I ask the noble Lord to bear with me, because I do not want to get this wrong. The answer is: only if the committee decides to report the regulations.
I will focus on some of the questions put to me, which are welcome. I start with the question from the noble Lord, Lord Kirkwood, on case closure timescales and the fact that there has been slippage. We are still on course to have ended all existing liabilities on CSA cases by the end of this year, 2018. The noble Lord referenced the NAO report. In that context, it is really important to say that we are continuing to consider the recommendations in the report. The department, in a broader context, has really taken on board that we need to be much better at listening. We thought that we were doing enough perhaps, but there is always more that we can do—within time and resource constraints, of course—but it is very important that we listen.
The noble Baroness, Lady Sherlock, asked how the representations will be sought. Will each parent to whom money is owed be written to individually? Depending on which category a case falls into, a client will receive a different letter or series of letters explaining what is happening and why, and, where appropriate, giving them the opportunity to ask us to try to collect their debt. These letters will be sensitively worded and will acknowledge that this may not be the outcome a client is hoping for. I was asked whether, if there has been a payment in the last three months, we will continue to collect. The answer is yes. If the case is in payment, we will continue to collect any arrears still outstanding for as long as the case remains in payment.
I was also asked whether our power to confiscate passports will be used only in a few cases. We will use this power in a targeted, proportionate way. I noted what the noble Baroness, Lady Sherlock, said about our having tried driving licences and asking whether that worked. The keyword here is “deterrent”. The vast majority of parents, we must stress, willingly pay towards their liabilities; we will seek to apply sanctions only in cases where parents wilfully refuse to pay. This happens only in limited circumstances. As with other enforcement powers, such as removing driving licences, the threat of exercising it can be very persuasive. The threat of denying people a passport is certainly something that stood out, when I first read the draft regulations, as something quite exceptional. I hope noble Lords will agree that it should send out a strong message to those who, frankly, are consistently refusing to take responsibility for their children.
The noble Baroness, Lady Sherlock, and the noble Lord, Lord Kirkwood, enquired about compliance rates for cases of collect and pay, asking what we are doing to improve the figure of 57%. The latest data, published in September, for collect and pay compliance shows it is going up; it is now 62%. Of the £1.85 billion due to be paid since the Child Maintenance Service began, £1.6 billion has been arranged through direct pay or collected through collect and pay while £290 million is currently unpaid—around 12% of the total. This percentage share continues to decline from 12.4% last year and 13.1% two years ago.
The CMS is not the only option available for separated parents to arrange child maintenance; it is there for people who cannot work together to make their own arrangements. The collect and pay service is in place for those parents unable to work together, who are less likely to be compliant. This means that the caseload is smaller but naturally more challenging than the CSA caseload.
The noble Baroness, Lady Sherlock, asked how many cases will be affected by the notional income power each year. We have not made projections on this point, but we anticipate the number to be small as, historically, only a small number of parents attempt to avoid their liabilities in this way. On the question of how many passports we expect to be disqualified every year, the figure referred to indicates that we project 20 applications for all types of sanctions will be made in the year. These include commitment to prison and disqualification from driving. Sanctions must only ever be a last resort; this is not just about how many we pursue but about targeting the right people. The threat often results in payments restarting.
The noble Lord, Lord Kirkwood, asked why the passport power is not being introduced for people in Northern Ireland. I can assure the noble Lord that this is not a particular sop to those resident in Northern Ireland who do not respect their responsibilities for their children. This is not being introduced in Northern Ireland simply because Northern Ireland citizens are entitled to an Irish passport; they have options for dual nationality, which would reduce the effectiveness of the power—they would simply find an easy way around it.
The noble Baroness, Lady Sherlock, asked whether giving periods of representation to account holders would mean that NRPs can move money to other accounts. This change is intended to close down a known loophole. If we intend to deduct a lump sum from a joint or business account, the funds will be frozen during the representation period. If parents move their funds to another type of account—for example, a sole account—we will target that account. If the funds are moved to an account we are unable deduct from, we will use our other strong enforcement measures to collect the debt.
