"Mr Speaker, the previous Administration established the Child Support Agency because the system of collecting maintenance through the courts had lost the confidence of parents. It was the right decision. Different courts applied different criteria, resulting in widely differing settlements for families in similar situations. Too often cases took months to come to court. Enforcement was difficult and costly.
"The Child Support Agency was designed to provide better support to children and families by making sure parental responsibilities were properly enforced. These were the right foundations upon which to build the new agency. It is why the Child Support Act 1991 enjoyed widespread support. But as we now know, over the years these good intentions have not been translated into good performance. When we came to office the agency cost more to run than it collected in maintenance and it was taking longer to process claims than the courts.
"The 2000 Act made important changes. Maintenance calculations were simplified. For the first time, parents on benefits could keep up to £10 of the maintenance they received. Tougher enforcement measures were introduced. The performance of the agency has improved. It has nearly doubled the number of children receiving maintenance payments. Around £600 million of maintenance will be collected this year, twice the level of 1997. This improved performance is a credit to the hard work of the agency staff, who are doing a good job in very difficult circumstances. They have had to cope with a great deal of criticism—much of it unfair—and I want to place firmly on record my appreciation for their commitment and dedication.
"However, notwithstanding the efforts of its staff, the performance of the agency remains unacceptable. It currently manages 1.5 million cases. Of the 670,000 cases assessed as having a positive maintenance liability, just over 400,000 parents with care are actually receiving any payment via the collection service, or have a maintenance direct arrangement in place. There is a backlog of over 300,000 cases. Despite having collected £4.5 billion, more than £3 billion of debt has built up. It has already cost the taxpayer well over £3 billion to administer.
"Only 30 per cent of lone parents receive maintenance. Fewer than 15 per cent of lone parents on benefit receive any maintenance through the CSA. There is little evidence to suggest that outcomes are any better than under the courts system it replaced. That is why last April my right honourable friend, the Member for Hull West and Hessle, asked the new chief executive of the CSA to undertake a review of the agency's operations. I am publishing his recommendations today on my department's website.
"The review recommended a restructuring of the agency's operation to increase productivity and performance. It proposed a plan that included migration and conversion, new legislative powers to write off debt and close cases, and the greater use of outsourcing to support the removal of backlogs and collect debt. The plan required an additional £300 million of new public money over the next three years, over and above the agency's £400 million a year budget.
"However, even if the plan were fully implemented, at the end of the three-year period only half of lone parents would receive maintenance. Only one third of lone parents on benefit would be receiving any money. And while more parents would receive maintenance, around half of those assessed would be eligible to receive only £5 or less per week. In those circumstances I do not believe it would be right to commit £300 million of additional public expenditure in this way.
"The CSA deals with many of the most difficult cases. In one in five cases the parents have never lived together. Five per cent question paternity. Half of absent parents have no contact at all with their children. Some 15 per cent have links to other cases—often more than one. Seventy per cent of new applications are on benefit and so have no choice but to use the CSA. Given this complexity, we should be suspicious of simple solutions. There are none. Walking away is not the answer. Neither is simply handing over the work of the CSA in its existing structure to another government department. Over 500,000 children are currently benefiting from maintenance payments collected through the CSA. We must ensure this continues.
"However, it is time for fundamental change. Having had an opportunity to consider this over the past three months, I have concluded that neither the agency nor the policy is fit for purpose. Therefore, I have asked Sir David Henshaw—a distinguished public servant—to completely redesign our system of child support. The primary objective must be to ensure the welfare of children. Sir David will set out both the policy and operational structure needed to achieve this. He will need to consider how best to ensure parents meet their responsibilities to their children, while minimising the cost to the taxpayer.
