On December 14th, the Government (via Department of Work and Pensions) launched a consultation on their “Child Maintenance: a new compliance and arrears strategy“.
The proposals in this consulation seek to strengthen the current Child Maintenance Service (CMS), which was introduced in 2012.
The proposals include:
improvements to child maintenance calculations and new compliance measures
stronger collection and enforcement measures
a request for further ideas on collection and enforcement
how to deal with the historic debt that accrued on Child Support Agency (CSA) cases
We have taken the time to read the document in its entirety and will now comment on the contents of the proposals. Unfortunately the Government and Department of Work and Pensions has once again failed in spectacular fashion to address (or even acknowledge) the problems with the Child Support Maintenance system that is currently used in the UK.
The Ministerial Forward (which is unattributed so could be either Caroline Dinenage or David Gauke) that prefaces this document makes a number of claims (none of which are actually backed up with clear evidence). These include statements such as
Following careful, staged implementation, this service is working well and avoiding the problems which beset the previous statutory child maintenance schemes.
This sounds like a lot of self congratulatory nonsense. Our recent survey into the Child Maintenance Service gave them a Net Promotor Score of -89 (on a scale of -100 to +100). Over 86% of the surveyed parents rated the CMS as “Terrible” or “Poor” in relation to the management of their cases. You can read more about the Survey here but its results are not at all indicative of a service “working well”.
The Consultation lists its objectives as
Continue to prioritise resources to benefit children of today;
Continue to encourage parents to collaborate over their child maintenance arrangements where possible, as this is in the best interests of their children;
Continue to minimise debt accrual in the Child Maintenance Service (CMS);
Further improve compliance through changes to child maintenance calculations;
Strengthen our collection powers across all schemes;
Address the historic arrears that built up under the CSA; and
Avoid taxpayers funding activity which won’t result in more money going to children.
These aims are interesting for a number of reasons. Firstly, the whole premise of the Child Maintenance Service is one based on the assumption that parents can not cooperate. It’s not an organisation that seeks in any way to encourage collaboration; quite the opposite in fact. We have been contacted by numerous paying and receiving parents who tell us their tales of a severe deterioration in the relationships once the CMS gets involved. In short, all the evidence we’ve seen demonstrates that (even where the parental relationship is strained) CMS involvement inflicts damage to parental relationships which, using the DWP’s own logic, is demonstrably not in the best interest of children.
CMS and parental collaboration
The DWP say that
Before parents can make an application to the CMS they must have a mandatory conversation with Child Maintenance Options, which is a free service that provides information and signposts to specialist support.
The issue is that this is a unilateral conversation that does not include both parents and does not in any way explore the other parties attitude or circumstances. Child Maintenance Options invariably point people towards the CMS online calculator which produces an amount based on a fundamentally flawed formula. Thus, the process is flawed before it even starts.
We are very concerned that the DWP does not appear to be being realistic about the impact that Child Maintenance Service involvement has on a parental relationship. For example, they describe the “Direct Pay service” as “collaborative”. There is nothing “collaborative” about any degree of involvement with the Child Maintenance Service. MP’s themselves have said that they want the Child Maintenance Service to “strike fear into the hearts of parents”; this is hardly a service discouraging conflict and encouraging collaboration.
What are the DWP proposing?
Remember that the DWP says that an objective of the Child Maintenance Service is to
Continue to encourage parents to collaborate over their child maintenance arrangements where possible, as this is in the best interests of their children
There is clear evidence that children in separated families benefit from good quality relationships between their parents
so, what is the DWP proposing that will encourage parental collaboration and support good relationships between parents?
Improving calculation compliance
The current calculation is simple enough in theory. It is baed on the gross earned income using either current payslip information or HMRC derived historical income information.
DWP say that
this system works well for the majority of our clients, we are aware of cases where the paying parent’s income is more complex and may not be adequately addressed by current legislation and processes
This is interesting as the inference could be drawn that the “client” is the parent receiving the payment. This is an important point and one that we will come back to.
The DWP then go on to outline their “improvement”
Bring into the assessment notional income from assets like coins and gold, income derived from capital and any foreign income.
Allow for the paying parents unearned as well as earned income to be included in the initial CMS calculation, when we are advised about possible unearned income at the point of application. Currently we make the initial calculation on earned income information only. This is because the system has been designed for the majority of people who only have one stream of income. We also propose to amend the information we give receiving parents when they make their application.
