I thank noble Lords for a set of very interesting contributions to this debate. It is clear that a lot of thought has gone into this area and it has provided a very constructive approach, not just today but over a considerable time. I therefore need to respond to as many of those issues as I can.
As I said initially, and as the statement read out by my noble and learned friend Lord Mackay confirmed, we have consulted on these two sets of regulations and taken views into account. We have changed our initial proposals on fees and on the sequence in which cases will close.
I want to reflect initially on the contributions that my noble and learned friend Lord Mackay has made to the development of these policies. He has made a
series of suggestions, both publicly and privately to us, aimed at improving the scheme and helping children. We have listened very carefully to his representations and taken action to reduce the strain on the parent with care. Although my noble and learned friend has made clear his view that the balance is still tilted towards the taxpayer at the expense of the parent with care, I hope that there is agreement that this is a question of striking the right balance and that it is appropriate that we do that by considering actual behaviour.
First, as a result of the consultation, we have amended our proposals for case closure by putting back those cases where parents within the statutory service have most to lose. We have put to the end of the case closure process those cases where money is flowing, which often follows hard-fought compliance, and the flow is maintained only by enforced collections. We have done this to ensure that money keeps flowing and compliance continues. These cases are most likely to fall into the category that my noble and learned friend is most concerned about, where parents with care find themselves unable to establish workable direct payment arrangements regardless of their willingness to do so.
Secondly, the 30-month review allows us to consider actual behaviour, to check that the impact of the reforms is as expected and to provide an indication of whether there are any unintended consequences for clients or the taxpayer. We intend to evaluate the overall impact of the child maintenance reforms in wider society, including the impact on overall maintenance outcomes. Our approach to the review is to use existing survey and administrative data sources where possible, combining these with internally and externally commissioned quantitative and qualitative research where necessary.
Our aim is that the child maintenance system in Great Britain should work better. We are going to focus on the impact on children of these changes. A key criterion for success of our reforms, which will be tested in the 30-month review, would be to increase the number of children benefiting from maintenance. Our estimates suggest that this number should rise, and we look forward to having this confirmed by the review—a point that the noble Baroness, Lady Sherlock, was particularly interested in. If there are fewer children receiving child maintenance as a result of our charging regime, this will be made clear by the 30-month review and we could consider what changes might be required. By that time, we will know how people will behave and refinements to the system, along the lines that my noble and learned friend Lord Mackay has recommended to us in the past—in other words, segmenting the caseload into “can make direct pay arrangements” and “cannot make direct pay arrangements”—can be considered on a more informed basis. To introduce this complexity at this stage would add delay to bringing the benefits of the new system to parents and further complicate the Child Maintenance Service’s processes.
Pressing ahead with the reforms will mean that more children will be better off, as our estimates suggest that there will be an increase in the proportion of positive outcomes for clients on the statutory scheme. This is due to more availability of data and more
updating of maintenance liabilities, together with a significant increase in the number of effective family-based arrangements. In the statutory scheme, the effect of the annual review coupled with direct interfaces with Jobcentre Plus and HMRC should mean that in future fewer cases are nil-assessed, meaning that more money could flow. We estimate that the percentage of nil-assessed cases will fall from the current 23% to around 6% of all arrangements in the longer term; I hope that this answers the questions asked by the noble Baroness, Lady Sherlock.
Over the 20-year period considered in the impact assessment published in 2013, including case closure, charging and the overall reform package, the assessment consistently gives a higher proportion of effective arrangements for parents who would have used or will use the statutory scheme than if the 2012 scheme was introduced on its own. As noble Lords have pointed out, we estimate that these reforms are likely to increase the proportion of effective arrangements from 60% to 70%.
There were a large number of questions, and I will try to go through as many as I possibly can. The noble Baroness, Lady Howe, asked how we will know if the arrangements are working for parents. We will be using data from the Understanding Society longitudinal study to assess progress on family-based arrangements across the whole population. She and the noble Baroness, Lady Sherlock, also mentioned the Secondary Legislation Scrutiny Committee. This was responded to by the Minister for Pensions subsequently and that response has now been published.
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One of the many questions of my noble friend Lord Kirkwood was why the non-resident collection fee was higher than the parent with care collection fee. That is to provide a greater incentive for the non-resident parent to collaborate and to pay directly, outside the collection service.
How will we decide who is unlikely to pay? We believe that in general it is fair to allow non-resident parents the opportunity to pay by the direct pay option. However, we are conscious that they should not be given the opportunity to avoid their responsibilities. Where there is a disagreement between the two parents, the Secretary of State must decide whether the non-resident parent is unlikely to pay. There will be a set of predetermined criteria as a starting point.
My noble friend talked about the experience of charging in the 1990s. The difference is that parents will now have the option of avoiding the charges in most cases. Where charges are levied they are designed to be a fair contribution to a system that remains highly subsidised. We have already tested the basic system. We will not charge until we know it is working well. Sadly, those precautions were not necessarily taken in 1993.
With regard to the right to appeal where the waiver is refused, applicants can make an internal complaint, a complaint to the independent case examiner, a complaint—in cases of maladministration—to the Parliamentary Ombudsman, or they can appeal to the court for judicial review.
Who will explain to the parent with care? We will do that, and the rationale for the decision will be recorded and explained to both parents at the time of the decision. If the parent with care does not agree, they can complain to the bodies I have referred to. Will the charging regime drive people apart? Our operational experience is that the older cases—the ones that my noble friend cited—are more compliant than new cases. These older cases often find it easier to work together; perhaps some of the immediate passions have died down. Will charging support collaboration and what is the evidence for that? Our research shows that over half of parents could come to a private arrangement if given support, and the fees regulations provide a nudge towards this step.
My noble friend asked about the postponement of case closure until we are confident of an effective support infrastructure. The sector already provides support for separated parents, and this support will be crucial in helping separated parents through case closure. A programme of work has been running since before the introduction of the Child Maintenance Service, to provide the sector with training and information materials to enable these organisations to provide effective support to separated parents.
On the question from my noble friend and the noble Baroness, Lady Sherlock, on what proportion of current child maintenance cases are being paid, that will become available in April 2014 when we have some management information. On the question from my noble friend about what drives us—revenue versus helping parents—I repeat that the aim of this reform is to help children. The whole point of having the full review is so that Parliament can test if we have achieved this.
The noble Baroness, Lady Sherlock, asked a question on the 60% to 70% rise. We estimate that around 50,000 cases could move from being nil-assessed to being positively assessed should a new application be made to the Child Maintenance Service. The calculations made under the scheme are based on the non-resident parent’s gross taxable annual income, which we can source from HMRC directly, and we can review annually. Those are the two main reasons why we believe that those outcomes will increase in the way we are anticipating.
The noble Baroness, Lady Sherlock, asked a question on what we mean by “working well”. We mean that the system is stable and there are no major periods of unplanned outage or long periods with long response times; and operations colleagues are happy that the system is working as intended, with full application volumes so that they are able to progress work to the planned timeframe—so it is a practical, working system.
On the noble Baroness’s question on information, clearly one of the differences is that there is direct access to HMRC, which does not happen in the older systems. Therefore it is not a question of getting more up to date; the information will be up to date, or up to each year. That issue of being up to date is therefore dealt with. Where there is less than full declaration to HMRC—in other words, misinformation going both to HMRC and to the other parent—that is, of course, tax fraud, which is obviously much more difficult to deal with.
There will be an option within direct pay for the parent with care to receive payments direct from the non-resident parent without having to reveal their location or other contact details. We are confident that provisions will be in place to ensure that every client is able to use that safely and securely. I think that I have dealt with all the questions.