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These notes refer to the Child Maintenance and Other Payments Bill as introduced in the House of Commons on 7th November 2007 [Bill 3]
CHILD MAINTENANCE AND OTHER PAYMENTS BILL
EXPLANATORY NOTES
INTRODUCTION
1. These explanatory notes relate to the Child Maintenance and Other Payments Bill as introduced in the House of Commons on 7th November 2007. They have been prepared by the Department for Work and Pensions in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.
2. The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.
3. The Bill was initially introduced in the House of Commons on 5th June 2007 and has been carried over from the previous Parliamentary session under Standing Order No. 80A. In the previous session the Bill was reported from Public Bill Committee, with amendments. The Bill contains amendments to clauses and schedules agreed in Committee.
Bill 3—EN 54/3
BACKGROUND TO THE BILL
Child Maintenance
4. The current system of child support maintenance is administered by the Child Support Agency ("CSA") and dates back to 1993. It was established by the Child Support Act 1991, and developed further by the Child Support Act 1995 and the Child Support, Pensions and Social Security Act 2000.
5. The CSA was set up to help ensure that parents take financial responsibility for their children. However performance has fallen short of expectations.
6. In February 2006, Sir David Henshaw was asked to consider proposals for the fundamental redesign of the child support maintenance system. His report 'Recovering child support: routes to responsibility' was published in July 2006 and set out recommendations to improve both child support maintenance policy and its delivery.
7. The Government's response to Sir David Henshaw, 'A fresh start: child support redesign - the Governments response to Sir David Henshaw' accepted many of his recommendations and agreed to investigate others further. This was followed by a period of consultation and more detailed policy proposals were then published in the White Paper 'A new system of child maintenance', in December 2006 (hereafter referred to as 'the White Paper') which was followed by a further consultation period.
8. The House of Commons Work and Pensions Committee reviewed the proposals contained in the White Paper. The Government's response to the Committee's report, together with its summary of the White Paper consultation, were published on 15 May 2007.
Mesothelioma
9. In July 2006 the Secretary of State announced a number of interim measures to ensure faster compensation payments to sufferers of mesothelioma, and his intention to put in place a long term solution to pay compensation in life wherever possible.
10. A consultation followed this announcement, a summary of which was published by the Government in March 2007.
11. In March 2007, the Secretary of State announced proposals to provide faster compensation to all those diagnosed with mesothelioma, providing up-front financial support within six weeks to those who were exposed to asbestos outside the workplace.
12. The Secretary of State also announced that the cost of this proposal would be met through compensation recovery whereby payments under the Pneumoconiosis etc. (Workers' Compensation) Act 1979 and the newly proposed scheme are recovered if a civil claim for compensation is subsequently successful. Payments under the new scheme would initially correspond to what can be afforded out of the projected compensation recovery amounts, and would increase as those funds allow.
SUMMARY OF MEASURES IN THE BILL
Child Maintenance
Child Maintenance and Enforcement Commission
Current position
13. The CSA was established in 1993 to assess, collect and enforce child maintenance payments from non-resident parents. The CSA was to replace court arrangements, which were seen as cumbersome and failing children and their parents. The original scheme was introduced by the Child Support Act 1991. This was amended by the Child Support Act 1995 and the Child Support, Pensions and Social Security Act 2000. The 2000 Act introduced significant changes including the introduction of a new scheme for calculating child support maintenance (the 'new scheme'), and changes to section 6 of the Child Support Act 1991, under which the CSA could treat parents with care in receipt of prescribed benefits as having applied for child support maintenance.
14. The CSA was established as one of the Executive Agencies of the Department of Social Security. Executive Agencies were first established following Sir Robin Ibbs's 'Next Steps' Report in 1988. The intention was that they would take responsibility for, and bring a new more customer-focused approach to, individual executive (service delivery) functions within Government. This would leave their parent Departments to concentrate on policy development.
15. Executive Agencies operate as part of their parent Department under powers that are delegated from Ministers, as they do not hold statutory status as bodies corporate in their own right. Executive Agencies have a Chief Executive who reports to the Department and Minister against specific targets, and they are staffed by Civil Servants. The Chief Executive of the CSA is supported by an advisory board of executive and non-executive members.
