-worth of arrears to chase, and 250,000 uncleared cases, with an average waiting time of approaching 500 days? Before his new plans come in in 2010, what is he going to do to ensure that the agency continues to deliver? Why is the CSA planning to reduce staff numbers—I understand by something like 2,000—over the next couple of years? Surely there should not be any reductions in staff until the CSA starts to deliver and ceases to be such a shambles.

In relation to his future plans, will he acknowledge that many people—particularly after the way in which the statement has been spun over the last few days—will regard the new organisation as a re-badged son of CSA and not the fundamental reform that they want? They will certainly be disappointed that we will not see the changes until 2010.

Earlier this year, the Secretary of State promised the House that his policy on the CSA would not be driven simply by gimmicks. In that case, why is he announcing a website to name and shame parents who are not paying, when he intends to use that measure only against people who have been prosecuted in any case? Does he acknowledge that that is likely to make almost no difference and will simply be seen as a gimmick?

Will the Secretary of State confirm what he did not say in the statement, which is that paragraph 5.42 of the White Paper makes it clear that he is planning to write off £800 million of the £3.5 billion arrears? I understand entirely his concerns about whether he will collect all that money, but why is he writing it off before he has even struck agreements based on the actual incomes of the non-resident parents? Surely that will be the right time to write off arrears. Will not people be suspicious that this is simply about massaging down the overall figures?

On the issue of trying to assess people’s income and collect the money, we are disappointed that the Secretary of State has not gone for the fundamental reform of folding the Child Support Agency into Her Majesty’s Revenue and Customs. When he says that he is going to use previous years’ income data, will he acknowledge that some of that will be 20 months out of date? That may mean that he will have the same challenges, appeals and disagreements that currently bung up the system. Is that not a serious concern?

Does the Secretary of State also acknowledge that, if he wants to demonstrate that he is getting tough on people who seek to avoid their responsibilities, he ought to change the CSA so that it is capable of pursuing parents who move abroad? That is possible for many other agencies. Are not people likely to conclude that they have had 10 years of non-delivery from the Government on the Child Support Agency, in spite of the initial promises, and that the Secretary of State is now suggesting four more years of delay? Why should people be confident that he will deliver on these grand aspirations?

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