Select Committee on Work and Pensions Fourth Report

Conclusions and recommendations

1.  In light of the recommendations of our previous report, we are pleased to note that the Government's proposals to reform the CSA include its eventual wind-up (Paragraph 9)

2.  The Government needs to recognise, in planning the provision of advice services and ensuring that these meet the needs of both parents, that parents making private arrangements may well not enjoy equal bargaining power, with the potential for such power imbalances to be reflected in the terms of financial arrangements. We also ask the Department to explain how the problems associated with the child maintenance system before the Child Support Act 1991 will not simply recur with the increased emphasis on private arrangements. (Paragraph 23)

3.  The Committee agrees that Jobcentre Plus has an important role in signposting lone parents to child maintenance advice services. However, by definition Jobcentre Plus will predominantly be dealing with lone parents claiming benefits. There will be other separating parents on low incomes with a need to have a child maintenance arrangement in place who will not necessarily have contact with Jobcentre Plus. The Government needs to find ways of reaching these other groups, such as low income separating parents in paid employment, to ensure that they are not at risk of being left without adequate child maintenance arrangements (Paragraph 31)

4.  The Committee accepts that C-MEC should not be involved in questions of contact and support for parenting by separated couples, but believes that these issues are an inevitable and unavoidable part of many CSA clients' lives. Ensuring that there is sufficient high-quality, holistic, trusted and independent advice for both men and women in all areas of the country is therefore an essential precondition of success for the Government's proposals. It will be crucial for parents who have separated, for example, to receive timely advice on what is a reasonable settlement and how payments should be set up. (Paragraph 57)

5.  The Committee recommends that whether the advice is provided by a single source or separate organisations signposted from a central body, the availability should be well known, and that the advice itself should be delivered sympathetically. We are not convinced that C-MEC will be the right organisation to deliver this advice (Paragraph 57)

6.  The Committee recommends that the Government ensures advice for separating parents is adequately funded to provide both a telephone service and face-to-face meetings. We recommend that the Government sets out its detailed plans in this area at the very latest before the Second Reading debate on the proposed Bill bringing in the child maintenance reforms (Paragraph 61)

7.  In our opinion, it seems that if the Government is intent on moving clients towards private agreements and away from using C-MEC then its decision not to explore the use of the courts is inconsistent. The Committee recommends that the Government reconsider the decision not to allow courts to make a maintenance order unless both parties consent (Paragraph 67)

8.  The Committee is concerned that the 12 month rule may not be working as intended and recommends that if the Government keeps the rule then it needs to find a way of addressing the weaknesses identified by Sir David Henshaw and highlighted in the evidence we received, in particular the confusion over the powers of the CSA to make maintenance assessments even after a "clean break" settlement and the potential manipulation of the 12 month rule by some self-employed non-resident parents to lower their child maintenance payments (Paragraph 76)

9.  The Committee believes that without any powers to set standards, monitor or enforce it is unclear what would motivate people to register private agreements and particularly how the Government would encourage separating parents, and especially those on low incomes, to do so. Parents must have confidence that C-MEC will enforce any child maintenance agreement which has been registered with it, if asked by either parent. Past experience indicates that the only way these arrangements can work is if both the parent with care and the non-resident parent believe that C-MEC will take on their case and process it speedily and efficiently if the arrangement breaks down. (Paragraph 86)

10.  The Committee is concerned that, whatever the merits of joint birth registration, this highly sensitive matter is being tagged onto child maintenance legislation when it potentially has wider ramifications through the family law system. (Paragraph 95)

11.  The Committee is not convinced by the Government's argument that it is inappropriate for C-MEC to collect maintenance calculated through voluntary arrangements. The Committee believes that Government should be doing all it can to facilitate private arrangements. In appropriate cases this will mean enabling parents to come to private agreements but providing an official collection service which provides both payer and payee with an authoritative account of payments of child maintenance made and received. (Paragraph 102)

12.  The Committee recognise that Deduction from Earnings Orders are a useful tool to receive payments from non compliant non-resident parents. We note that the DWP intends to test them as a first means of collecting maintenance, even if the non-resident parent would be willing to pay by another method. Although this proposal could have merits, it would be a significant step and we ask the Department to set out when and where it will "test" this and what steps it will take to avoid antagonising non-resident parents with good payment records who are asked to participate. We ask that the lessons learned from this exercise be reported to the Committee (Paragraph 107)

13.  We request further statistical information on the likely actual impact of the move from net to gross income on different categories of parents (Paragraph 114)