Proposed changes
16. In the White Paper, the Government proposed that a non-departmental public body (NDPB) should be established to deliver child maintenance and replace the CSA. This Bill establishes a body corporate to be called the Child Maintenance and Enforcement Commission which is referred to, in the Bill and in these Notes, as 'the Commission'. The Commission will have a role in the processes of national Government but will not be a Government Department or part of one. It will operate at arm's length from Ministers in its day to day decision making. Although Ministers will set high level principles, the Commission will have full autonomy to run the child support maintenance system.
17. The main objective of the Commission will be to maximise the number of children living apart from one or both of their parents for whom effective maintenance arrangements are in place. This objective will be supported by the following subsidiary objectives:
- to encourage and support the making and keeping by parents of appropriate voluntary maintenance arrangements for their children; and
- to support the making of applications for child support maintenance under the Child Support Act 1991 and to secure compliance when appropriate with parental obligations under the Act.
18. Most of the functions that fall to the Secretary of State under the Child Support Act 1991 will be transferred to the Commission. In addition to these functions the Commission will have further responsibilities for raising awareness among parents of the importance of taking responsibility for the maintenance of their children and making appropriate arrangements for the maintenance of children of theirs who live apart from them. To support this process, the Commission will also be required to provide a service that provides information and guidance to both parents for the purpose of helping to secure the existence of effective maintenance arrangements.
19. The CSA currently commissions external service providers to help enforce maintenance payments. The Commission will have more flexibility to commission external providers to carry out its functions in order to deliver services in the most efficient and effective way.
20. The structure of the Commission will consist of a Board with the following members:
- a person to chair the Commission (the 'Chair'), who will be responsible for setting the overarching strategic direction of the Commission, owning strategy and policy, and undertaking external stakeholder relations;
- a chief executive, who will be known as the Commissioner for Child Maintenance, who will be responsible for the executive oversight of the organisation, for delivering the operational outcomes set by the Board through direct delivery, managing the commissioning role of the Commission and acting as the Accounting Officer;
21. The Board will be able to employ staff to carry out the day to day functions of the Commission.
Removal of compulsion for benefit claimants
Current position
22. Under section 6 of the Child Support Act 1991, if a parent with care is paid or has claimed income support, or income based jobseeker's allowance, (or one of those benefits has been claimed or is paid in respect of that parent), they are treated as though they have applied for child support maintenance.
23. Parents with care who do not wish to be treated as applying for child support maintenance need to demonstrate good cause: for example, that applying for maintenance could put them, or any child living with them, at risk of harm or undue stress. If they do not demonstrate good cause, section 46 of the Child Support Act 1991 enables the Secretary of State to make a decision to reduce their benefit.
Proposed changes
24. The Bill will repeal sections 6 and 46 of the Child Support Act 1991. This will mean that parents with care in receipt of (or applying for) the prescribed benefits will not be treated as applying for maintenance, and therefore they can not be subject to a reduced benefit decision.
25. Once this change occurs existing parents with care whose application for child maintenance was made under section 6 (and was therefore compulsory) will have a choice of withdrawing from the statutory scheme should they wish to do so.
Maintenance Calculations
Current position
26. Under the current 'new scheme' legislation, the information used to calculate maintenance includes: the non-resident parent's net weekly income, the number of qualifying children, and the number of 'relevant other children' (those living with the non-resident parent whether or not they are children of that parent). The maintenance calculation can be adjusted if a change in circumstances is reported to the CSA, although a change of less than 5% in net weekly income would not result in an adjustment.
27. For the purposes of child maintenance, net weekly income is a non-resident parent's income from employment or self employment, tax credits, or from an occupational or personal pension after deductions for income tax, national insurance, and contributions to an occupational or personal pension have been applied.
28. Once enough information is provided by the non-resident parent, a calculation is performed to establish how much maintenance is payable to the person with care. The basic rate of maintenance takes account of how many children the non-resident parent is required to pay maintenance for, and is based on a percentage of their net income, up to a maximum of £2,000 per week, which is:
- 15% for one qualifying child;
- 20% for two qualifying children; and
- 25% for three or more qualifying children.
29. A flat rate is payable by non-resident parents who are in receipt of benefit or earn less than £100 a week, and is an amount up to £5 per week.
Proposed changes
30. The Bill will make several amendments to how a maintenance calculation is arrived at and maintained. Gross weekly income details from the latest available tax year will be used to calculate maintenance instead of net, and this will usually be based on information already held and made available by Her Majesty's Revenue and Customs ("HMRC").
