The Government's proposed child maintenance reforms - Work and Pensions Committee Contents

7  Transferring CSA cases to a new collection system

CMEC performance and operating costs

66. In 2010, our predecessors considered the performance of CMEC and the extent to which the three-year operational performance plan (announced in 2006) had addressed ongoing problems associated with IT systems and the effective collection of payments.[67] We were therefore interested to explore the organisation's progress as part of this inquiry. The current Commissioner, Noel Shanahan, provided the following figures to demonstrate the organisation's progress in recent years.

  • 972,000 children are benefiting now, compared with 800,000 three years ago;
  • £1.15 billion is collected in child maintenance now, compared with £1 billion three years ago;
  • Liabilities are being paid in just under 80% of cases, compared with 66% three years ago.[68]

67. The former CMEC Commissioner, Stephen Geraghty, described the recent performance of the CSA as "very strong" and suggested that the remaining problems dated back to between 1993 and 2005 when the arrears built up.[69] However, information on the CSA website indicates that a significant number of non-resident parents are still failing to make payments to the CSA where maintenance is due; the number of non-resident parents in the CSA system who do not pay increased from 140,900 in March 2005 to 142,300 in March 2011. [70]

Accumulation of arrears

68. The CSA continues to report £3.8 billion of arrears in child maintenance payments. Mr Geraghty told us that only around £1 billion is potentially collectable; the rest could not be collected for a number of reasons, including: the cases were over 10 years old; the individuals concerned had died; and parents with care no longer wanted the money. [71]

69. Noel Shanahan told us that the £3.8 billion figure could not be considered accurate because it had been inflated "by over 200%" through the use some years ago of "interim maintenance arrangements" established by the CSA. In these cases, the CSA over-estimated payments due, and used these estimates as a lever against non-resident parents who were reluctant to pay.[72] Noel Shanahan indicated that question-marks around the validity and accuracy of the £3.8 billion in arrears explained why the National Audit Office was unable to give a full sign off to CMEC's Client Funds Accounts for 2008-09 and 2009-10.[73] Dame Janet Paraskeva, the CMEC Chair, told us that it had no powers to write off the £2.8 billion in arrears that cannot be collected, but that there needed to be a "clean break from that old legacy" when the new scheme is launched.[74]

70. We are concerned that CMEC is reporting around £2.8 billion in historic arrears that it is never likely to collect and believe that it is unhelpful for this amount to sit on CMEC's accounts indefinitely. The Government should clarify whether this amount can be written off the CMEC accounts or abandoned when the new system is established. If so, CMEC must provide a clear public explanation as to why this amount cannot be collected.

Enforcement powers

71. Stephen Geraghty said that 90% of employed non-resident parents comply with CSA payments, compared with 80% of those on benefits and 70% of the self-employed. He provided the following information on the use of CMEC's enforcement powers:

  • CMEC has set up around 600 orders to deduct funds directly from bank accounts. This is often used where compliance is an issue with non-resident parents who are self-employed.
  • Last year CMEC set up around 56,000 orders to deduct money from non-resident parents' earnings.
  • Last year 1000 people received prison sentences for non-payment, and 35 actually went to prison. The remaining sentences were suspended.
  • CMEC has started commencement of the power to seize 800 houses, and have taken 12 so far.[75]

72. Stephen Geraghty pointed out that several enforcement powers in the Child Maintenance and Other Payments Act 2008 remain uncommenced: curfew orders, passport disqualification and driving licence disqualification without having to go to court. [76] Noel Shanahan confirmed that CMEC would find it helpful to have the power to remove an individual's passport or driving licence, but that this power would mostly act as a deterrent and would only be used in very few cases.[77]

73. We recommend that CMEC be provided with the full range of enforcement powers listed in the 2008 Act, including those which are currently uncommenced.

Cost implications for CMEC

74. The Government plans to launch the new statutory collection service in 2012 for new customers and to close the Child Support Agency to new applications over a two-year period. Parents who currently use the CSA will have the choice of either agreeing their own maintenance arrangements or accessing the new statutory service.[78]

75. The Government has not provided details of the cost savings estimated to be delivered through charging and the reduction in caseload and stated that this would depend on the final strategy agreed by Ministers.[79] However, Noel Shanahan indicated that CMEC's aim was to achieve at least a 30% reduction in costs, in common with other parts of Government.[80] CMEC's most recent annual report indicates that its net operating costs were £572 million for 2009-10.[81] The Minister told us that the Government was investing £30 million in England in parenting support (through the Department for Education) and that she would prefer money to be spent on this rather than a statutory child maintenance service.[82] While this may be true of England, it is not clear whether a similar investment is being made in the devolved administrations.