"In undertaking his task, Sir David will need to address several difficult choices and questions. What support and advice can be given to help parents reach a fair solution as to how best to support their children in the event of their relationship breaking down? Can we find a more cost-effective way of ensuring children get maintenance payments? What is the right balance between enforcing responsibilities, getting more money to children and value for the taxpayer? Should benefit claimants be forced to use the agency even if they have informal arrangements in place? Should the Government continue to chase cases where the parents have decided to get back together again and restart their relationship? In some instances, the agency is chasing cases where the end result will be recycling money in the same household, with no benefit to the child.
"There will be an opportunity for all those in this House and beyond to make their views known to Sir David and his team. He will be seeking the widest possible involvement in his work. Just as the original proposals commanded widespread cross-party endorsement, my ambition is to make sure that this new framework enjoys a similar level of support. I have asked Sir David to deliver his findings to me before the Summer Recess and today I have placed in the Library copies of the terms of reference for his work. These have been drawn as widely as possible to allow all of the options for reform to be fully considered.
"The Government have a clear responsibility to those already using the agency to ensure that it delivers for children and parents. Therefore I am publishing today proposals which will help to stabilise and improve the performance of the agency in the short term. The plan will make more effective use of current enforcement powers, improve the productivity and effectiveness of the new IT system and increase debt recovery.
"I am making available up to £90 million of investment over the next three years, from the department's existing resources, to support this short-term recovery. This investment will of course be subject to review in the light of Sir David's work and achievement of agreed milestones. In addition, I am making a further £30 million available to contract out some of the agency's debt recovery. I expect this to result in a substantially increased recovery of the current debt owed to parents with care.
"The CSA will take quicker and firmer action on those who default on payment. Supported by changes to the secondary legislation, we will increase the use and effectiveness of deduction from earning orders. The CSA will also be able to make more progress in clearing up the growing backlog of cases. And we will draw on data held by credit reference agencies to help speed up enforcement. I will consider tougher enforcement measures that require primary legislation. However, these will need to be addressed as part of the redesigned child support system.
"The extra investment will mean that by 2008 we will improve compliance rates, ensure that 200,000 more children benefit from maintenance payments, be on track to help lift an additional 40,000 children out of poverty, and see a significant increase in the number of parents receiving child maintenance premium.
"Given the considerable cost and risks involved, the stabilisation and improvement plan will stop short of converting all of the old scheme cases into the new scheme. I know that conversion is a matter of concern to many members of the House—rightly so. I have asked Sir David to consider this as part of the redesign of child support. We must come to a decision on the right way forward as soon as possible.
"I believe that Members on all sides continue to support the original objectives of the Child Support Agency. The measures that I am announcing today are an important step towards improving the current arrangements and critically putting in place the foundations for a system of child support that will have a better chance of meeting those objectives. Relationships, as we all know, come to an end. Responsibilities do not. I know every Member of this House will want to make sure that this fundamental truth must underpin any new arrangements.
"I commend this Statement to the House".
My Lords, that concludes the Statement.
My Lords, your Lordships will have noticed that I have an unfailing habit of thanking the Minister for repeating a Statement in this House. I do so again today. Often this extends to the content of the Statement itself, but I am very much afraid that now I cannot say the same. The Statement paints a gloomy picture indeed. Before I continue, however, I should like to say how sorry I am that the noble Baroness, Lady Hollis, is not in her place. I am sure that the whole House will join me in wishing her a full and speedy recovery.
My Lords, as the Statement acknowledges, the Child Support Agency was set up by the last Conservative government with all-party support. It remains as true today as it was in 1993 that, wherever possible, children should be supported financially by both parents and that even low-earning or benefit-recipient absent fathers—for it is usually fathers—should make a contribution to the upkeep of their children according to their means.
Unfortunately, no one in either House of Parliament realised the scale of the problem that was to be tackled. However, by making a few quite popular changes in 1995 and 1996, the then government made it considerably more acceptable, in particular by reducing the maximum level of maintenance, which made it more affordable for absent parents. The Government inherited a system that was, I believe, beginning to work, and the noble Baroness, Lady Hollis, the then Minister for child support, was able to say in 1998 that around 80 per cent of assessments were correct to the last penny and that some 98 per cent of maintenance,
"is passed on to the parent with care within 10 working days".
