Family Law

Consumer Protection – in the House of Commons at 2:46 pm on 11th June 2019.

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Photo of Will Quince Will Quince The Parliamentary Under-Secretary of State for Work and Pensions 2:46 pm, 11th June 2019

I beg to move,

That the draft Child Support (Miscellaneous Amendments) Regulations 2019, which were laid before this House on 9 May, be approved.

These regulations amend child maintenance legislation to enable the delivery of the child maintenance compliance and arrears strategy.

We all know that, when parents work well together, their children fare better. A reformed child maintenance scheme based on that principle was launched in 2012 and administered by the Child Maintenance Service. This scheme was designed to encourage parents to work together following separation and, where possible, to make a private family-based arrangement for the child. Where parents are not able to do this, the statutory scheme is there as a fall-back option. I am pleased to say that, following staged implementation, the service is working well and largely avoiding the problems that beset the previous statutory child maintenance schemes. As the reformed scheme has been implemented, we have listened to the issues that hon. Members and external stakeholders have raised. This valuable input has informed our new child maintenance compliance and arrears strategy.

Last November, this House approved regulations tackling a number of those issues, closing down loopholes, introducing tough new sanctions for those who evade their responsibilities and dealing with the historic arrears that built up under the Child Support Agency. This second set of regulations supporting the compliance and arrears strategy builds on those made last November. It includes provisions to make deductions from benefit fairer, to address uncollectable debt and to improve information-gathering processes, alongside amendments to the calculation and fees regulations so that they better reflect the intent of the 2012 reforms.

Let me turn first to the changes to powers to make deductions from benefits. All parents have an obligation to support their children regardless of their financial circumstances. Parents on benefits are liable to pay the flat rate of maintenance of £7 per week. If they do not pay voluntarily, we can take deductions directly from their benefit payment, plus a collection fee of £1.40. There are different rules surrounding what may be taken for ongoing maintenance and what may be taken for arrears.

The Child Maintenance Service can currently make weekly deductions of £8.40—a flat rate of maintenance at £7, plus a £1.40 collection fee—towards ongoing maintenance from certain benefits, and £1.20 towards arrears from a smaller number of benefits. In some cases, a total of £9.60 a week can be deducted. I want to make this policy fairer for all parents involved.

The regulations enable deductions towards arrears to be made from the same benefits from which the Child Maintenance Service can deduct ongoing maintenance. They also ensure that the service can deduct a maximum of £8.40 a week in all cases. They will stop deductions towards arrears and ongoing maintenance being taken at the same time, with arrears deductions being taken only after ongoing liability has been satisfied. This removes all current inconsistencies and means that arrears of child maintenance can be cleared at a faster rate.

I am also proposing specific changes to deductions from universal credit. The Child Maintenance Service can already deduct £8.40 towards ongoing maintenance from universal credit, if the paying parent has no income from employment. The new regulations will allow the Child Maintenance Service to do the same where the paying parent has earnings in line with other benefits. This will only apply in cases where the paying parent is liable to pay only the flat rate—that is, based on earnings of £100 a week or less. This change means there will be a more efficient and consistent approach to clients on UC with similar financial circumstances.

Let me turn to the proposals regarding protected trust deeds. A protected trust deed is an arrangement in Scots law between a debtor and their creditors. In Scots law, child maintenance arrears that are covered by the deed cannot be collected once a parent enters into its terms. Although dividends may be received towards arrears while the deed is in operation, once it expires any arrears covered by the deed are legally uncollectable. At present, any child maintenance arrears are still held on child maintenance computer systems, even though they are no longer enforceable. The regulations will extend our write-off powers to cover arrears within the terms of a protected trust deed, once that deed has expired. This change keeps our legislation in line with that in Scotland and provides clarity to parents about the status of these arrears. It also stops the Child Maintenance Service holding information about uncollectable arrears indefinitely at a cost to the taxpayer.

There are occasions when child maintenance agents need to access premises to gather information, using powers of entry—whether to trace a parent, to recover child maintenance arrears or to ensure that the child maintenance calculation is as accurate as possible. We do this in a limited number of cases and when other measures to collect this information have failed. In line with the Protection of Freedoms Act 2012, we propose an additional safeguard to protect the public from unnecessary intrusion. The regulations require an inspector to apply for a judicial warrant where they are refused or expect to be refused access to premises, or where they cannot contact the occupier. Although the Child Maintenance Service cannot use its powers of entry to access a wholly private dwelling, this change would reassure the public that independent judicial consideration has been given to any request for inspection. I expect only about 20 judicial warrants to be sought per year, and the occupiers of these premises will have all the usual rights of appeal via magistrates courts in England and Wales, or sheriff courts in Scotland.

