The
Committee consisted of the following
Members:
Chairman:
Mr.
Martyn Jones
Baron,
Mr. John
(Billericay)
(Con)
Blears,
Hazel
(Salford)
(Lab)
Davies,
Philip
(Shipley)
(Con)
Dobson,
Frank
(Holborn and St. Pancras)
(Lab)
Goodman,
Helen
(Parliamentary Under-Secretary of State for Work and
Pensions)Harris,
Mr. Tom
(Glasgow, South)
(Lab)
Hodgson,
Mrs. Sharon
(Gateshead, East and Washington, West)
(Lab)
James,
Mrs. Siân C.
(Swansea, East)
(Lab)
Mactaggart,
Fiona
(Slough)
(Lab)
Mercer,
Patrick
(Newark)
(Con)
Ottaway,
Richard
(Croydon, South)
(Con)
Rowen,
Paul
(Rochdale) (LD)
Selous,
Andrew
(South-West Bedfordshire)
(Con)
Sharma,
Mr. Virendra
(Ealing, Southall)
(Lab)
Watson,
Mr. Tom
(West Bromwich, East)
(Lab)
Webb,
Steve
(Northavon) (LD)
Mark
Etherton, Committee Clerk
attended the Committee
Second
Delegated Legislation
Committee
Tuesday 23
June
2009
[Mr.
Martyn Jones in the
Chair]
Draft
Child Support Collection and Enforcement (Deduction Orders) Amendment
Regulations
2009
10.30
am
The
Parliamentary Under-Secretary of State for Work and Pensions (Helen
Goodman): I beg to
move,
That
the Committee has considered the draft Child Support Collection and
Enforcement (Deduction Orders) Amendment Regulations
2009.
It
is a pleasure to serve under your chairmanship, Mr. Jones.
The regulations will implement some of the powers inserted into the
Child Support Act 1991 by the Child Maintenance and Other Payments Act
2008. The powers support the Governments proposals for tougher
enforcement in the White Paper A new system of child
maintenance of December 2006. The 1991 Act makes provision for
the Child Maintenance and Enforcement Commission to use two new
administrative toolsregular deduction orders and lump sum
deduction ordersto collect child maintenance from an account
held by a deposit taker, normally a bank or building society,
containing money belonging to a non-resident parent who has
arrears.
Some
non-resident parents will do everything that they can to avoid meeting
their financial obligation to their children. The Government
want to ensure that fast, effective action is taken to enforce payment
of child maintenance when that happens, and to encourage compliance
with ongoing liabilities. We recognise that deduction orders cannot
tackle that issue alone, but the new tools will be used alongside all
the other enforcement measures already available to the commission,
such as deduction from earnings orders, bailiff action and charging
orders.
Deduction
orders will allow swift collection and enforcement, because they can be
made without the need to go to court. They can be used to
collect child maintenance from non-resident parents
who might otherwise find it easier to evade their financial
responsibilitiesfor example, the self-employed or people who
change jobs frequently. The commission is not able to use a deduction
from earnings order to collect child maintenance in those cases. The
regulations will implement deduction orders and set out the detail of
how they will operate. They have been developed in close consultation
with representatives of banks and building
societies.
A
non-resident parent who has arrears of child maintenance will have
every opportunity to make an arrangement to pay those arrears before a
deduction order is made. If the non-resident parent fails to do so, the
commission will use information that it already has, first to liaise
with deposit takers to identify a suitable account on which to make an
order. It will then need to decide whether a regular or a lump sum
order is likely to
be most effective, given the individual circumstances. That will depend
on a number of factors, including the arrears owed and the type of
accounts
identified.
