My Lords, I begin by thanking noble Lords for bearing with me as I take these regulations through from a seated position. I want to say a particular thanks to the noble Baroness, Lady Sherlock, for giving me early notice of her response to the regulations, for which I am extremely grateful. The regulations were laid before both Houses on 12 September 2018. They enable the Government to make amendments to child maintenance legislation to deliver the new child maintenance compliance and arrears strategy. Let me give the Committee some context and background to the regulations.
The Government introduced a reformed child maintenance scheme in 2012. The reformed scheme provides stronger incentives for parents to work together following separation and, where possible, to make a family-based arrangement for maintenance, avoiding state intervention altogether. The Child Maintenance Service is there for families unable to make a private arrangement. It delivers a simpler scheme, avoiding the problems which beset the previous statutory child maintenance schemes. These draft regulations will strengthen the statutory scheme and introduce measures to prevent parents artificially minimising their child maintenance liability. They will also introduce new collection measures, close loopholes and broaden the sanctions that we can bring against the small number of parents who persistently fail to meet their obligations to their children.
Now that the majority of cases with ongoing maintenance have been closed on the CSA schemes, the Government want to draw a line under the regrettable legacy of the CSA and end the years of uncertainty that families who have historic CSA cases have experienced. For many years, these cases have been held in limbo. The debts outstanding are often small, and in some cases, when asked, parents have moved on with their lives and are not interested in pursuing the debt. These regulations will give parents in certain circumstances a final chance to tell the Government that they still want to consider taking action to collect their debt where it is likely to be possible at reasonable cost to the taxpayer. This will enable these cases to be closed finally in the next few years.
A small number of parents are currently able to lower their child maintenance liabilities artificially, or avoid them altogether, by drawing an undeclared income from assets. Whether this is via loans against the value of bullion or through the acquisition of virtual currency, the cultivation of a cash-poor but asset-rich lifestyle is a rare but growing method of evading child maintenance responsibilities. These regulations introduce new powers to address this problem. Where a client believes their ex-partner possesses the relevant assets, the Child Maintenance Service will investigate, escalating to its financial investigations unit if appropriate. If possession of a relevant asset is confirmed, and the value exceeds £31,250, a notional income will be calculated at 8% of the asset’s total value. This will be added to the total income used to calculate the maintenance due. It is recognised that assets can be acquired for legitimate reasons, which is why this power will be used in only a very small number of cases. The draft regulations protect assets in certain circumstances, including where the asset is used for business purposes or is the primary home of the parent or a child.
It has become evident that some parents are able to place all their funds in joint or unlimited partnership accounts, rendering them inaccessible to our current powers. These regulations extend the Government’s powers to enable the Child Maintenance Service to use regular and lump sum deduction orders in relation to joint and unlimited partnership bank accounts and to use lump sum deduction orders in relation to sole trader accounts. The introduction of this new power will mean that an additional £350,000 of maintenance per year may be collected for children.
To protect the rights of other joint account holders, a number of safeguards have been put in place to prevent deductions being taken from the other joint account holder’s funds. Joint or unlimited partnership accounts will be targeted only where there are insufficient funds in the parent’s solely held accounts. Before action is taken, the last six months’ account statements will be checked to establish the ownership of the funds. In a small number of cases where, despite investigation, it is not possible to establish how much of the funds within the account belong to the parent—for example, because no evidence is furnished as to ownership—a pro-rata approach will be adopted. This will assume that the parent’s share of the funds is equal to that of the other account holders. All account holders will be notified before a deduction order is made in respect of a joint account and given the opportunity to make representations in relation to the funds targeted. The standard representation periods will be 14 days for regular deduction orders and 28 days for lump sum deduction orders. All account holders will also have appeal rights. Further safeguards are in place to ensure businesses have sufficient cash flow to continue to trade. A deduction will not be taken if it would reduce the account balance below a reasonable amount; we suggest, for example, £2,000. There is also a requirement for the Government to review these provisions every five years.
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With respect to passports, the Government plan to commence an existing power to enable the Child Maintenance Service to disqualify a parent with child
maintenance arrears from holding or obtaining a UK passport. These regulations make further provisions in respect of this power. This measure will add to the existing sanctions of commitment to prison and disqualification from holding or obtaining a driving licence and will operate in a similar way. It will be used only where a parent has consistently failed to meet their financial responsibility for their children and all other enforcement powers have failed to regain compliance. Given the serious nature of this power, appropriate safeguards are in place. It will be for the court to decide whether to disqualify a parent from holding or obtaining a UK passport. The court has the power to suspend the disqualification order on such conditions as the court thinks appropriate. This power will be used in only a small volume of cases but will serve as a deterrent to encourage the payment of maintenance as early in the case as possible.
Debt on CSA schemes has built up since they launched in 1993. Over the years, successive Governments have tried various strategies to collect this debt, including using external debt collection agencies and offering parents the option of making a part payment, but none of these has been successful in getting money to children. The published Child Support Agency client fund accounts for 2015-16 make clear that £3.1 billion of CSA debt is deemed uncollectable. These regulations include changes that help to deliver certainty to parents by attempting a final collection of their debt where they want it and where such action is likely to be cost-effective for the taxpayer. For a case to be in scope for these regulations, the debt must have accumulated on the 1993 or 2003 CSA schemes. It must also be a case where only arrears of maintenance are due—that is, where no maintenance is currently due for a child—and the case has not received a payment within the past three months. Where a case started on or before 1 November 2008 and has more than £1,000 arrears, or is over £500 if the case started after 1 November 2008, or the arrears accrued under the CSA but have transferred to the Child Maintenance Service system and are more than £500, we will write to the parent the money is owed to and ask whether they would like us to make a last attempt to collect the debt. Parents will be given 60 days to tell us that they want us to attempt to collect the debt. If representations are not received within the 60-day period, the debt may be written off.
Where CSA debt falls below the thresholds prescribed in the regulations and no payment has been received in the past three months, it will be written off without seeking representation. This is because it will not be cost-effective to attempt collection of debt below these thresholds. There are different thresholds according to age of debt, as the older the debt, the harder it is to collect. Where this applies to a case, both parents will be notified that the debt has been written off. Where the debt is below £65, these regulations will enable the debt to be written off without notice to the parties. This is in line with the current threshold used for debts owed to government. Finally, if a case has debt subject to sequestration, which is Scottish insolvency, these regulations will enable it to be written off when the sequestration expires. This will apply to all child maintenance schemes, as this debt becomes legally uncollectable due to the way sequestration operates.
In conclusion, I am of the opinion that these regulations will strengthen the statutory Child Maintenance Scheme by enabling greater compliance by the small number of parents who deliberately try to reduce their child maintenance liability or to evade their parental responsibilities. It will bring certainty to families with historic CSA debt by offering a final chance of collection of that debt, where it is possible at reasonable cost to the taxpayer. I am satisfied that this instrument is compatible with the European Convention on Human Rights, and I commend these regulations to the Grand Committee.