14.  The Committee recommends that legislation should continue to provide for the Secretary of State to have the power to make regulations, subject to parliamentary approval, to adjust the standard percentage rates in the new formula; and in addition that the rates should be reviewed every five years. The Committee recognises that taking account of the income of the parent with care would introduce unwanted complexity into a child support system that is trying to be simpler (Paragraph 117)

15.  We agree with the Government's intention to reverse the decision in the Smith case and define gross income as being total income after the deduction of capital allowances. However, we note this will leave the issue open of how the parent with care can obtain sufficient information to challenge low assessments, and ask the Government to set out how it will address this problem (Paragraph 124)

16.  We recommend that more research should be carried out into the appropriate level of income variation to balance operational efficiency and responsiveness to individual hardship. There should be a legal duty placed upon those non-resident parents who are involved in C-MEC cases to report to C-MEC any change in income greater than or equal to the set proportion. The Department should closely monitor how effective C-MEC is in dealing with these cases promptly. (Paragraph 134)

17.  The success of the new assessment system will depend, in considerable part, on the operational system for the transfer of information between HMRC and C-MEC. We ask the Government to make it clear how the process of data sharing will work in practice and to report the evidence from any pilots that have taken place in testing the systems to exchange information (Paragraph 139)

18.  The Committee recommends that there should be a clear, robust process of dealing with well-founded applications for variations and appeals against maintenance calculations where the parent with care believes that the non-resident parent's maintenance assessment is based on incorrect or misleading income data (Paragraph 145)

19.  The Committee recommends that the statutory child support system moves away from the current system of overnight liabilities which causes day counting and diary keeping by parents and constant readjustments. In the Committee's view the ideal solution is that there should be an initial agreement between the parents and C-MEC on the approximate amount of time the children spend between the two households. This should govern the assessment for the remainder of the year and not be adjusted unless there are major contact changes. For arrangements with close to 50:50 shared care the Government should consider the case put by Sir David Henshaw for having no child support liability at all between parents (Paragraph 162)

20.   the Committee recommends that informal payments should not be included in any C-MEC maintenance calculations. However, if, as the Government has stated, they are to be taken into account then there should be clear advice on procedural matters and an unambiguous list, prescribed in legislation, defining what counts as an informal payment (Paragraph 167)

21.  The Committee recommends that the Department does not introduce a charging scheme for applications to C-MEC. (Paragraph 174)

22.  the Committee is very concerned about the moral hazard which may be created if section 6 is abolished, by allowing non-resident parents to avoid their parenting responsibilities and by leaving parents with care on benefits. We would urge the Government to research whether similar simplification and operational savings could be achieved, and the moral hazard avoided, through a minimum lower limit where maintenance amounts below a very low level are not pursued because the benefits are too small and the costs too great. We also recommend piloting the removal of the requirement for parents with care on benefit to use C-MEC in order to analyse the effect it will have on them and on C-MEC's caseload and resources. If the Government does remove compulsion nationally in 2008, appropriate safeguards must be installed to protect vulnerable parents with care on benefit. The Government should also be prepared for the effect such a move will have in the short term on increasing the burden on C-MEC's resources as parents with care look for advice on their child support options (Paragraph 179)

23.  The Committee welcomes the Government's commitment to increase "significantly" the maintenance disregard for parents with care on benefit. On the basis of the evidence we have seen, we believe that a full disregard would be a desirable, but bold, step, especially in relation to the achievement of the Government's child poverty targets. However, given the potential cost to the taxpayer, any action should be preceded by a thorough assessment of the potential positive and negative impact on work incentives of different levels and types of benefit disregard, including percentage withdrawals instead of fixed £ amounts and the effects of annual uprating in line with prices or earnings. It should also include a proper cost-benefit analysis, and we call on the Government to publish and act on its results promptly (Paragraph 197)

24.  The Committee recommends that the Government should reassess the increase in the size of the flat rate payment for non-resident parents on benefit and it should instead be index-linked to inflation. The Committee also recommend further research is carried out into the effect this payment has on poverty among non-resident parents and their families and indeed on the work load of CSA and C-MEC; if there is found to be a significant negative impact, the Government should consider abolishing this payment and introducing nil assessments for non-resident parents on prescribed benefits (Paragraph 205)

25.  The Committee recommends that if C-MEC is granted powers to make administrative orders then these should be accompanied by safeguards to ensure against inaccuracy and to provide a swift, effective and independent process for a right of appeal. The Government should therefore set out what appeal methods it intends to introduce for C-MEC customers (Paragraph 225)