If
the commission decides to make a regular deduction order, the deposit
taker will be required to deduct regular amounts of ongoing maintenance
and/or arrears from the non-resident parents account. The
commission will send a copy of the regular deduction order to the
deposit taker, specifying details of the account, the amount, the dates
on which deductions are to be made and when it will take effect. A copy
of the order will also be sent to the non-resident parent. The deposit
taker will have a legal duty to make deductions from the account
specified in the order, ensuring that it does not take the account into
overdraft, and to pay that amount to the commission. The deposit taker
may also take an amount of up to £10 towards its administrative
costs before making each
deduction.
Safeguards
will be in place to protect both the non-resident parent and the
deposit taker. The amount of each deduction will not exceed 40 per
cent. of the net weekly income used in the current maintenance
calculation. The regulations set out clearly the circumstances in which
either the non-resident parent or the deposit taker can apply for a
review of an order. Examples are where the non-resident parent has no
beneficial interest in all or some of the amount specified in the
order, and if any of the amount on the order has been
paid.
The
regulations will allow the commission to make a regular deduction order
on an account that is used wholly or in part for business purposes, but
only where that account is used by the non-resident parent as a sole
trader. Both the non-resident parent and the deposit taker will have a
right of appeal to a county court, or sheriff in Scotland, against the
making of the order and against a decision following an application to
review the
order.
If
the commission decides to make a lump sum deduction order, the deposit
taker will be required to deduct a lump sum from the non-resident
parents account in respect of a specified amount of arrears. A
number of safeguards are again built into the process. The commission
will initially send the deposit taker and the non-resident parent a
copy of an interim order, which will specify details of the account and
the amount of arrears to be collected by final order. The interim order
will also instruct the deposit taker to freeze up to the amount
specified on the order. The non-resident parent and the deposit taker
will each have 14 days to make representations to the commission
against the proposals in the interim order. At any point throughout the
process, they will also be able to apply to the commission for consent
to release some or all of the funds. For example, the non-resident
parent might do this where the funds are needed to prevent hardship,
while the deposit taker might do this where it had the intention of
exercising its right of set-off before the order was served.
A robust
appeals process will also be in place. Both the non-resident parent and
the deposit taker will have a right of appeal to a county court, or
sheriff in Scotland, against the making of the order and any decision
following an application for consent to release funds. The commission
will not make a final order until the 21 days allowed for an appeal
have passed, and will only instruct the deposit taker to release funds
once the
outcome of any appeal against the making of the final order is known.
The deposit taker will have a legal duty to comply with the
requirements of the order and to pay the commission the specified
amount. The deposit taker may also take up to £55 towards its
administrative costs before making payment to the
commission.
Hon. Members
will be aware from the impact assessment, which was published alongside
the draft regulations, that the commission plans to start with a small,
controlled implementation. We recognise that that approach will not
result in a significant increase in the amount of child maintenance
collected immediately; it is estimated at around £2 million in
the first year. However, the approach will enable the commission and
deposit takers to develop expertise in that new area and minimise the
risk of errors. It will also enable the commission to gather
information to assess properly the benefits of increasing numbers in
the future.
Hon. Members
will also be aware that the powers in the 2008 Act allow the
regulations to permit both types of deduction order to be made on a
joint account. The regulations before us do not include provisions in
respect of joint accounts. We are taking a cautious approach to that
step which, in the case of lump sum deduction orders, may involve
freezing funds belonging to a third party who owes no child
maintenance. The commission needs to think carefully about the
additional safeguards which would need to be set in place if we decided
to use the powers set out in the 2008 Act, and consider the
administrative implications for both it and deposit takers.
Once
deduction orders are in operation, the commission will be able to
gather information about how best to maximise their effectiveness in
the future. The impact assessment states that that policy will be fully
evaluated by the commission in September 2010. As part of that
evaluation, it will look specifically at the effect of excluding joint
accounts from the scope of deduction orders. If it finds that that is,
in fact, reducing their effectiveness, we will introduce further
regulations permitting orders to be made on joint accounts.