I am also proposing changes to the manner in which the Child Maintenance Service requests information from certain organisations. Mortgage lenders and occupational pension providers can be a valuable source of information where there is a need to trace a parent, to calculate a maintenance liability or to decide on the best enforcement power to use. To collect this information currently, the Child Maintenance Service has to arrange for one of our inspectors to visit. Repeat visits are often needed when the information is not readily available, and that can be costly and time-consuming. The regulations add mortgage lenders and occupational pension providers to the list of persons who are legally required to provide the service with information; that information is provided in writing, on request.

When calculating child maintenance, the Child Maintenance Service aims to produce a fair reflection of what the paying parent can afford. This is usually based on the taxable income figure provided by Her Majesty’s Revenue and Customs. The income figure given to the Child Maintenance Service by HMRC is currently provided after any deductions for pension contributions, but before non-taxable allowable expenses are disregarded. Parents need to notify the service to get those non-taxable expenses disregarded from their income figure. I propose a change in the legislation to make it clear in law that the income figure used to calculate maintenance must be used after allowable expenses have been disregarded.

The regulations also include a small technical change to collection fees, which were introduced in 2014 and were aimed at encouraging collaboration. They accrue alongside ongoing maintenance and, as with maintenance liability, accumulate when left unpaid. Collection of these outstanding fees can be enforced as though they were unpaid child maintenance. The regulatory changes that I am proposing clarify this policy intent and will provide the courts with a clear direction on fees when a liability order is sought.

Photo of Jim Cunningham Jim Cunningham Labour, Coventry South

Who decides on the level of fee—the court or the Department?

Photo of Will Quince Will Quince The Parliamentary Under-Secretary of State for Work and Pensions

The fees and charges—20% for the paying parent and 4% for the receiving parent—are set by the Child Maintenance Service.

The regulations build on the success of the child maintenance reforms, further developing collection measures and information-gathering powers, helping to make child maintenance fairer for all parents and ensuring that we fully deliver on the commitments in the compliance and arrears strategy. I commend the regulations to the House.

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Work and Pensions) (Employment) 2:56 pm, 11th June 2019

May I first welcome the Minister to his place?

These regulations are a series of changes and clarifications designed to make it easier to collect arrears and maintenance payments under the child maintenance scheme. The Opposition do not want to obstruct the measures, and we will support them today. We agree with the Minister that it is extremely important for parents to fulfil their obligations towards paying for the cost of bringing up their children. If parents fail to fulfil this obligation and fall into arrears, it is right that Government Departments step in to pursue them—and, as a last resort, through the social security payments system. In supporting this change, we are mindful that having £8.40 a week deducted from benefits for child maintenance arrears can be extremely difficult for somebody on a low income, which may be as low as £73.10 a week if they are claiming jobseeker’s allowance.

We are also too aware of the Government’s rather chaotic approach to our welfare and social security system, and the unacceptable levels of debt, poverty and growing food bank use that are largely driven by the universal credit reforms. However, this must be weighed against fairness towards the care-giver, who has to bear the additional costs of food, clothing, school expenses, childcare and other day-to-day costs of bringing up children. Child maintenance payments can be vital to families—especially those on low incomes—and to protecting children from poverty. According to the single parent charity Gingerbread, child maintenance alone lifts a fifth of low-income single parents out of poverty.

It is important to remember the context in which separated families are living. Lone parents are particularly vulnerable to poverty. According to the Joseph Rowntree Foundation, one in four lone parents is in persistent poverty—twice as many as any other group—and the inadequacy of the current social security system arguably makes child maintenance an even more vital source of income for struggling lone parents. Austerity cuts have driven lone parents further towards the brink, with the two-child limit and the benefit cap pushing three quarters of children in lone parent households further into poverty. The value of child benefit and child tax credit has not increased since 2015 due to the benefits freeze, making it harder to cover the costs associated with bringing up and looking after children. Meanwhile, the cost of childcare grows, according to the Child Poverty Action Group. The full cost of bringing up a child for a single parent has increased by 18% since 2012. Using social security as a vehicle for cuts is a political choice—and the choice has consequences, with over 4.1 million children now living in poverty.

