My Lords, I will speak also to the draft Child Support (Ending Liability in Existing Cases and Transition to New Calculation Rules) Regulations 2014.
These regulations were laid before both Houses on 2 December 2013. They enable the department to charge application, collection and enforcement fees for the statutory child maintenance scheme introduced in 2012, which is delivered by the Child Maintenance Service. They also make provision for the department to close cases on the 1993 and 2003 schemes delivered by the CSA, and specify the means by which existing clients must exercise their choice to make an application to the 2012 statutory maintenance scheme. I am satisfied that these instruments are compatible with the European Convention on Human Rights.
Before addressing the regulations in detail, I should emphasise that the programme of reform began in 2006 when Sir David Henshaw delivered an independent report on the future of child maintenance. In his report, Sir David recommended stopping using the CSA as a default option for parents, and introducing charges to provide both parents with an incentive to collaborate. Since then, as part of our reform programme, we have ended compulsion on parents on benefits to apply to the CSA, secured the powers to introduce a new child maintenance system and introduced a full disregard of child maintenance for the purpose of assessing benefit entitlement from 2010.
All these actions have been about helping parents to collaborate in the best interests of their children and to reduce levels of conflict between parents after a separation. This is because evidence suggests that children do better when their parents work together. We are taking a twin approach to increasing the number of parents who work together after a separation to agree child maintenance rather than relying on state intervention. First, we are supporting them to work together on not only child maintenance but the whole range of issues faced following a separation. Secondly, we are incentivising them to think twice about whether they could set up a more collaborative family-based child maintenance arrangement without automatically turning to the statutory scheme.
We are therefore reforming the child maintenance landscape to put collaboration and family-based arrangements at the centre. We are investing £14 million in the Help and Support for Separated Families initiative, directing parents to the support they need during and after separation. For those unable to make family-based arrangements, the new, faster, more efficient 2012 statutory scheme, delivered by the Child Maintenance Service, will be there. The 2012 scheme has a built-in HMRC interface.
We opened the 2012 scheme using a pathfinder approach in December 2012 and, following assurance that the processes, procedures and client interfaces were working well, we opened the scheme to all applicants on 25 November 2013. Those making an application to the statutory scheme will be invited to enter into a discussion with the Child Maintenance Options service, which provides free, impartial information and support on the various ways to set up maintenance arrangements. This conversation gives parents the information they need to consider what is the best arrangement for them.
We propose to introduce fees for those wishing to apply to the 2012 scheme and for continuing to use it. Sir David Henshaw’s report recommended this as a balanced incentive. His argument was that people are more likely to consider whether a service is necessary for them if a charge is applied for it.
Evidence shows that more than half of parents with care using the Child Support Agency could reach their own family-based arrangements with the right support. We launched a consultation on the draft Child Support Fees Regulations 2013 and the draft Child Support (Ending Liability in Existing Cases and Transition to New Calculation Rules) Regulations 2013 to seek feedback on our proposals, and published the Government’s response in November 2013.
We listened carefully to the feedback and reduced the proposed application fee from £100 to £20. Vulnerable applicants who declare that they have experienced an incident of domestic violence or abuse and have reported it to one of the organisations named in the guidance referred to in the regulations will be exempt from paying the application fee. Those under 19 years of age will also be exempt.
We have reduced the parent with care collection fee from the proposed “7 to 12%” to 4%. By reducing the fee to 4%, we have shifted the balance in favour of the parent with care even further so that it stands in a one-to-five relationship with the 20% non-resident parent fee. It is also charged only on money actually collected. It is the non-resident parent who faces by far the highest charges, reflecting the fact that they have greater control over whether they use the collection service. We believe that both parents should make a financial contribution towards the cost of the service. The proposed fees will bring in revenue of £170 million per year. This is a financial contribution towards the cost of the service, which remains heavily subsidised by the taxpayer.
We wanted to ensure that there was provision to enable parents who need to use the statutory scheme to avoid ongoing collection fees. We have therefore
introduced Direct Pay. Direct Pay is where the Child Maintenance Service calculates the amount payable and the non-resident parent makes payments directly to the parent with care. Direct Pay will provide a way for parents to access the statutory service in a way that can help rebuild trust between them. We are also proposing enforcement charges for non-resident parents to encourage them to comply with their commitments and to help to offset the cost of administrative action to enforce compliance. The current system offers no financial incentive for non-resident parents to pay in full and on time.
There are currently three statutory schemes in operation: the 1993 and 2003 schemes, delivered by the CSA, and the new 2012 scheme, delivered by the Child Maintenance Service. We propose that cases will close on the 1993 and 2003 statutory schemes. We considered the responses to the consultation on these regulations and have altered our initial approach.
The main change is the order in which cases are selected for closure. The details of this order are included in the scheme that accompanies these regulations. We will divide the caseload into five segments and close them sequentially. To summarise: the first cases to be closed are those where the non-resident parent is assessed to pay a nil amount, followed by those where the non-resident parent is non-compliant. The next cases to be closed will be those handled off the system, followed by the remaining compliant cases.
The final group of cases to be selected will be those where there is an enforced method of payment in place, or legal enforcement action ongoing. Non-resident parents in this category will be invited to undergo a positive test for compliance. They will be required to demonstrate their ability to pay voluntarily for a period of six months. This will inform the department’s decision as to whether they should be allowed to pay the parent with care directly, and avoid collection fees, if an application is made to the 2012 scheme.
This programme of reforms aims to promote collaboration between separated parents in order to ensure that their children achieve the best outcomes in life. We have consulted on both the fees and the case closure proposals, changing our initial proposals on fees and the sequence in which cases will close. I have held two briefing sessions in the House of Lords with the aim of keeping noble Lords fully informed on the reform programme.
I understand that introducing fees to encourage collaboration is a significant change, but emphasise that under Section 141 of the Welfare Reform Act 2012 we have committed to reviewing the effect of the fees regulations within 30 months of their coming into force, and to laying a report about the conclusions of that review before Parliament.
I spoke earlier of the careful way in which we introduced the 2012 scheme. We will continue with this approach, and will not introduce fees or begin the process of closing cases on the 1993 and 2003 schemes until we are confident that the 2012 scheme is working well. We anticipate that this will be in the summer. Those on existing child maintenance schemes will have already been told about case closure and the introduction
of the charging of fees. We will not begin charging collection fees until six weeks after the regulations come into force, so anyone affected will have plenty of notice about when the collection changes will begin to affect them personally. I beg to move.
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