None the less, the formula used to calculate payments was hideously complicated and slow and led to long delays in assessment. The Government therefore produced a new one which was intended to go live in late 2001. It was delayed several times due to problems caused by a new computer system, but it did go live in 2003. Now, three years later, it still is not working properly and cases resolved under the old formula have still not been entered into it. I note that the Statement says that it is quite likely they never will be.
The problems with the computer programme were so dire that they caused the resignation of the chief executive last year. This was hardly surprising when a Select Committee of another place, in July 2004, described the CSA's £456 million IT system as,
"defective and over spec, over budget and over due".
The new chief executive, Stephen Geraghty, then stepped into the breach, with an initial remit to investigate what was going on in the agency and to report to Ministers with solutions, as we have heard. I emphasise this as it is quite clear that his solutions of another £300 million and hundreds of extra civil servants are unacceptable to the Government. I am glad, though, that we will be able to see exactly what he said through the departmental website. I cannot help but wonder whether he was given the wrong remit. But we shall see.
The department has already admitted that there is a backlog of cases amounting to almost 330,000 and that more than £3 billion of debt remains uncollected. Recent figures from the CSA statistical summary of last month show that the new scheme is still not delivering. Why has only 61 per cent of maintenance due under the new scheme been paid as of December 2005, compared with 72 per cent under the old scheme? Why does the agency's enforcement unit cost £12 million a year to run but only managed to recover £8 million from absent parents last year? Why did the agency receive 63,678 complaints in 2004–05, an increase of almost 30 per cent? Is it because of the fact that, of the 67,000 cases assessed as having a positive maintenance capability, only just over 40,000 parents with care are actually receiving any money? Most importantly of all, why have the Government taken so long to get down to this fundamental review?
Better late than never. So I welcome the decision to appoint Sir David Henshaw to conduct what I hope will be a root and branch review of a government organisation which by any account is a total shambles.
I also believe that this new review should look at each operation of the CSA separately. Assessment, case management, collection and enforcement are all discrete functions of the agency and could ultimately be carried out by separate organisations, either within or without the public sector. I note that an immediate solution is to use an outside agency to collect such debts as have been identified. This must be right—but I hope the Minister will acknowledge that it is only a temporary solution. There are also suggestions around of attachment of earnings orders being used. I would have thought that these were long overdue.
In essence, this is an honest and, for once, unspun Statement. At long last the Government are grasping a nettle and my party will do all in its power to contribute to the solution. Child support is one subject on which we desperately need a consensus.
My Lords, I thank the Minister for repeating the Statement first delivered in another place. As I sat with the noble Lord in the Public Gallery in the Commons, I felt the Secretary of State's response to the serious concerns raised by my honourable friend David Laws fell far short of the standards of courtesy and behaviour we certainly expect in this House. Frankly, they did not measure up to the scale of the crisis at the CSA.
Let me give noble Lords a little flavour of the Secretary of State's remarks. He accused David Laws of "dancing around" and "intellectual bankruptcy", and then said that he did not want to get party political. Lone parents deserve far better than that from the Secretary of State who is meant to be responsible for protecting them and seeing that they get the money they need to bring up their children.
I pay tribute to my noble friend Lord Kirkwood of Kirkhope—as he then was not—for chairing the Select Committee in another place and its excellent report. I know that he does not exactly share our views on this particular matter, but I pay tribute to him.
Why is it intellectually bankrupt to argue, as we do, that the CSA has failed, and failed again, beyond any reasonable prospect of redemption and that most, if not all of its functions should be handed over to HM Revenue and Customs? Why is that not a serious proposition to be examined sensibly and in detail rather than shrugged off with a few snide remarks?