Although we support the Government’s intention to continue making deductions from paying parents to pay off arrears after they have no maintenance liability, as stated by the Minister, I note that there has been no impact assessment of these regulations. Will he commit to a full impact assessment, and commit to monitoring this policy to guard against any unintended consequences of the change?

Photo of Jim Cunningham Jim Cunningham Labour, Coventry South

My hon. Friend makes a point about childcare. I do not know whether he has seen the reports today about the Government paying something like £5 an hour for childcare although the costs are a lot higher than that. That means, in effect, that a lot of families are being excluded from childcare. Does he agree that the Government should do something about that?

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Work and Pensions) (Employment)

I certainly do. I thank my hon. Friend for that intervention. This case has been highlighted in the media today by the shadow early years Minister, my hon. Friend Tracy Brabin.

We agree with the regulations’ intention to extend deductions from universal credit to include cases where the paying parents’ household has earnings, but will the Minister provide clarification about the commencement of this policy? The Department for Work and Pensions consultation in December 2017 said:

“Changes to UC deductions would be implemented when UC is fully rolled out.”

However, it appears from the commencement regulation of the draft statutory instrument that the changes in respect of universal credit will take effect before roll-out has been completed. Is the Minister able to clarify that? Given that universal credit has been beset by so many problems and delays so far, will it be able to cope with yet another change to the system?

We welcome the DWP’s intention to reduce outstanding arrears. Indeed, its consultation on this issue said that its changes

“would send a clear message to paying parents that failing to pay for their children is not an option. We will recover the arrears eventually, even if we have to wait until they claim State Pension.”

However, that appears to be slightly at odds with the Department’s actions of December last year when it wrote off billions of pounds in arrears in child maintenance. Will the Minister supply an update on the progress of this arrears write-off and how many receiving parents have made representations asking for their arrears to be collected?

Alarmingly, according to the latest statistics, the level of arrears under the new CMS system appears to be creeping up, just as it did under the old system. Since the CMS began, a total of £259.2 million of child maintenance has been unpaid and should now be paid through the Collect and Pay service. That is 11% of all child maintenance due to have been paid since the service began. Although I do not doubt the commitment of the new Minister to tackling non-compliance and arrears, these figures start to make his words on the issue seem rather hollow. Does he have a performance target on the amount of child maintenance remaining unpaid?

Arrears can be compounded by the failure of enforcement in Direct Pay, where parents manage payments directly with each other. In its report on Direct Pay, published this year, Gingerbread reported complaints from parents that arrangements are prolonged by unclear thresholds of enforcement, and that there is inconsistent follow-up and very poor communication from caseworkers. It is very difficult to track enforcement in Direct Pay. Despite its being a central plank in the child maintenance system, the DWP does not track whether payments are made. As Gingerbread says, this means that the Department cannot report on compliance in 70% per cent of cases. Given its centrality to child maintenance arrangements, does the Minister not think it is now vital to track whether payments are being made under Direct Pay?

Labour Members would not contend with other measures in these regulations, including changes to information gathering—which will make things simpler and save the taxpayer money—powers of entry and the calculation change. However, I will finally raise an issue that is not dealt with in these regulations but is a major concern to separated families. Fees were introduced under the new system to encourage more family-based and Direct Pay arrangements. However, the evidence shows that, far from increasing collaboration between parents and prompting compliance, fees are deterring parents from using the CMS, and where parents do pay, it is a struggle to afford it. The Department for Work and Pensions itself has said that some parents are staying in an ineffective Direct Pay arrangement rather than moving to Collect and Pay. Does the Minister agree that it unfair to charge single parents for using the CMS system when often it is the only option available to them? Will he commit to reviewing the impact of fees on receiving parents who have experienced financial coercion and abuse? I look forward to his response.

Photo of William Wragg William Wragg Conservative, Hazel Grove 3:06 pm, 11th June 2019

I shall not detain the House for too long with my remarks on this important statutory instrument that has considerable effects on our constituents. I cannot, for the life of me, think why these Benches are not heaving at the moment.

I wish to draw two specific matters to the attention of my hon. Friend the Minister. I do so on the basis of understanding the fairness that there should be within this system for both the paying and the receiving parent. The first concerns income calculations. The SI makes several changes. However, what can be done to address the issue of mid-year salary reviews for the paying parent, which can lead to a significant unfairness? As I understand it, a maintenance calculation is meant to last for a whole tax year, subject to a change in income of 25%, up or down, within that year.