26.  The Committee notes that section 2 of the Child Support Act 1991 already provides that the Secretary of State must have regard to the welfare of any child likely to be affected by any decision involving the exercise of a discretionary power (e.g. such as whether to, and how to, effect enforcement against a non-compliant, non-resident parent). The Committee recommends that the Government reaffirm that this requirement will still apply in the new scheme of enforcement powers. Furthermore, the Committee has serious reservations as to how far the proposal to publish on the web the names of non-resident parents who have been successfully prosecuted, or non-resident parents who have substantial arrears, is consistent with this principle, given the potentially seriously detrimental effect on individual children's welfare (Paragraph 229)

27.  If C-MEC is to concentrate on compliance and enforcement with severe sanctions for non-resident parents who fail to pay their child support, then the Committee recommends that another organisation provide the advice services on levels of maintenance and shared care at the point when parents separate. Such advice should be part of a more holistic approach to relationship breakdown when children are involved (Paragraph 234)

28.  The Committee doubts that many parents with care would wish to use the court system to enforce child support liabilities. However, where there are substantial arrears, and the CSA has failed to take effective action to enforce those debts, then the Committee believes that it would be consistent with the overall policy thrust of the Government's reforms to allow parents with care the option to enforce such debts through the courts in their children's name (Paragraph 240)

29.  The Committee is concerned that parents who will now have a choice to opt in to C-MEC will not have the full information which they need to make an informed decision as it is not clear how they would move out of the system once they are in it. The Committee therefore recommends that the Government states what the expected life of a C-MEC order would be and under what conditions the case would be closed or moved onto a private maintenance direct agreement. (Paragraph 250)

30.  We note that Sir David Henshaw recommended that there should be a 'clean break', with a new body to deliver the new system, and a residuary body responsible for pursuing old debt. We are concerned that the Government's proposals will in time mean that C-MEC is running three different systems. This does not represent the clean break envisaged by Sir David Henshaw. We fear that, given the experience of the CSA, this will jeopardise the success of C-MEC. This means that the transition should be planned with administrative efficiency at its heart. We appreciate that the Government wants to focus on support for the poorest families first. We are, however, concerned at the CSA Chief Executive's comments that C-MEC may prioritise the old scheme nil assessment cases. This approach may be misplaced effort and result in little additional child maintenance for parents with care. We would welcome clarification on this aspect of the Government's proposals. (Paragraph 255)

31.  We have seen no evidence that, with CSA's record of serial IT failures, this third attempt to create a new system of child maintenance arrangements with the necessary IT support will be any more successful than the first two. The Committee recognises that the proposed reforms simplifying the child maintenance calculation does not necessarily mean a simplified IT programme as has been demonstrated by the current CSA computer system problems. The National Audit Office report on IT projects, Delivering successful IT-enabled business change, highlights the complexities of the technical issues around joining new and old systems and we hope that the Department has learnt from its past mistakes from its first two CSA IT systems. Our predecessor Committee wrote in depth about these problems and recommended that the DWP should be significantly more open about its IT projects. In this light we recommend that the Government publish detailed explanation of its plans for C-MEC's IT system in an attempt to win public confidence before the work begins (Paragraph 261)

32.  We are disappointed that having emphasised the importance of advice services in the White Paper there is evidence that the Government has already failed in explaining to current CSA clients what the potential meaning of the White Paper is to them. This is a vulnerable client group whose needs must be anticipated and met and we ask the Government to address this urgently (Paragraph 264)

33.  Given that the level of arrears is still rising, we ask the Government to explain in greater detail the changes in resourcing levels and processes which it plans to introduce to turn the situation around (Paragraph 270)

34.  The Committee recommends that the DWP should develop an action plan to ensure that the availability of compensation for maladministration (as described in the Department's publication, Financial Redress for Maladministration) is effectively drawn to the attention of potential applicants. The Committee further recommends that the Secretary of State be required to report to the Committee annually setting out the full details of the sums paid in respect of alleged maladministration by C-MEC, both under the scheme for Financial Redress for Maladministration and through legal proceedings (Paragraph 281)

35.  On balance, the Committee recommends that the Department should make every effort to collect debt owed to parents with care that can be proved to be accurate. However, the Department should look in more detail into the efficiency of collecting debt owed to the state, particularly where the calculated amounts are questionable (Paragraph 285)

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