Independent observers with an open mind would point out that the Inland Revenue must be the government department best placed to know individuals' personal financial circumstances and to enforce collection of debts. We agree that such a transfer would not be easy, but we are not looking for an ideal solution, just a realistic way out of a very deep black hole where the Government seem unable to stop digging.
I turn now to the review by Sir David Henshaw—sorry, it is not a review but a redesign. My dictionary says that a review is,
"a formal assessment of something with the intention of instituting change".
I would have hoped that that is what this redesign is meant to achieve.
Let us look at the terms of reference. They are: how best to ensure that parents take financial responsibility for their children when they live apart; the best arrangements for delivering this outcome cost-effectively; and the options for moving to new structures and policies, recognising the need to protect the level of service offered to the current 1.5 million parents with care. Is that not simply a statement of what the CSA is meant to do? It is just another review of how it should work. This seems to me, yet again, to be putting off the evil day of decision.
Why has Sir David Henshaw been selected? His curriculum vitae shows that his career has been entirely in the public sector. He has, for example, acted as a former adviser to the Prime Minister's Delivery Unit; he is a non-executive director of the Home Secretary's National Offender Management Board, adviser to the Cabinet Office Strategy Unit and member of the Treasury's Public Services Productivity Panel. With an organisation experiencing the degree of failure of the CSA, would it not have been better to have brought in someone who was more of a breath of fresh air and had some private sector discipline and experience?
My Lords, as ever, I am grateful to the noble Lords, Lord Skelmersdale and Lord Oakeshott of Seagrove Bay, for what I am sure they meant to be constructive comments on the Statement. I also thank the noble Lord, Lord Skelmersdale, for his tribute to my noble friend Lady Hollis. We all hope that she will be back in her place as soon as possible. I pay tribute to her for her eight years' stewardship of the Child Support Agency, which at all times was pretty challenging. I very much admire the work she did. Whether I am so fortunate in inheriting her portfolio in that respect will have to be judged over the next few months.
I agree with the noble Lord, Lord Skelmersdale, that children should be supported by both parents, even where their relationship has broken down. That must be the intent of any development and redesign of child support arrangements. It was the intent behind the new system introduced in 1993. The noble Lord referred a little to the history of child support since then. He also referred to the very complicated formula which the 2001 changes were designed to change. There have been many operational problems throughout the history of the CSA and the introduction of the 2001 changes has clearly not brought about the changes that were desired, although I think the actual assessment system has stood the test of time. Rough and ready though it might be, it has been one great asset of the changes.
On conversion, I would not wish the noble Lord to think that I said "never". It is our view that the system as it stands is not yet ready for conversion, but we will look to Sir David to advise us more on that matter in his proposals to redesign the system.
The noble Lord, Lord Skelmersdale, quoted a number of figures about performance between old and new systems. One has to be very wary about making direct comparisons because the circumstances of both systems were different. But I would not walk away from the proposition that the overall performance of the Child Support Agency has simply not been acceptable. The Statement is a clear acceptance of that fact.
The review by Stephen Geraghty was very good, but we decided that the £300 million extra public expenditure was too risky and costly for us to make such a decision. That is why we have given Mr Geraghty the green light to institute a modified review which will cost £120 million altogether. That will be focused on increasing the numbers of staff and dealing with clients at the front line and retraining the excellent staff who have had an awful lot to put up with over the past 13 years. Over the next two to three years, we expect to see significant improvements. But as the Statement made clear, it is not only the operational matters about which we are concerned. Our analysis, which I believe is confirmed by the work of Mr Stephen Geraghty, is that the whole child support system is not fit for purpose. That is why we have asked Sir David to start with a blank sheet of paper and suggest a wholesale redesign of the system.
I do not want to debate with the noble Lord, Lord Oakeshott, dictionary definitions of "redesign" and "review". Telling the House that we wish to redesign the system is an acceptance that the current system will simply not do. Therefore, we are going much further than simply having a review—we are asking Sir David to suggest to us the wholesale redesign of child support arrangements.
