Select Committee on Work and Pensions Written Evidence

Memorandum submitted by Child Support Action


  1.  The Government says that a new system of child support should be transparent. We agree. If this objective is to mean anything more than mere words then Regulation 8 of the Child Support (Information, Evidence and Disclosure) Regulations 1992 must be amended to authorise disclosure of information held by the Secretary of State—or C-MEC to a parent with care. If consenting adults have been close enough to share semen then they can expect to be close enough to share financial information.

  2.  It should be recognised that having taken away the right to go to Court to resolve the issue of child maintenance, the State owes a legal duty of care to parents—and that if the State negligently causes financial loss to parents then it should be under an obligation to compensate those parents.

  3.  There is a real risk that the Government objective in establishing C-MEC to assess and collect a smaller caseload will fail.


  4.  Child Support Action is a limited company, which provides Internet advice and assistance to parents with care and non-resident parents. Alison Davies is a director of the company as a result of her own dealings with the CSA.

  5.  Alison Davies was badly let down by the CSA in her own assessment. The lack of information disclosed to her about the circumstances of the NRP made it impossible to understand whether or not the calculation undertaken by the CSA was correct. In her case the NRP had income from two sources. The CSA was specifically made aware of this fact and confirmed that income from both sources was included in the assessment. Some four years after information was received it was discovered that the CSA had never in fact taken into account both sources of income in the assessment—causing her substantial financial loss. Alison Davies sued the CSA and, much to her surprise, they stated in their defence that they owed no legal "duty of care"' to her. Her case was proceeding to the Court of Appeal in 2005—but the CSA paid her arrears prior to the case coming to Court so her case was never heard. The two essential issues deriving from this case have still not been resolved, namely:

    —    transparency in the assessment process, and

    —    the extent of any "duty of care" owed by the CSA.

Question 1—Key Principles

  6.  Child Support Action supports the key principles about encouraging action to support services by parents with care and non-resident parents. It is essential that C-MEC is perceived as an organisation that is prepared to listen. Our experience to date is that the CSA is arrogant and prepared to listen neither to a PWC or an NRP. It will be essential to engage an NRP in discussions from the outset—but that if engagement is not reciprocated then early action from C-MEC should be taken.

  7.  Our concern is that C-MEC seems to be set up on the premise that it will have a smaller caseload dealing with fewer—but more complex—cases. Our immediate comment is that there is a high risk that this objective will fail from the outset because:

    —    If Courts have been given jurisdiction then difficult cases would have been taken away from C-MEC. The Government has rejected this proposal.

    —    Unless private agreements can be registered (and then enforced) by C-MEC it seems that no PWC would have a real interest in negotiating an agreement, which would be unenforceable.

    —    The laudable objective of giving PWCs the right to keep more maintenance paid is likely to result in more applications being made to C-MEC than before—and the client base who have an assessment are more likely (quite properly) to contact C-MEC on a more regular basis to ensure maintenance is actually paid.

    —    C-MEC has said that it intends to renew applications on an annual basis based on the last tax return of an NRP. We do not understand why a PWC would be expected to enter into a private agreement which would be expected to run indefinitely and which would not be automatically updated to take into account any increased salary by the NRP. The Committee must understand that it is emotionally draining on an annual basis for a PWC to have to review their financial circumstances with an NRP—whom by definition they no longer want to have a close association with. An application to C-MEC would (as it now stands) allow parents to "set and forget" an assessment without having to go through the emotionally draining requirement of renewing contact with a former partner on an annual basis.

  8.  We entirely endorse the Government's wish to have a simple and transparent system (paragraph 1.28) but we believe that these are weasel words. To be transparent it is essential that source documentation used by the CSA to make a calculation are disclosed to a PWC so that the PWC can form an assessment about whether or not the assessment is correct. We see that in paragraph 2.19 the Government recognises that some parents will not be in a position to facilitate their own arrangements without help and that effective information will need to be available. We would say that if C-MEC intends to rely on an income tax return for the purposes of an assessment then at the very least C-MEC should procure the last income tax return from the NRP and produce it to the PWC who would then be in a position to judge whether or not any private agreement was realistic.

  9.  Whilst we share the objectives of the Government, we do not share their optimism.

Question 2

  10.  The Governance of C-MEC is largely irrelevant to its users. We do however have concerns that at the moment a Minister of State is nominally responsible for the delivery of child maintenance. We have serious reservations about the fact that this is simply an opportunity to allow Government to get "off the hook" and be able to say "its not our fault". We are very sceptical of Government motives. It is well known that MPs face huge post bags in relation to constituents problems with the CSA. At present at least the Minister is theoretically responsible.