31. Alongside this, the percentages applied for the basic rate in relation to earnings of a non-resident parent between £200 and £800 per week, will change to:
- 12% for one qualifying child;
- 16% for two qualifying children; and
- 19% for three or more qualifying children.
32. New percentages will be introduced for non-resident parents whose earnings are over £800 per week. The percentages will apply in relation to earnings between £800 and £3,000 per week. They will be:
- 9% for one qualifying child;
- 12% for two qualifying children; and
- 15% for three or more qualifying children.
33. Percentages for relevant other children will also change to the same level as those for basic rate.
34. The level of flat rate maintenance for non-resident parents in receipt of a prescribed benefit, or earning less than £100 per week, will also be increased from £5 to £7 per week.
35. The Bill will enable restrictions to be imposed on how often a maintenance calculation is changed. Annual reviews will take place to ensure the calculation reflects any changes in income or circumstance, specifically the income figure for the latest available tax year will be updated. Between annual reviews, the calculation will be revisited only where there has been a large change in income, or a fundamental change such as a child or children moving to live with the other parent.
36. Another change relates to cases where both parents each have at least one child of the relationship living with them. In such cases, both parents are a person with care in relation to one child, and a non-resident parent in relation to another. Currently they would both be liable to make a maintenance payment. The changes will enable one liability to be offset against the other, so that only the parent with the highest liability actually makes a payment.
37. Child maintenance obligations of a non-resident parent under certain types of private arrangement will also be taken into account when calculating the amount of child support maintenance payable under the Act.
Collection and Enforcement
Current position
38. In the majority of cases an application for payment of child support maintenance is made by the person with care. The applicant supplies to the CSA details of the children for whom maintenance is sought, and sufficient details of the non-resident parent to enable the CSA to contact them in order to calculate a maintenance liability.
39. The CSA will then attempt to contact the non-resident parent and obtain details of income and any other relevant information. Once a calculation is made, arrangements can be set up with the non-resident parent for payment of maintenance.
40. In some cases the non-resident parent will refuse to provide enough information to the CSA, or if it has been made available and a maintenance calculation made, they attempt to avoid payment. In these instances the CSA will use enforcement powers available to it in order to collect maintenance.
41. The enforcement powers available to the CSA are as follows:
- A deduction from earnings order to recover money directly from a non-resident parent's salary at source is usually the first action to be taken. This requires the employer to deduct amounts from a non-resident parent's income and pay them to the CSA.
- Where this is inappropriate or proves ineffective, the CSA can apply to a magistrates' court (in England and Wales) or a sheriff (in Scotland) for a liability order. In England and Wales, this will allow for the use of bailiffs to recover the debt and will then enable application to the county court to take further enforcement action. In Scotland, a liability order can be enforced by 'attaching' the debtor's assets and selling them, 'arresting' funds such as bank accounts and having them transferred to the CSA, and 'inhibiting' the debtor from dealing in heritable property until the debt is satisfied.
- In England, the next stage of enforcement available is an application made to the county court for a third party debt order or charging order. A third party debt order requires a third party, for example a bank or building society, to pay an amount held on behalf of the non-resident parent, for example funds in a bank account, to the CSA. A charging order is placed on land or property belonging to the non-resident parent and means that when the property is sold, arrears of maintenance can be recovered from the proceeds.
- In Scotland, an application can be made to the sheriff for an arrestment order, which freezes a debtor's moveable assets held by a third party who are then instructed to pay the money to the creditor, or a Bill of inhibition which means that the outstanding debt can be claimed from the proceeds of the sale of land or property.
- If all of these methods have been exhausted and arrears are still outstanding, the CSA can begin proceedings against the non-resident parent in the magistrates' court (or in Scotland, to the Sheriff), the result of which could be committal to prison for up to six weeks or suspension of a driving licence for up to two years.
Proposed changes
42. The Bill will introduce several changes to enforcement powers, with both changes to existing powers and new powers introduced. Changes to existing powers include:
- regulations may provide for a deduction from earnings order to be specified as an initial method of collection unless there is a good reason not to in a particular case;
- liability orders will be administrative and will no longer require an application to a magistrates' court or the sheriff; and
- removing the requirement to obtain an order from the county court before an application for a charging order, or a third party debt order can be made to that court.
