Thirty Ninth Report Contents

Instruments drawn to the special attention of the House

Draft Child Support (Miscellaneous Amendment) Regulations 2018

Date laid: 12 July 2018

Parliamentary procedure: affirmative

Summary: This instrument, laid by the Department for Work and Pensions (DWP), proposes to introduce a number of changes to child maintenance legislation. These include: including major assets in the calculation of child maintenance liabilities; adding to the range of collection and enforcement powers to include deductions from joint accounts and the confiscation of the payer’s passport; and mechanisms to write off certain debts that built up under the 1993 and 2003 Child Support Agency schemes which are now being closed down. We have received four submissions which are published in full on the Committee’s website with DWP’s response.2 The submissions express a wide range of, sometimes contradictory, reactions to the proposed legislation but seem consistent in their view that it is premature and that further work is needed to get the detail right. We take the view that the enforcement measures proposed are likely to have very little effect in improving the current 57% compliance rate for Non-Resident Parents which has been roughly static for the past two years.

These draft Regulations are drawn to the special attention of the House on the ground that they give rise to issues of public policy likely to be of interest to the House.

5.This affirmative instrument has been laid by the Department for Work and Pensions (DWP) under the Child Support Act 1991 to introduce a number of changes to child maintenance legislation. These include: including major assets in the calculation of child maintenance liabilities; adding to the range of collection and enforcement powers to include deductions from joint accounts and the confiscation of the payer’s passport; and mechanisms to write off certain debts that built up under the 1993 and 2003 Child Support Agency schemes which are now being closed down. It will also introduce powers to write off debt that has been sequestrated in Scotland. The instrument is accompanied by an Explanatory Memorandum (EM) and a partial Impact Assessment (IA).

6.The instrument has resulted in four submissions being sent to the Committee from Ms Joanna Archer, Dr CM Davies, Families Need Fathers and Gingerbread. They are published in full on the Committee’s website. They express a wide range of, sometimes contradictory, views on the proposed legislation but seem consistent in their view that it is premature and that further work is needed to get the detail right. The DWP has responded to the key points raised in the submissions, some of which go beyond the content of this specific instrument. That document is also published in full on our website.

Child Maintenance calculation amendments

7.The existing system is being amended to address the concerns of stakeholders that a small number of wealthy Non-Resident Parents (NRP) are currently able to manipulate their assets to artificially lower or avoid their child maintenance liability. In her submission, Ms Archer mentions that her former spouse has bought a yacht but cannot be made to pay the weekly cash sum due to her.

8.The change enables a notional income at a set percentage to be inferred from assets individually worth more than £31,250. Assets include shares, bonds, bullion and virtual currency. However, Gingerbread states that it is not clear from the wording of legislation whether this provision is limited to UK assets and whether penalty could be avoided by moving assets offshore.

9.The submission from Fathers Need Families expresses concern that the calculation of assets is biased towards the parent with care:

“ … this legislation proposes to extend the value of future assessments to include unearned income of paying parents, without taking any account of income earned or otherwise received by the receiving parent… receiving parents experience a measure of financial ‘protection’ in so far as they receive child-related benefits, housing support, etc, which are reviewed regularly and … their state benefits are unaffected by received Child Maintenance payments, regardless of whether these are £0 or £1,000 a week.”

10.DWP’s response confirmed this approach:

“We believe both parents have a responsibility to contribute financially towards the cost of bringing up their child, including their food and clothing, as well as contributing towards the associated costs of running a home. While this responsibility is shared, the purpose of a statutory child maintenance scheme is to calculate and, where necessary, arrange collection of a legal liability from the person named as the Paying Parent. The calculation represents an amount of money that is broadly in line with the amount that a Paying Parent would spend on the child if they were still living with them, irrespective of the income or assets of the Receiving Parent.”

Deductions from joint and unlimited partnership accounts

11.To close down another avenue to avoidance, the changes enable the Secretary of State to make regular or lump sum deductions from joint and unlimited partnership accounts in which the NRP has an interest. The other account holders will be informed of the intention and given a set number of days to make representations. Ms Archer expressed concern that this notification period would allow the NRP to move their assets elsewhere but one of the provisions of the initial Interim Order that the instrument introduces includes an instruction to the deposit-taker not to do anything that would reduce the amount standing to the credit of the account below the amount specified in the order (regulation 3(13)).