Anyone reading Sir David's CV would conclude that he has many qualities. He has an outstanding career in the public sector. For those who think we should look to Australia for clues about how child support should be organised in the future, Sir David is also a former Visiting Fellow of the Royal Melbourne Institute of Technology. I believe that he is an excellent choice.
The noble Lord, Lord Oakeshott, talked about having someone from the private sector. Although Mr Stephen Geraghty, the chief executive of the Child Support Agency, started life a very long time ago as an employee of the Inland Revenue, most of his highly successful career has been spent in the private sector. He has experience of banking and insurance, including running contact centres. Essentially, the CSA is a very large contact centre, albeit with very complicated matters to undertake. We have someone in post who understands the kind of operations that the CSA undertakes and has private sector experience.
On whether we should go down the route suggested by the noble Lord, Lord Oakeshott, in terms of Her Majesty's Revenue and Customs, the point my right honourable friend was making in the other place, in a somewhat robust way, is that you cannot take an agency that faces many problems and troubles and simply plonk it under the auspices of another agency. Equally, we understand that the work of the CSA is very complicated. It is dealing with adults whose lives in many cases have become very disrupted, as shown by the figures that I quoted in the Statement. In half the cases that the CSA is concerned with, the non-resident parents have no contact with their children and one in five have not had a relationship together. Those are stunning figures and they show the complexity of the situation. With the greatest respect to Her Majesty's Revenue and Customs, it does not have the experience of dealing with those types of matters. Of course we will listen to and await with great interest Sir David's work. As the Statement made clear, we will invite parliamentarians to contribute to that work.
My Lords, when I was an elected Member for a number of years, by far the most difficult, intractable problems that I faced from constituents were CSA problems, which grew and grew over the years. Does he recall that the courts did not deal with the cases, the CSA is having problems dealing with them and there is no guarantee that the Inland Revenue could deal with them any more successfully? Instead of beating ourselves, hard-working officials and dedicated Ministers around the head and body for not being able to deal with this problem, should we not be pointing the finger at the people who caused it—the errant fathers who are not meeting their responsibilities?
We should remember that people are doing a really good job, as I know from the CSA staff who are working in what used to be my constituency. When Sir David Henshaw is doing his—it is not a review; what is it called?
My Lords, when he is conducting his redesign, as well as looking at the systems, could he also consider whether further legislation is necessary to give powers to make fathers meet their responsibilities?
My Lords, there is much in what my noble friend has to say. I will not run away from the problems that the CSA has in its operational performance, but these issues go much wider. My noble friend is right. In terms of enforcement we have a real problem in the number of parents who seem to feel that it is acceptable not to support their children financially when their relationship breaks up—if they had a relationship in the first place. That is wholly unacceptable. Clearly, as part of Sir David's redesign, we are asking him to look at enforcement powers to see what further powers our new child support system needs.
At the end of the day, it is not a question of the Government's or the agency's failing performance. The sole purpose of child support arrangements is to make sure that children receive sufficient financial support. My noble friend is also right to suggest that this is a problem that has bedevilled Parliament and governments for many years. The search for a way forward with as much consensus as possible is earnestly to be desired.
My Lords, will the Minister acknowledge that the contract with the IT supplier, EDS, contained clauses that allowed the Government to claim compensation for non-functionality? Will he tell the House whether the Government have taken advantage of those clauses and how much if anything has been claimed back? Will he look very carefully at the position of the 270,000 parents with care who are currently in the old system and are on means-tested benefits who are denied the benefits of the new scheme; namely, the £10 premium? In this redesign through Sir David or howsoever, will he look at the equity that will be involved, and at those locked in the old system which is now shelved compared with those who have the advantages of the new system available to them right now?