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A question was asked about whether the amount frozen in a lump sum deduction would be reduced if some of the money belonged to the other account holders. Although the debt outstanding will be frozen in the case of a lump sum deduction, if we receive representations from other account holders and, following
these, decide that a proportion of the money does not belong to the non-resident parent, we will deduct only the proportion that we have decided belongs to the non-resident parent. Those working on this issue in the Department for Work and Pensions have been considering many of the possibilities—as has the noble Baroness, Lady Sherlock—of how people will work hard to get around the system.
I was asked whether we have targets for family-based arrangements. We do not have targets. We want families to make an arrangement which suits them. Around 25% of families who contacted the Child Maintenance Options service chose a family-based arrangement. Other families may make these arrangements without speaking to the service. Family-based arrangements tend to have high rates of compliance.
I was asked what target has been set for increased compliance and arrears. Again, we do not set formal targets. Our ambition remains to take the new powers debated today and continue to build on our success to date. Again, it is more about listening, watching and seeing how these regulations work out, bearing in mind that, as I have already made clear and the regulations make clear, we can revisit this instrument within five years if it is found to be ineffective.
The question of the yacht came up. Again, we have discussed and debated this interesting issue in the department. How easy is it to set a value on a particular asset? Some may think that it is easy to value a yacht, but it is quite difficult. It is easier to value a house because you can look at comparisons, go to estate agents and so on, but we have to think about the proportionate cost.
There is more to it than that in considering why we have not included high-value items such as yachts as an asset under these powers. The assets chosen reflect those which are most commonly used by individuals to generate undeclared income to support themselves and are based on operational experience. We are not interested in targeting assets that cannot be used in this way. It certainly persuaded me to a considerable degree that, unfortunately, these high-value items are often purchased using credit. We attempted to take into account this kind of lifestyle inconsistency under the CSA, but it has not been adopted because it has rarely led to a change in the liability of a case.
We must remember that buying such items is simply not the reality for the vast majority of clients. The latest published statistics show that more than 90% of paying parents pay less than £100 a week. Payment amounts vary according to family circumstances. To put this in context, for a hypothetical separated family with two children—and no children from another
family—a weekly payment of £100 per week might imply a gross income of approximately £625 per week, which is around £32,500 a year. Our focus is on introducing a power that will effectively target a small minority of highly-motivated individuals who take steps to avoid their responsibilities, not those funding a lifestyle through debt.
The noble Lord, Lord Kirkwood, asked whether I can say anything about the number of people moving from the old scheme to the new scheme, which, in the words of the noble Lord, was disappointing. The number of parents opting for the new statutory scheme—the noble Baroness, Lady Sherlock, also referred to this issue—was lower than was expected but we continue to monitor the arrangements parents make, including understanding why parents may not choose to make an arrangement. It is very difficult to monitor that. To what extent should we seek to pry—if I may use that word—into people’s private lives about why they do what they do? This is a very fine and difficult balance. I can appreciate that. With the depth of experience of the noble Baroness, Lady Sherlock, and the noble Lord, Lord Kirkwood, we have to be careful to try to do the right thing while being proportionate but not being naive, and putting the children first. It is very difficult.
Finally, the noble Lord, Lord Kirkwood, asked what happens if parents cannot afford to pay off their arrears because of other debts. If the paying parent is having financial difficulties, the Child Maintenance Service will discuss the parent’s income and outgoings with them to agree an affordable and sustainable payment arrangement that settles the outstanding arrears within two years. In exceptional circumstances this period can be extended, for example where the paying parent has recently stopped claiming benefit and started new employment or self-employment.
I hope that I have mostly answered, if I can put it that way, the questions that have been raised. I am very grateful to the Committee for asking for much more detail following my introductory speech. The Government are committed to building on the success of the Child Maintenance Service. These regulations will help to do this, first, by extending our enforcement powers, closing down known loopholes and sending a clear signal that those who fail to meet their obligations to their children will be pursued, and secondly, by addressing the arrears which represent the legacy of the CSA in a way that best balances the interests of parents with the public purse. I commend this instrument to the Grand Committee.