Passports

12.The instrument also commences a power set out in sections 39B-G of the Child Support Act 1991 enabling the Secretary of State to apply to the court for an order to disqualify an NRP who is wilfully refusing to pay what is owed from holding or obtaining a UK passport for up to two years.

13.The views on this provision in the submissions were mixed–while welcoming stronger enforcement measures, Gingerbread wondered how frequently they would be used, and suggested there should be greater focus on common enforcement powers. Dr Davies questioned whether the withdrawal of someone’s passport was consistent with the European Convention on Human Rights. DWP responded that the decision would be for the courts to exercise this power in a proportionate manner:

“This measure will be used as a last resort, where all other enforcement actions have been found to be inappropriate or ineffective. We will apply to the court to disqualify a Paying Parent from holding or obtaining a UK passport where they have consistently failed to pay, and demonstrated wilful refusal or culpable neglect to pay their maintenance, and we have exhausted all our other enforcement options.”

Historic debt under Child Support Agency schemes

14.The DWP currently operates three schemes. It is the DWP’s intention to shut down in 2018 the two legacy schemes from the Child Support Agency (CSA), known as the 1993 and the 2003 schemes. As part of that process these Regulations introduce criteria to enable DWP to write off certain debts which are too small or too old to collect cost effectively. Again the submissions provide a mixed response to this proposal.

15.We found this section of the EM rather weak in setting out the rationale for the policy choices made and the likely policy effects and DWP has provided a further summary:

“Write-off measures

Our existing write-off powers are limited and do not allow us to effectively address the £3.7 billion arrears accumulated under the CSA. Alternative options that don’t involve legislative change represent significant costs and legal risks. In addition they do nothing to increase the amount of money flowing to children, and create prolonged uncertainty for both parents as to what, if any, further enforcement steps may be taken and when this might be.

Some of the options we have considered include:

Write off approach

Policy rationale–debt below threshold

It is not cost effective to attempt collection on individual debts of less than £500 (or debts of less than £1000 where the case is ten or more years old, as older debt is harder to recover) so we propose to write off all in-scope debt below this amount. It costs on average between £500 and £1000 to investigate and take action on these cases. This includes some of the cases going forward for collection activity in our arrears teams and some cases being put through legal enforcement processes. We feel that the thresholds based on age of case and amount of debt provide a reasonable cut off point to ensure that we do not pursue cases at disproportionate cost to the taxpayer.”

16.A partial IA is included for the provisions that enable Deduction Orders from joint and unlimited partnership business accounts. The Committee was surprised that the measures which have the potential to write off billions of pounds worth of debt, including debts owed to the Secretary of State, were not also analysed more fully in an Impact Assessment. Nor is any indication given of the number of cases which will be subject to this termination process. While we fully acknowledge the DWP’s need to balance the costs and the benefits of the system to the taxpayer as well as the parents, we would expect to have been presented with a more cogent explanation for the decisions about the various thresholds that the Regulations apply.

Conclusion

17.We note the figure quoted by a number of sources that the current rate of compliance of NRS using the current Child Maintenance Service is 57% and has been roughly static for the past two years. While the stronger enforcement measures set out in this instrument sound impressive, DWP’s own estimate is that Deduction Orders on joint and business accounts are only likely to successfully obtain the money owed in about 200 cases per year. We question whether this is going to make an appreciable difference to that overall compliance statistic.

18.Although the EM makes no reference to it, it would appear that these measures are largely in response to the Commons’ Works and Pensions Committee report on the Child Maintenance Service published in May 2017.3 Amongst other conclusions that Report described DWP as tentative in deploying its current enforcement powers and recommended “a stronger approach to enforcement, comparable with the Government’s approach to other areas of financial liability such as benefit fraud or tax.” We note that in a letter to the Minister, the DWP Committee described the Government’s initial response to their recommendations as disappointing.4 We await with interest the DWP Committee’s reaction to the current legislation.

19.The submissions we have received go beyond the scope of this instrument and call for a major review of how assessments are calculated and the way in which Child Maintenance payments interact with Universal Credit. In its supplementary material DWP have acknowledged that there is a problem, but “believe it applies only in limited scenarios to a very small proportion of the child maintenance caseload. We are currently performing analysis to confirm the scale of this complex issue, which in turn will inform our approach to addressing it. We have committed to sharing the results with interested stakeholders once completed.”


3 Work and Pensions Committee, Child Maintenance Service (Fourteenth Report, Session 2016–17, HC Paper 762).




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