Child Support Collection and Enforcement (Deduction Orders) Amendment Regulations 2009

My Lords, I beg to move that the draft Child Support Collection and Enforcement (Deduction Orders) Amendment Regulations 2009, which were laid on 3 June 2009, be approved. Noble Lords will be aware that some non-resident parents are determined not to accept financial responsibility for their children. Unfortunately, they demonstrate this by failing to pay their child maintenance and building up arrears. The Child Maintenance and Enforcement Commission already has a number of tools it can use to enforce payment when this happens. For example, it can use a deduction from earnings order, which is an effective method of collecting both ongoing liabilities and arrears in many cases. However, in some cases, a deduction from earnings order cannot be used or is ineffective; for example, because the non-resident parent is self-employed or frequently changes jobs. The Government want the commission to be able to take quick and effective action to enforce payment of child maintenance in all cases where a non-resident parent is failing to comply. With this is mind, we set out our proposals for tougher enforcement in our White Paper, A New System of Child Maintenance, in December 2006. Subsequently, the Child Maintenance and Other Payments Act 2008 inserted powers into the Child Support Act 1991 which would allow the commission to use deduction orders to collect child maintenance from an account held by a non-resident parent with a deposit-taker or from funds held by a third party. Because deduction orders will be administrative they can be made without going to court first and can therefore get money flowing for children more quickly. They will provide an additional tool that can be used alongside existing methods of collection and enforcement. The regulations before us today will implement the powers taken to enable both regular and lump-sum deduction orders to be used on accounts held by deposit takers, which will normally be banks or building societies. These regulations do not make provision for deduction orders to be used on funds held by third parties, such as solicitors. The commission has decided to use deduction orders on bank and building society accounts first because it believes that orders on these accounts have the greater potential for collecting child maintenance. The regulations have therefore been developed in close consultation with representatives from the banking sector which will be responsible for operating the orders. The commission will go on to assess the scope for further regulations which will enable it to use lump-sum deduction orders on funds held by third parties. This will involve working with a number of stakeholders, including solicitors and other government departments. I should make it clear that, where there are arrears of child maintenance, the commission will do all it can to make an arrangement with the non-resident parent to pay those arrears before a deduction order is made. The commission would much prefer child maintenance to be paid, for example, by direct debit, which will not incur any additional charge for the non-resident parent and is much easier and cheaper for both the commission and the deposit-taker to administer. However, if the non-resident parent fails to make a satisfactory arrangement to pay, the commission will use what information it has to first liaise with deposit-takers in order to identify a suitable account on which to make an order. In doing so, the commission will ensure that it does not make an order on an account which is specifically excluded by the regulations. This would apply where, for example, the non-resident parent has no beneficial interest in any of the funds in it because they are operating it solely as a trustee. The regulations also prevent the commission from making a lump sum deduction order on an account which is used wholly or in part for business purposes. However, it may make a regular deduction order on such an account, but only where it is used by the non-resident parent as a sole trader. 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 parent’s 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 and pay the relevant amount to the commission. The deposit-taker will also be able to deduct an amount up to a maximum of £10 towards its administrative costs before making each deduction. This takes account of the fact that deposit-takers will be required to process deduction orders manually because they operate differently from direct debits and standing orders and cannot be automated. 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, and the deposit-taker must not deduct an amount that will put the account into overdraft. The regulations also set out clearly the circumstances where either the non-resident parent or the deposit-taker can apply for a review of a regular deduction order. This includes, for example, where there has been a change in the amount of the maintenance calculation in question or an incorrect amount has been specified in the order due to an error. 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 parent’s account in respect of a specified amount of arrears. The order will operate in a similar way to a third-party debt order from a court but, because it is administrative, the process will be quicker. The primary legislation makes provision for a number of safeguards in respect of lump sum deduction orders and the regulations set them out as an integral part of 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 arrears to be collected by a final order. The interim order will also instruct the deposit-taker to freeze up to the amount specified in the order. Both the non-resident parent and the deposit-taker will have 14 days to make representations to the commission against the proposals in the interim order. At any point throughout the process, from receipt of the interim order until the funds are paid to the commission, both the non-resident parent and the deposit-taker may apply to the commission for consent to release some or all of the funds from the account. The non-resident parent might do this where, for example, there is an existing written contractual obligation to make a payment to another party. The deposit-taker might do it where, for example, it already has a written agreement with the account holder that a specific amount in the account is held as security against a loan. 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 a decision following an application for consent to release funds. The commission will not make a final order until the time allowed for an appeal, 21 days, is passed and will not instruct the deposit-taker to transfer funds until any appeal against the making of the final order is resolved. The deposit-taker will have a legal duty to comply with the requirements of the order and pay the specified amount to the commission. The deposit-taker may also take up to a maximum of £55 towards its administrative costs before making the payment to the commission. This aligns with the amount a deposit-taker can currently take for administering a third-party debt order made by a court which requires deposit-takers to follow a similar process. Noble Lords should be aware that the new powers inserted into the 1991 Act made provision for regulations to allow both regular and lump-sum deduction orders to be made on a joint account. However, these regulations do not include such provisions. We recognise that these new powers are unprecedented and, therefore, the commission will use them carefully, particularly on initial implementation. That is why the safeguards are built into the process. It is also why the commission is planning to start to introduce deduction orders using a small dedicated team so that implementation will be at a low volume and controlled. The impact assessment, which was published alongside the draft regulations, says that this policy will be fully evaluated by the commission in September 2010. If that evaluation finds evidence that excluding joint accounts from the scope of deduction orders is reducing their effectiveness, we will introduce further regulations to extend provisions so that orders can be made on joint accounts. The evaluation will also enable the commission to collect information which will allow it to assess the potential for and likely benefits of increasing the number of deduction orders made in the future. In the mean time, the provisions in these regulations will enable the Child Maintenance and Enforcement Commission to start to use deduction orders both as an additional enforcement tool and as a means of encouraging ongoing compliance. My Lords, 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 House.