76. Noel Shanahan indicated that it would take "about three or four years" to introduce the Government's proposals, and that the transition would involve "in the region of between £150 million to £200 million in terms of additional costs".[83] Stephen Geraghty believed that reducing the number of parents using the state system might not significantly reduce costs because the system would "end up with a smaller but very work-intensive caseload. Therefore, you will still end up with a lot of the costs and not so much of the charges."[84]

77. The performance of the CSA has improved gradually against a number of indicators but is still falling well short of the expectations of both parents and the Government. We are therefore keen to ensure that the closure of CSA cases and the creation of a new system contributes to a further improvement in processes and that the reforms do not represent a barrier to the overall progress that CMEC is making. This is especially significant given that the introduction of the new system may cost up to £200 million.

IT investment

78. Our predecessors' 2010 Report also commented on CMEC's performance, including its ongoing IT problems. Research by the National Audit Office cited in that Report indicated that, as of October 2009, the IT system had over 1,000 reported problems, of which 400 had no known "workaround", which had resulted in thousands of cases being stuck in the system.[85] Stephen Geraghty told us that many of the IT problems had now either been resolved, or had been identified and would be resolved:

[In 2003] virtually everything was wrong, including the fact that it went live with lots of known issues. [...] The way we have run the system since means it now works. [...] [In December 2009] we were getting about 3,000 incidents a week. That is now down to 1,100. Of those 1,100, 450 or so are linked to 22 problems, which we will now go on to fix.[86]

79. However, the Minister argued that CMEC could not continue with its existing systems:

There is only so long we can go on with a system that is running two IT schemes with two different sets of rules, 100,000 cases that both schemes cannot cope with. The thing is, I think, perhaps more precarious than some of the results that we are looking at would suggest, because of the hard work of staff.[87]

Dame Janet Paraskeva agreed, and suggested that "it would not be worth the millions and millions of pounds that you would have to put in, frankly, to keep those systems going, because they are so complex in any case". The Minister stated that "it was actually a strategic decision by the Government not to invest further in the current schemes, because they really were past their sell­by date and needed replacing".[88]

80. However, the previous Government had already made a significant investment to resolve the CSA's IT weaknesses. In 2009, we understand that a £50 million contract was agreed between CMEC and Tata Consultancy Services to introduce a replacement IT system for CSA cases. This replacement system is yet to be introduced. We sought assurances that this £50 million investment would continue to represent value for money in light of the Green Paper proposals. Noel Shanahan confirmed that this new system would meet CMEC's requirements under the Government's proposals as currently envisaged.[89] In particular, the Green Paper indicated that the new IT system would need to create a new link to the HM Revenue and Customs' tax systems, which would provide information on income that could be used to calculate child maintenance.

81. Mr Geraghty told us that HM Revenue and Customs (HMRC) already shares information on income, especially of self-employed non-resident parents, with the CSA, but said that the CSA would usually accept the figure provided by the non-resident parent. He accepted that parents with care may not believe the income reported by the non-resident parent, and that compliance rates for self-employed non-resident parents at 70% are lower than for those on benefits (80%) or in employment (90%).[90]

82. The transition to the new system will require significant resources, including investment in staff and IT systems. The enormous IT problems experienced with the previous child support systems caused huge disruption and distress to parents and this must not be repeated. We request an assurance from the Government that CMEC will have the resources and staff it needs to manage the transition effectively and that the new IT system will not be introduced until it has been demonstrated that it works as it should.

83. We welcome the Government's proposal that the new child maintenance calculation system will draw upon the latest information on non-resident parents' income from HMRC. Our expectation is that the proposed system would use information on income reported to and accepted by HMRC, rather than self-reported income, as the basis for the calculation of the liability of self-employed, as well as employed, parents. It would be helpful if, in response to this Report, the Government clarified the timetable for introducing this mechanism and provided us with more information on how it will work in practice.

67   HC 118 Back

68   Q 145 Back

69   Q 65 Back

70 Back

71   Q 69 Back

72   Q 150 and Q 152 Back

73   Q 152 Back

74   Q 150 Back

75   Q 85 Back

76   Q 85 Back

77   Q 151 Back

78   DWP, Strengthening families, promoting parental responsibility: the future of child maintenance, Cm 7990. January 2011 Back

79   DWP, Strengthening families, promoting parental responsibility: the future of child maintenance, Impact Assessment, January 2011 Back

80   Q 162 Back

81   Child Maintenance and Enforcement Commission, Annual Report and Accounts 2009/10, HC60 Back

82   Q 137 Back

83   Q 158 Back

84   Q 92 Back

85   HC 118 Back

86   Q 78 Back

87   Q 148 Back

88   Q 149 Back

89   Q 159 Back

90   Qs 86 and 89 Back

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Prepared 3 July 2011