Increase the number of staff in the Financial Investigations Unit (FIU) so we have increased capacity to look into complex cases and ensure that maintenance is not being evaded. The FIU has powers to ensure the maintenance calculation accurately reflects a parent’s circumstances and ability to pay.
Where it is clear that parents are deliberately hiding their income, we can use our existing powers to prosecute them.
The FIU also enables us to make maximum use of our civil enforcement powers to recover unpaid maintenance, as investigations can reveal details of assets we may be able to seize.
Much of the above is not “improving calculation compliance” at all. As a matter of fact it looks suspiciously like they are moving the goal posts rather than attempting to understand the problems with the current system.
Deductions from benefit
To extend deductions from Universal Credit (UC) to include cases where the paying parents’ household has earnings.
Extend deductions from benefit so that arrears can be collected when on-going maintenance ends. We propose to apply these changes to all child maintenance schemes. Changes to UC deductions would be implemented when UC is fully rolled out.
The DWP is also proposing to make deductions from the following benefits:
Contribution based Employment and Support Allowance
Contribution based Jobseeker’s Allowance
Industrial Injuries Disablement Benefit
Widowed Parent’s Allowance
War Widow’s payments
Statutory Maternity Allowance
Severe Disablement Allowance
Income Related Employment and Support Allowance (ESA)
Income Based Jobseeker’s Allowance (JSA IB)
Income Support (IS)
Pension Credit (PC)
Universal Credit (UC)
They also say this
We propose that deductions would apply if the paying parent or their partner is in receipt of an income related benefit.
Curiously, even after talking about the measures that they claim are going to ensure that payments are made they say
We will recover the arrears eventually, even if we have to wait until they claim State Pension
Deductions from partnership or sole trader business accounts without limited liability
First, a little word on Joint Bank Accounts
The DWP ran a consultation in 2016 about deductions from Joint Bank Accounts, the Government response of which we had commented on previously.
Interestingly, the figure they claim they will be able to obtain from these Joint Account deductions has changed from the £390,000 previously reported. Page 8 of the methodology paper attributes this to “older QSS data”.
The DWP now says it will recover £570,000 (a 46% increase on the previously reported figure). Whilst the quantum of money the DWP “believes” it will be able to take may seem like a large sum, let’s put this figure into context:
In the last Full Year figures that we have available from the statistics published by the DWP (2016) the total maintenance due under the “Direct Pay” and “Collect and Pay” schemes was £360.4mln.
Of this figure, £98.3mln was due under the “Collect and Pay” scheme. Of this, a total of £49.1mln was paid (49.99% was paid; rounded to 2 decimal places). This left £49.2mln that had not been paid on time (50.05%; rounded to 2 decimal places).
The additional £570,000 the DWP now claim their Joint Account deductions would recover makes up 1.15% of the unpaid maintenance under the collect and pay scheme only leaving 98.85% still unpaid.
We would question whether the damage done to new relationships in having the CMS taking money that is potentially not generated by the “liable parent” outweighs the minuscule (statistically significant) impact this action will have on the CMS “efficiency”.
The question needs to be asked, will it create more problems than it solves?
Sole Trader Business accounts
The DWP is also now proposing the deduct money from sole trader business accounts and those of partnerships without limited liability. They say that this will allow the collection of an additional £270,000 per annum.
This is another ill thought out and worrying development that demonstrates once again that Julia Gault and her colleagues in the Child Maintenance Policy Unit do not understand some of the simple things about how business (or indeed human nature) works.
The consultation document says at point 64:
All necessary steps would be taken to ensure that the process for making deduction orders against partnership business accounts operates fairly and has adequate safeguards to protect the rights of all parties to the account. We propose that a deduction would not be performed if the account balance is less than £2000. This is to help ensure the business has enough cash flow to continue to run effectively.
Firstly, £2,000 is another arbitrary figure seemingly plucked out of thin air and to suggest that deductions could be made from business accounts containing as little as £2,001 is very worrying indeed.
The DWP then goes on to say
Where it is not possible to establish what funds in the account belong to the paying parent, we propose to assume that a proportionate share of the funds in the account belong to the paying parent. The share would be based on the number of account holders. This means if there are two partnership business account holders then each would be considered to own an equal share of the funds held. Accordingly, only the paying parents deemed 50% share of the funds would be subject to the deduction order.