Hon. Members
will also be aware that the powers in the 2008 Act allow for deduction
orders to be made in respect of third parties such as solicitors who
are holding funds resulting, for example, from the sale of a property
or an inheritance. Up to now, the commission has focused its efforts on
working with deposit takers to ensure that deduction orders made on
accounts held by them have the best chance of working effectively. We
believe that deduction orders on bank and building society accounts
have the greatest potential for collecting child maintenance. However,
the commission will now assess the scope for further regulations, which
will enable it to recover child maintenance arrears from third
parties.
Mr.
Tom Watson (West Bromwich, East) (Lab): I welcome my hon.
Friend to her new position. My sincere apologies to her for
intervening, because I know that she is about to finish her speech, but
I am a little slow this morning and do not quite understand the
detailed language that she is using. To be clear, are we creating a new
power to take money out of the bank accounts of absent fathers who are
squirreling money away from their
children?
Helen
Goodman: My hon. Friend has understood the essence of the
measure. The powers were taken in the primary legislation that was
passed last year and we are
introducing secondary legislation to specify precisely how that will
work and to bring the powers into effect, which, if the Committee
agrees, will be in August this year.
We will be
looking at the scope for further regulations to enable the commission
to recover child maintenance arrears from third parties. That will
involve working with a number of stakeholders, including solicitors and
public bodies. In the meantime, the provisions in these regulations
will enable the Child Maintenance and Enforcement Commission to start
to use its new enforcement powers. That will help to improve the flow
of money to children whose parents are reluctant to meet their
responsibilities.
Given all the
safeguards in place, I am satisfied that the statutory instrument
before us is compatible with the European convention on human rights,
and I commend the regulations to the
Committee.
10.41
pm
Andrew
Selous (South-West Bedfordshire) (Con): It is a pleasure
to serve under you this morning, Mr. Jones. I thank the
Ministers officials for the comprehensive explanatory notes and
regulatory impact assessment. From our point of view, they are useful
for finding out what the regulations do and they inform our debate. It
is a vital part of the democratic process that we have enough
information to enable us to do our job properly.
As the hon.
Member for West Bromwich, East rightly implied, we are taking unto
ourselves a draconian power. It is one, however, that Her
Majestys Opposition support because it is both necessary and
right. We want that money to go to the children who should get it in
order to reach our child poverty targets and because it is the right
thing to do. Nevertheless, as has been said, it is a significant step.
For the first time in law, the House has taken upon itself the power to
go directly into a citizens bank account and remove money in
order to give it to that persons child or children. It is
right, therefore, that we spend some time going through the deduction
orders and examining the safeguards that are in place.
The Minister
dealt with the safeguards and I am satisfied that they are necessary
and satisfactory. She pointed out that the non-resident parent will
have 14 days to make representations and then a further 21
days to appeal to a county court, or a sheriff in Scotland. Although
the deduction orders go down the administrative route in the first
instancein other words, they can be proceeded with without
going to a courtevery non-resident parent, if they feel they
are being unfairly treated, has the right to apply to a court. That is
a necessary and vital safeguard, and we would not be happy to back the
measure were that not in place.
The
background to the orders is that the Child Support Agency has been
hampered in its work because the courts are expensive and often slow to
do their job. When non-resident parents realise that they do not have a
case in resisting the orders, we hope that the majority will go through
without it being necessary to go to a court. However, as I said, there
is an absolute right for a non-resident parent to make representations
to a court if
necessary.
I
have a number of points to make. I have not arrived at 10 just to get
to 10it has simply come out that way. I will go through them
slowly to give her and her officials time to give answers that are as
full as possible.
First,
a number of non-resident parents have written to me and I have picked
up cases from around the country where non-residents parents say that
they have asked the Child Support Agency whether they should be paying
child maintenance. They believe, perhaps from a telephone conversation
or a misunderstanding, that they have been told they do not have to.