A constituent of mine from Marple has been making payments for his son since 2011. In 2017, he lost his job and briefly claimed benefits. He was fortunately able to find new work quickly, albeit on a significantly lower salary of 20% less than his previous job. He informed the CMS of his change in circumstances. However, because he fails the 25% test, the CMS is refusing to review the calculation, meaning that he is now making CMS payments based on a salary of over £7,000 more than he currently earns. As he is not earning that money, he does not have the money to pay, and this is therefore putting him in financial difficulties. He also has two other young children to care for in his current relationship. The policy is currently meant to cover scenarios such as losing or gaining employment completely, but not a change in job, role or salary. Ironically, had my constituent remained unemployed, his maintenance calculation would have been reduced, but by finding new work quickly, taking a pay cut and keeping up with his payments, he is now worse off, and that seems deeply unfair. Would my hon. Friend the Minister consider reducing the 25% threshold for a recalculation review to about 10% to 15% to give a better deal in such cases?

Let me now give the other perspective, of the receiving parent. A constituent of mine from Offerton informs me that she has been divorced from her children’s father for seven years, and in all that time has only received approximately six months of maintenance payments from him towards the upbringing of their two sons. She received a letter in February this year informing her that the CMS plans to write off the £11,867.99 that is owed to her in unpaid child support. I find that course of action astonishing.

The issue is not the father and ex-husband’s ability to pay, but his refusal to do so, as he is a successful self-employed director with his own limited company. A deduction of earnings order seems rather powerless, as, being his own boss, he is unlikely to enforce such an order against himself. More than £11,000 is an astonishing amount of money in the context of raising a child. What can be done to enable the CMS better recover significant maintenance payments and arrears from people outside the standard PAYE tax system?

Photo of Angela Crawley Angela Crawley Shadow SNP Spokesperson (Disabilities), Shadow SNP Spokesperson (Pensions), Shadow SNP Spokesperson (Youth affairs), Shadow SNP Spokesperson (Children and Families), Shadow SNP Spokesperson (Equalities) 3:10 pm, 11th June 2019

I welcome the new Minister to his role. I appreciate fully that it is not an enviable task to strike the delicate balance between ensuring that families and parents receive the support they need and ensuring that those who should be paying and are responsible for their children do so. It is no easy task, and I recognise that he has a hard task ahead of him.

The Child Maintenance Service ultimately provides vital financial support where parents are no longer able to work together. The fact that all parents ought to be responsible for the welfare of their children is unequivocal, but many families find themselves in a situation where they are either not receiving the financial support they are due or are unable to provide the financial support they would like to, due to their circumstances.

The historical changes to child maintenance still impact many families. The announcements regarding trust deeds, mortgage providers and methods of payment collection are broadly welcome. The reality is that most of the families who rely on this service are vulnerable. Many parents rely on this support, whether they are the receiving parent who relies on it to bring up their children, or the paying parent who finds themselves in financial hardship.

Despite the range of powers that the Child Maintenance Service has at its disposal, many receiving parents find that those powers are not being fully utilised. Examples have been given of paying parents finding ways around the system, and the pursuit of child maintenance is perhaps not being fully utilised. While further powers are welcome, it is important to consider the impact of these consecutive changes on many families who are reliant on this vital financial support.

There are examples of individuals evading the system and of frustrated parents who are unable to get the support they require. There are frankly many other people who are simply in a great level of poverty, regardless of whether they are the receiving or paying parent, but they are at the mercy of a bureaucratic system that does not recognise that. The charges applied to recovering and paying through the collect and pay service are often perceived as a disincentive, but there is frankly no alternative for many families.

I reiterate the concern that neither an impact assessment nor a family test has been done for these regulations, as far as I am aware. We know that under universal credit, those in debt struggle to pay for essential items. The possibility of pushing people further into debt has to be considered. Unfortunately, some people are in danger of being forced into a vulnerable place where they rely on food banks and Scottish welfare fund crisis grants, and those are people in receipt of universal credit. Does the Minister think that these changes will increase the number of people relying on mechanisms such as food banks and the Scottish welfare fund? How many cases throughout the UK does he think the regulations will affect? If a family test has been done for these regulations, why have the Government not published it? If a family test has not been done, what was the reason for that?

My final questions to the Minister are about the Cabinet Office guidelines on fairness in debt collection. The stated aim of the Cabinet Office is to

“continually improve how government interacts with people in debt, particularly those in vulnerable circumstances”.

Were the Cabinet Office guidelines taken into account when these changes were considered? Does the 40% maximum deduction rate for universal credit, which is soon to be reduced to 30%, take into account this change for those on universal credit who are paying back child maintenance arrears?