43. New powers to be introduced include:
- a deduction order applied to a current account held by the non-resident parent with a deposit-taker such as a bank, which can be used to collect arrears and regular child maintenance;
- a lump sum deduction order which can be used to collect arrears directly from other accounts of the non-resident parent, held with a deposit taker;
- the ability to impose a curfew on a non-resident parent, which will be monitored electronically; and
- the ability administratively to disqualify a non-resident parent from holding a travel authorisation, which may be a UK passport and/or an ID card issued under the Identity Cards Act 2006 that records that the person to whom it is issued is a British Citizen.
Debt Management Powers
Current position
44. Since its inception in 1993, the CSA has collected over £5 billion in child support maintenance. At the same time, however, around £3.5 billion of debt has accumulated. The CSA has no statutory powers to write off debt.
45. Since August 2006 the CSA has held contracts with private sector debt collection agencies to pursue debt on its behalf.
Proposed changes
46. The Bill will introduce new powers to enable the Secretary of State or the Commission to collect and manage debt:
- The ability to negotiate settlements where a lesser amount of money offered by a non-resident parent can be accepted as full and final settlement of the debt.
- The ability to write off debt of a description specified in regulations, where it appears to the Commission that it would be unfair or otherwise inappropriate to enforce it. It is intended that the type of debt specified in regulations for these purposes will include:
???????????????? debt which is owed by a non-resident parent who is for example reconciled with a parent with care who has asked for the recovery action to be stopped.
- The ability to write off debt which has arisen from fees and interest charged under regulations that were abolished in 2001.
- The ability to apply for arrears of child support maintenance to be recovered from the estate of a deceased non-resident parent.
- The ability to sell debt to a third party in specified circumstances.
- The ability, in prescribed circumstances, to offset a maintenance liability and in some cases arrears where, for example, a child moves from the care of one parent to the other. Also, in prescribed circumstances, the ability to offset money paid by a non-resident parent to a third party, against the maintenance they are liable to pay.
Transfer of cases to new rules
Current Position
47. There are two child support maintenance schemes in operation:
- 'Old scheme' cases are applications made between 5th April 1993 (when the CSA began) and 2nd March 2003. These cases are subject to the formula for assessing maintenance as set out in the Child Support Act 1991 before it was amended by the Child Support, Pensions and Social Security Act 2000; and
- 'New scheme' cases are applications made since 3rd March 2003 (when the scheme was introduced) or any old scheme cases which were converted to the new scheme because they linked to a new scheme case. These cases are subject to the method of calculating maintenance as set out in the Child Support Act 1991, as amended by the Child Support, Pensions and Social Security Act 2000.
Proposed changes
48. The Bill will provide a general power enabling the Secretary of State to set out a framework for existing cases to move to the new maintenance calculation rules so far as future accrual of liability is concerned. Once the Commission comes into existence it will advise Ministers on the regulations which govern that process.
Other Provisions
49. The Bill will introduce powers to enable the disclosure of certain qualifying information about some non-resident parents to credit reference agencies, to be used by such agencies for the purpose of furnishing information relevant to the financial standing of individuals (determining their credit rating).
50. A piloting power will be introduced to enable new policies to be tested, and changes to the definition of "child" to align it with the Child Benefit Act 2005.
51. The Bill introduces information gateways between the Commission and the Secretary of State, the Northern Ireland Department and HMRC.
52. The Bill will prevent any further use of the social security provisions (which are now generally redundant) which provide that a person is liable to maintain their children, and that the Secretary of State may seek an order to recover amounts paid in income support where this has been paid as a result of failure to do so.
Mesothelioma
Current position
53. The intention of the Pneumoconiosis etc. (Workers' Compensation) Act 1979 ("the 1979 Act") was to provide a reasonable level of compensation to sufferers of certain dust related diseases, or their dependants, who are unable to pursue a civil claim because their former employers have ceased to carry on business. Mesothelioma is one of the diseases covered by the 1979 Act, and only people who receive Industrial Injuries Disablement Benefit are eligible to receive a payment under the 1979 Act.
54. The Social Security (Recovery of Benefits) Act 1997 ("the 1997 Act") provides for the recovery of social security benefits (as listed in the 1997 Act) which have been paid in respect of any accident, injury or disease to claimants who go on to receive compensation in respect of the accident, injury or disease, following a civil claim. The intention of the 1997 Act was to ensure that a person does not receive double compensation, and that the Government could recover the listed social security benefit payments it had made, from the person deemed liable for the accident, injury or disease following a civil claim.
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