Later, they suddenly find that they should have been paying and are
told that they have significant arrears. That is when the 40 per cent.
deductionthe maximum rate permitted by the
regulationscomes into play. That is a huge amount to take out
of someones income.
My point is a
general one, and I do not necessarily expect the Minister to have the
facts at her fingertips and to know the agencys approach;
perhaps she might get back to me on it. We need to ensure that
non-resident parents who genuinely believe that their need to pay has
been suspended, perhaps because of a misunderstanding, are not unfairly
treated, particularly if they then have a 40 per cent. deduction from
their income.
My second
point relates to joint accounts and has been answered. It was not clear
whether joint accounts were covered by the regulations and I am pleased
that there will be a review of whether they should be. A large number
of non-resident parents will set up joint accounts if they can, perhaps
with a new partner if they have one, and that will invalidate the
ability of the deduction order to do its job. If that becomes apparent
early on, will the Minister return to the matter in less than a
years time to remedy the situation? She said that some
non-resident parents will do anything and everything in their power to
get out of their proper financial obligations. I worry that that could
be an easy loophole for non-resident parents to abuse and will
invalidate what the Government are quite properly trying to
do.
Thirdly, has
the Department considered whether non-resident parents are likely to
make significant use of various cash conversion facilities around the
country? I have a constituency case where the parent with care
is extremely worried that the father of her children is about to
convert a large sum of money into cash and it is not going to touch his
bank account. There are people who provide that facility, and again
that could be a quick and easy loophole to abuse. There is not an easy
answer to that, but I would be interested to know whether the
Ministers officials have briefed her on the Departments
estimation of how typical that behaviour is by non-resident parents.
Again, she might not have a full response, which would be
understandable as it is a general
point.
My
next point is technical, relating to the fee for regular deductions.
The Minister said that a fee of up to £10 could be deducted,
which is also the figure that I picked up from the explanatory notes.
However, paragraph 12 on page 17 of the regulatory impact assessment
says:
up
to £25 for each regular
deduction.
Will
she clarify in what circumstances £25 can be
deducted?
I
note that the Minister who signed off the impact assessment was Lord
McKenzie of Luton. Does that mean that he is in charge of CSA policy,
or does the hon. Lady have the policy-holding brief for the CSA?
Traditionally, the CSA was always allocated to a
Minister
in the Lords. It was thought to be such a hot political potato that it
was normally kept at that end of Parliament. I would be grateful if the
Minister could clarify
that.
My
next point relates to the analysis of the order, which will happen
after a year; I think that the impact assessment says that that will be
in September 2010. How will that information be shared? Will there be a
written statement to the House? Also, how quickly does the Minister
envisage that any necessary action will be taken? It has taken quite a
long time to prepare the regulations. They were first thought of back
in 2006 and will not come into force until August, which is already
nearly three years in total. If we have not got them quite right and if
there are potential loopholes, some of which I have mentioned, we do
not want matters to drag on. We need to be effective in what we are
doing. Therefore, the analysis that will take place in September 2010,
along with the question of how it is acted on and shared with the
House, is very
important.
The
minimum amount, which I do not think the Minister referred to, is set
out in proposed new regulation 25D on page 4 of the
regulations. Like the hon. Member for West Bromwich, East, I, too, may
be a little slow this morning, but I cannot work out to what the
minimum amount relates. I am not sure whether it is a
minimum amount to be left in an account or a minimum amount to be taken
in certain circumstances. I would be grateful if the Minister could
clarify that.
My next
pointI think that it may be the eighthis about the
basis on which the Department will select the cases for the lump sum
and regular deduction orders. The Minister has told us that, in effect,
we are considering a pilot. It will not be applied to every child
support case across the country. Where there is a bank account, and
where there are liabilities that are not satisfied, the Department will
proceedperhaps properlyin a cautious way, with a small
number of staff working on 140 or so cases a month. How and on
what basis will they be picked? Will they be picked out of a
hat? Will they be particularly difficult cases, or will they be chosen
in response to the greatest degree of lobbying by MPs, in order to get
MPs off the Departments back? What is the basis of that
selection? It would be good to know that.