My Lords, I am grateful to the noble Lord and I want to pay tribute to his work as chair of the Select Committee and for its report, which was very informative. As for the computer system, noble Lords will know that it was not the most successful IT system ever developed in this country. Indeed, many problems were caused by its introduction. Frankly, I pay tribute to CSA staff who have had an almost impossible task at times in trying to work it. There has been a realignment of the contract with EDS. The result is that the original £456 million cost has been reduced by £65 million. In addition, we have held back a further £17 million based on performance.
The system has many defects which are gradually being put right, which is gradually getting the system back to a stable state. I doubt that it will ever achieve what it ought to have achieved, but it is becoming more fit for purpose. Clearly, we need to be strong in terms of our relationship with EDS. Also, it is in the interests of everyone to make sure that there is co-operation in putting right the rest of the defects.
On the child maintenance premium, I well understand the matter that the noble Lord raised, particularly in relation to parents with care who are on the old system who have not been converted to the new system. The problems are the operational feasibility and cost. I have taken advice on this matter and I understand that manual intervention is required in the vast majority of cases, which might mean looking at 300,000 cases manually in order to pick the 50,000 that are likely to be eligible. As the noble Lord will realise, the amount of work involved would be extensive. However, as part of the redesign, it is a matter that we will ask Sir David to pick up.
My Lords, I noticed that in the initial stages of contact between parents and the CSA, parents were given a special number to telephone for advice. They tried many times to make contact. I do not know whether the line was out of action or whether it was deliberately blocked—I am not passing judgment on that; I say that only because that is the type of trap that the new body should avoid. I have not until now heard of any parents—former constituents of mine—who have successfully made contact, anxious to help as they were. They have utterly failed to make any contact or get advice at any stage.
My Lords, I am grateful to the noble Lord. The figures that I have show that the average waiting time for callers is now 13 seconds for the new system as opposed to 49 seconds for the old system, which is a big improvement over the past 12 months. Obviously, there is a way to go and part of the work that we now wish to undertake within the CSA is to improve on that. Having visited the Northern Ireland CSA, which has a close relationship with the CSA in the rest of the country, I have been impressed with the dedication of staff in the Belfast centre who, as I said earlier, do a difficult job to the best of their abilities.
My Lords, I welcome the new design but I want to ask about experience in other countries in Europe. Presumably, every country has this problem and finds the solution very difficult to reach. Will Sir David Henshaw in the time that he has been given before the summer recess be able to look at the experience in other European countries in particular?
My Lords, my noble friend raises an important point. I have not had the advantage of visiting child support services in other countries as yet although no doubt the time will come. Clearly, experience in other countries shows that this is a very difficult area. There is no question that collecting child support from parents who do not want to give money to their former partners in respect of their children is a difficult issue to deal with. There clearly are examples of systems in other countries which seem to work better than those here. We should learn from them. Australia is often pointed at as the best example in the world. It is different; in Australia most people turn to the Australian Child Support Agency. It also has, because the tax system is rather different in Australia, much greater access to information.
There are clearly lessons that we can learn there but, at the end of day—rather like the suggestion that you could simply hand CSA over to Revenue and Customs—we need to adapt any lessons from other countries to our own situation. In looking at the experience of other countries, that would be a matter for Sir David himself to decide.
My Lords, while recognising the reasoning for rejecting the financial costs of the Geraghty report, will the redesign proposals be limited, or required to be contained within any ceiling of expenditure?
My Lords, affordability and cost-effectiveness are words that come clearly to mind in any policy that is going to be developed. I cannot say any more than that. We will have to wait and see what Sir David's redesign proposals are concerned with. We found it difficult to justify an expenditure of £300 million of additional money for a child support system which, to all intents, is widely thought to be in serious difficulty and which we believe to be not fit for purpose. It would have been risky. That is why we felt we could make some initial investment to deal with some immediate problems for more front-line staff, but on overall expenditure for the future, the first thing is to see what Sir David comes up with in terms of the redesign.