Another incredibly simplistic view which would not take into account initial investment nor detail of the partnership agreement (which is a private document between the partners) and which has the potential (if not the likelihood) of causing friction within the businesses potentially putting employees and their jobs at risk.
The DWP is now suggesting implementing measures in the Child Maintenance and Other Payments Act 2008 to revoke Passports for up to 2 years. The CMS already has the ability to revoke Driving Licences or argue for committal to prison and we think these are incentive enough.
The DWP then gives an insight into the mentality behind the Child Maintenance Service when they say:
As with our current powers to remove driving licences and commitment to prison, we expect the threat of losing a passport to nudge paying parents towards compliance.
So, they want to “nudge” people with “threats”. In any other situation, using threats to coerce a person to relinquish money to a legal stranger would likely be considered extortion. However, the Government appears to think that this is acceptable and (astonishingly) that this will not damage relationships between parents (thereby affecting the children involved) .
Historical CSA Arrears
The consultation also makes reference to the historical alleged arrears that were accumulated during the operation of the 1993 and 2003 Child Support schemes administered by the Child Support Agency (CSA).
The problem with the alleged figures is that the National Audit Office has said repeatedly that they are not confident that these are correctly calculated. Essentially these arrears may have been conjured out of thin air by a combination of maladministration and Government error.
At Voice of the Child the solution seems simple. The Government has shown itself to be incapable of administering a system that is fair or achieves the intended outcome. Instead they have opted to employ management that has officiated over the shambles that was the CSA, many of whom were simply rebadged into the Child Maintenance Service. These include the head of the CMS, Tom McCormack; the head of Arrears and Enforcement, Marc Gill and also the head of the Financial Investigation Unit, Barry Porter. We have said before that one of the first things that should happen is that the entire Senior Leadership within the CMS should be fired for incompetence. The Ministers who allow these people to continue the cycle of misery and maladministration whilst turning a blind eye should probably go as well.
What should happen next?
If it’s the Government’s position that they have calculated the amounts owed correctly and this money is vital for children then the Government should pay it. Wipe the slate clean.
The £3.8bln in arrears should be immediately settled out of the DWP budget (the DWP had a budget of £6.5bln in 2016/17 and paid out over £173bln in benefit and pension payments). The Government should be made to satisfy a debt it alleges exists and has allowed to accumulate by virtue of their own incompetence.
We are extremely disappointed that once again, instead of addressing the issues with the Child Maintenance Service and underlying legislation, the Government is choosing to suggest measures that would not solve the problems but instead implement measures that are likely to create new ones.
We have said many times that wholesale reform is the only way to fix the issues. This MUST start with the legislation. The issues that afflict the CMS have existed since 1993 and are grounded in flawed assumptions and logic in the 1991 Child Support Act and subsequent amendments and legislation.
If the Government really wants to encourage parents to contribute fully and fairly then reform is needed across the spectrum of Family Law and Child Maintenance Legislation. Incentives to limit a parents’ involvement need to be immediately removed, proper account needs to be given to the costs associated with shared care of the children (with DWP Policies revised where appropriate) and the Maintenance legislation needs to be reformed in concert with the 1989 Children Act and Family Justice systems which are equally flawed and broken.
A question to consider:
Are the costs of a parent with 35% of the time really materially different to the parent with the balance? Housing, transport, food, clothing etc. All of these must be paid by both parents if they are involved in a a child’s life to the extent that would be of benefit to the child.
Even with the suggested amendments in the consultation, Child Maintenance would be relatively simple to legally avoid but we are not going to write a “how to” manual for this purpose at this time. We would rather that the system was complied with voluntarily as any fair and equitable system would be.
Proper incentives are needed; provided in the form of a benefit, (not a punishment) if the Government really wants to “support parents” or “encourage collaboration” for the sake of children.
The Government is approaching their perceived (manufactured?) problem from completely the wrong direction and until these simple lessons are learnt and (and the underlying issues) understood then issues with Child Maintenance Service look set to continue.
Caroline Dinenage, Julia Gault et al should all hang their heads in shame at this lazy attempt at addressing the problems they are too afraid to address properly.
In a Family Law system designed for combative parents there is no real allowance for the views of children and any understanding of how Family Law ultimately impacts on children most of all.
We speak for the children in Family Law so that, finally, the children have a voice.