I come to my
final point. I apologise again if I did not quite hear what the
Minister said. However, she mentioned solicitors accounts when
someone has sold a house. If a solicitor, an accountant or another
professional person has a client account in which there is money, will
the orders apply to it? I would be grateful for clarification on that
issue too.
I apologise
for making a reasonably large number of points. However, as I said, it
is an important debate. We are taking unto ourselves a very significant
power and we owe it to our constituents and to non-resident parents up
and down the country to whom the order will apply to receive
answers.
10.53
am
Paul
Rowen (Rochdale) (LD): May I also begin by welcoming the
Minister to her place? I also welcome, in general, the introduction of
these regulations. Those of us who were involved in the passage of the
Child Maintenance and Other Payments Act 2008 knew that to enable
non-resident parents to pay their dues fully
was an important part of the process. I certainly support the
introduction of the order, with the appropriate safeguards. Like the
hon. Member for South-West Bedfordshire, I just have a few questions
that I would like the Minister to answer.
There is the
issue of costs£25 or £55. As we speak at the
moment, in the House of Lords the banks are arguinghopefully
not very successfullyagainst the decision that the Office of
Fair Trading should be able to deal with bank costs for people who
become overdrawn. On what basis were the sums of £25 and
£55 arrived at? It seems quite high for a monthly deduction. I
appreciate that, for a non-resident parent who has been reluctant to
engage, there will be initial costs to the deposits holder. However,
once an agreement has been reached and the order signed, with modern
computers, £25 seems an excessive amount for processing what is
deemed to be about £1,300 a year for each non-resident parent. I
should be grateful if the Minister clarified
that.
I
also want to ask about the number of people and the costs involved for
the Department. Like the hon. Gentleman, I think that the impact
assessment is very helpful; it is very clear about what the Department
wants to do. In the summary of cash benefits, it is stated that 500
cases will be considered each month, of whom, say, 350 would have bank
accounts, and 70 per cent. of those would be considered each month,
leading to the 140 cases each month where the orders are
applied.
That seems fine, but the costs of implementing that
show that the equivalent of 11 full-time staff would be involved in
that process. That seems very high, given that the cost of that would
be £444,000 and the actual amount collected would be only £2.18
million. I appreciate that, in the past, the costs of the CSA have been
much higher than that, but nevertheless, with modern technology and
the co-operation of the banks, we should not need 11 full-time members
of staff.
Like the hon.
Gentleman, I am interested in the cases of people who have joint bank
accounts and those who are not sole traders. What is the position of
someone who is in business with a new partner? Again, that could be
used as a means for not co-operating with the agency in collecting the
money. During the Bills passage, we raised scenarios of people
who were able to use their business and their business costs as a means
of hiding their true income, so that they did not have to pay. It is
not clear just how the Department will deal with this. I think there
will be only a small number of casestypically people who are
self-employedwhere, as the hon. Gentleman said, the use of
cash, rather than money flowing through an account, is used to avoid
successful claims. These are some of the more difficult cases, and it
is usually the resident parent who is owed vast sums of money, which
affects their childrens future. I should like to know a little
bit more about what the Minister and the Department are planning to do
to deal with those difficult
cases.
Thirdly,
a point that was also made by the hon. Gentleman, where we are dealing
with money held by other people, I should have thought that we could
move fairly quickly. If a house has been sold as part of a divorce, we
ought to be able quickly to get an agreement that the money owed will
be transferred over.
My final
point concerns the date. Will the Minister explain why, when the
Department usually works on two payment dates in either April or
October, she has
chosen August, given that it is part of the holiday period? What will
the likely impact of that be in terms of getting the system up and
running? If it is going to work, we need to make sure that the systems
are fully in place.
10.59
am