Many families in my constituency are reliant on the Child Maintenance Service, and I would like to ensure that, whether they are the paying or receiving parent, this is the fairest system that they can use, in circumstances where they are unable to use any other service. Any changes to the legislation can have unintended consequences, and consecutive changes to the Child Support Agency and the Child Maintenance Service have had an impact. Those in financial hardship, whether they are the paying or receiving parent, must be kept in mind. I want to know that these changes to legislation will not push people further into poverty and hardship, and I hope that the Minister has considered those points.

Photo of Will Quince Will Quince The Parliamentary Under-Secretary of State for Work and Pensions 3:16 pm, 11th June 2019

First, let me thank all hon. Members for their comments and the good-natured and constructive approach they have taken. With your permission, Madam Deputy Speaker, I would like to take this opportunity to briefly respond to a number of the points raised.

The hon. Members for Weaver Vale (Mike Amesbury) and for Lanark and Hamilton East (Angela Crawley) asked about universal credit. In October, the maximum deduction for universal credit will go down from 40% to 30%. I will, of course, continue to monitor this policy in the way that I monitor all policies in my role.

The hon. Member for Lanark and Hamilton East asked about the family test. We conducted a family test, which concluded that there would be no adverse impact on family formation, family life or couple separation as a result of the proposals. As the Minister with responsibility for the family test, I think Members would expect no less. The family test was presented to the Social Security Advisory Committee as part of its scrutiny of the deductions from benefits provisions.

The hon. Lady talked about charges and the fairness thereof. It is important to say that charges account for about 10.5% of the costs of running the service. It is important that we operate a service that is fair to both the paying parent and the receiving parent. Most importantly, it must be fair to the children, who are the ultimate beneficiaries.

My hon. Friend Mr Wragg raised a couple of points. Knowing what a determined campaigner and champion for the good folk of Hazel Grove he is, it would be churlish of me not to say that I would be happy to meet him to discuss this issue further. To set his expectations, there are no plans to change the 25% threshold. Nevertheless, I would be interested to hear his thoughts and any particular case that he would like to raise. I will come on to talk about enforcement, which he also raised.

My hon. Friend asked about deductions on earnings from people outside the PAYE system. If a parent is employed, we can make deductions of up to a maximum of 40% of their net income. For the self-employed, it is a bit more complicated, but we have a wide range of enforcement powers we can use, such as making deductions direct from a parent’s bank account—including, since December 2018, from joint and business accounts, which was a significant step.

The Opposition spokesman raised a point about when UC deductions will change and when that change will be implemented. We are aiming to start UC deductions from earnings when this package of changes is introduced and UC has been rolled out. He also asked whether a deduction from a parent’s benefit will affect their relationship with the child. That is a very important point. We will —I will, certainly—very carefully monitor the implementation of this policy, and also deductions of benefits. Any deduction from a parent’s benefit requires consideration of the welfare of any child—he would expect nothing less—and if we concluded that a deduction from benefit would negatively affect the child or children, it would not be taken. I hope that assures the hon. Gentleman.

The hon. Gentleman asked about parents who are put on direct pay, and questioned whether the CMS does anything when payments are not made. The CMS still provides support for direct pay clients, so it is just not true to suggest that that support is not available. Those who do not receive their maintenance in full and on time should contact the CMS straight away, so that the case can be moved to the collect and pay service to enforce payments and any arrears.

It is important to say that, at the start of any case and at each annual review, parents are notified of what to do if their arrangements break down. The CMS sends text messages—SMS messages—to all direct pay parents three months after they have set up their arrangements to remind them to contact the CMS if their arrangement is not working for any reason. Information is available online, and is also provided by the CMS and Child Maintenance Options. It is important to say that, since March 2017, there have been sustained increases in the number of direct pay arrangements moving to collect and pay, although it is also important to note that this has levelled off in the past two quarters.

The Opposition spokesman also asked how many parents have made representations for their debt to be collected. At present, only a small proportion of cases have got to this stage in the process, so we are yet to publish data on that. That is a question he may want to ask me a little bit further down the line.

Last November, the House passed regulations to close loopholes, update the child maintenance calculation, deal with historical debt and bring in tough new sanctions for those who persistently evade their responsibilities. This second package of regulations builds on the first. The changes will make deductions from benefit fairer, tackle unenforceable debt, improve our information-gathering processes, and update calculation and fees regulations. I commend this statutory instrument to the House.

Question put and agreed to.