Question 3—Principles for moving forward

  11.  We recognise that the Government has a problem. The Government was plainly unable to resolve the history of moving cases from the "old scheme" to the "new scheme". Our fear is that once again parents with care will suffer. If, for example, an application to C-MEC would result in a higher assessment then why should parents with care be "stuck" on the "new scheme" and prevented from making an application. Why should parents with care have to wait until 2012-13 before making an application under a scheme that the Government says will be "improved".

Question 4—Simpler assessment formula

  12.  We all agree that we need a quicker slicker system but we have grave problems with the objectives set out by the Government since "the devil is in the detail"—and we do not know exactly what is proposed.

  13.  We do know that the Government's previous attempts to renew assessments on an annual basis failed—there was simply too much work. There is a real risk that the Government will be "swamped".

  14.  It seems to us that the Government is, through the back door, massively seeking to change the principles of assessment. The change from net to gross income is only a small part of the change—at present only earned income is generally included in an assessment. Are we correct in understanding that the change to gross income will henceforth mean that income received by an NRP from, for example, rent, dividends, bank interest, directors emoluments, benefits from employment etc are now going to be included as income available for assessment—we are surprised (to say the least) that the Government has not made its position clear since this would potentially result in a very significant increase in maintenance available for children.

  15.  On the other hand we still have problems with the reliance on latest available tax year information. What if an NRP does not file a tax return on time or at all? What if a tax return is false? The CSA has proved itself utterly incapable of investigating fraud without the involvement of a PWC. Committee MP's will know about the problems of their constituents in this regard. There is a real and grave risk that the legitimate interests of a PWC will be ignored.

  16.  We have further concerns. What if, for example, an NRP has entered into a legitimate tax mitigation scheme such as the purchase of an enterprise zone trust scheme endorsed by the Government—which has the effect of reducing income tax payments. Would income available to a PWC be correspondingly reduced. Would the outcome of the case in Smith v Smith which went to the House of Lords be different? The Government has purported to make a very complex issue appear very simple. How would variations be dealt with—eg lifestyle inconsistent with income.

  17.  The Governments stated objective of ensuring transparency (which we endorse) will fail unless the Government/C-MEC will produce to a PWC all of the core information relied on by it in preparing an assessment.

  18.  We would call for information available from HM Revenue and Customs to be used as part of the assessment process—rather than requiring it to be the only piece of information to enable an assessment to be carried out. The Government may wish that family circumstances were simple—but our experience is that they are not.

Question 5—Three approaches

  19.  We support paragraph 4.27—it is essential to count all children supported by an NRP whether under the child maintenance scheme or other arrangement. We agree that it would be necessary to prepare a notional assessment.

Question 6—Approaches to enforcement

  20.  We agree that enforcement should be a priority if an NRP defaults.

Question 7—Administrative enforcement

  21.  We are sceptical about administrative enforcement, which seemed to take away valuable rights of a citizen. To be blunt the mistakes of the past show that the CSA cannot be trusted. Administrative enforcement in the future may cause immense hardship for vulnerable (and poor) NRPs who often do not have access to good quality, affordable, specialist legal advice. The imposition of a charging order or administrative removal of a driving licence could cause tremendous hardship—in entirely inappropriate circumstances. Once again we can only repeat our concerns about the lack of legal duty of care the CSA (and presumably C-MEC) claims to owe. If mistakes were made which caused loss would C-MEC pay? "Naming and shaming" is an irrelevance which will have no impact on collection of child maintenance—seizing goods of an NRP such as a few sports cars would be much more effective.

Question 8—Chasing collectable debt

  22.  It is important to attempt to recover collectable debt. In circumstances where CSA maladministration has caused the parent with care financial loss then the CSA/C-MEC should pay. The Department for Work and Pensions does not seem to make reference to its own guide called `Financial Redress for Maladministration'. Our view is that very few users of the service are aware of this publication. The CSA should notify parents with care (and NRPs) about this document so that people should be encouraged to make a claim for compensation against the CSA in circumstances where their maladministration has caused financial loss. At present only those who know about the policy and push the guide make claims.

Question 9—Write off powers

  23.  Our view is that much of the debt is for all intents and purposes practically irrecoverable. The CSA should write this off and pay compensation to the parent with care. If the Government then wants to factor off the remaining debts to recover part of its losses then this is a matter for the Government.

9 January 2007

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