Child maintenance: yet another DWP effort
A new DWP consultation, with an early response date, sets out plans for revised calculation and better collection in current cases, but writing off of many old debts
The statutory child maintenance system has gone through many changes in its 24 years of existence. The Government has conceded that the present system, particularly in relation to the legacy cases, is not satisfactory and the DWP has now issued a public consultation, Child Maintenance: A New Compliance and Arrears Strategy, in which responses are sought by 8 February 2018.
There are four main aspects to the consultation.
- First, there is to be an improvement to child maintenance calculations and new compliance measures.
- Secondly, there is a call for “further ideas” on collection and enforcement.
- Thirdly, there will be proposals for stronger collection and enforcement methods.
- And, fourthly, there are proposals to deal with historic debt which has accrued on Child Support Agency cases.
Before the consultation document addresses these matters, however, we are told that there is to be encouragement for collaboration between parents. Parents are recommended to seek information from the Child Maintenance Options. This is a notoriously unreliable source of information and, if agreements are made in the light of that information, then it is likely that one or other of the parties' interests will, in many cases, be prejudiced. There is no mention in the consultation document about the Scottish registered minute of agreement, which is such a successful feature in Scots family law and would be more so but for the terms of s 9(4) of the Child Support Act 1991, which renders any such agreement – no matter how fair and reasonable – vulnerable to an application for child support maintenance after only one year.
1. Calculation and compliance
In the first of the proposed compliance measures, DWP now suggests that there should be a method of calculating income from assets even if these assets produce no income. Solicitors will be aware that there were major problems with reg 18 of the old Variations Regulations 2000 by virtue of which a non-resident parent could be deemed to be earning 8% per annum net on assets even if they were earning him nothing at all.
Eight per cent might have been a reasonably fair figure in 1991. It certainly was not in the years leading up to the implementation of the 2012 scheme, which abolished the assets variation altogether. DWP is proposing improvements, it tells us, in the calculation of child support liability for paying parents with complex income so that assets and other sources of income which are not presently captured in the calculation will be taken into account. This should reduce the ability of some non-resident parents to arrange their finances in order to defeat or minimise child support liability.
The general proposal is to bring into the assessment notional income from assets like coins and gold, and also foreign income. The proposal should allow unearned, as well as earned, income to be included in the initial calculation. Normally, that is brought in at the insistence of the parent with care but that is only possible if the parent with care not only knows about that income but also knows that it should have been taken into account. In order to effect such a change, the DWP proposes to increase the number of staff in the Financial Investigations Unit.
This should be a good thing. The powers of CMS to investigate and to enforce are presently quite wide but, in practice, not much used. Further investment into this area should help to defeat some of the more obvious tricks of the well-advised non-resident parent. One thinks, in this regard, of the terms of s 32L of the 1991 Act as amended, providing a draconian remedy which for some reason is hardly ever used. It may be that the increased workforce in the FIU will bring that very useful remedy into the light. Even now solicitors acting for parents with care should be demanding that CMS use it in appropriate cases.
2. Call for further ideas
The consultation document calls for responses about the minimum value of an asset on which CMS should assume a notional income from capital which generates no real income. The lower the minimum value, the greater the cost to CMS of administering the system and it may be optimistic to expect that assets below the previous figure of £65,000 will be relevant. The consultation does not deal with the issue of crypto-currencies, which may provide a safe haven for the wealthier non-resident parents if they find that foreign income is going to be taken into account in the calculation.
DWP proposes to make changes to the system of deduction from benefits. The proposal is to extend the deductions from universal credit. At the moment CMS can deduct £8.40 per week in respect of current child maintenance from universal credit where the non-resident parent's household has no earnings. This cannot be done where there are earnings, and it is proposed to change that. Deduction from earnings orders will still be used for those recipients of universal credit with earnings over £100 per week, but the deduction from universal credit, in the view of CMS, may be more effective for those who are liable to pay flat rate maintenance but still refuse to pay voluntarily.
Child support has not been one of the most spectacular successes of Government's administration. Universal credit has not been without its problems. The proposal is to combine the two, and although the principle can hardly be faulted, it may be wise of CMS to delay implementation of such a scheme until they are sure that the appropriate IT and administrative systems are in place.
The next idea in the consultation document is that there should be deductions from joint accounts where there are failures to pay ongoing maintenance. At the moment there can be a regular deduction order from bank accounts, but these cannot apply to joint accounts nor to business accounts. DWP plans to allow deductions from joint accounts now, and claims that this will allow an extra 290 deductions to be performed each year. This seems to be a very small benefit for a potentially damaging change. In any event those who have been clever enough to ensure that their money is in joint accounts and therefore free from these deductions in the past will surely find other very simple ways to avoid these deductions, such as putting the funds into an account in the name of the person with whom the non-resident parent has previously had a joint account.
Business accounts may be more of a challenge. At the moment partnership funds cannot be subject to deduction, but under the proposals partnership accounts can be attached if the account balance is more than £2,000 and all partners to the account would have the opportunity to make representations in relation to the order. These representations could include information about the proportion of the account genuinely due to the non-resident parent who is a partner in the business.
Partnership accounts could be subject to regular deduction orders and lump sum deduction orders, and decisions would accordingly have to be taken about the proportion of the balance of the account which is owed by the non-resident parent concerned in respect of his maintenance liability. Representations, once more, would be allowed from the other partners in the business. The proposal is to offer a 28 day and 14 day period for representations in respect of the regular deduction orders and lump sum deduction orders respectively.
DWP accepts that there may be a need to strike a balance between the welfare of the ongoing business and the need to satisfy the maintenance claim. The consultation asks whether we have any reason to suggest why CMS should not follow HMRC's approach of leaving a minimum of £2,000 in the business to enable it to survive.
In the most intransigent cases of refusal to pay maintenance, CMS can apply to the court for an order disqualifying the non-resident parent (NRP) from driving and also to commit the NRP to prison for a period of up to 42 days. The point to remember about imprisonment is that, unlike imprisonment for the non-payment of a fine, the maintenance liability will not be removed by serving the sentence.
In the Child Maintenance and Other Payments Act of 2008 there is a possibility of regulation allowing removal of a passport. Although this was in the Act, it has never been included in the scheme. DWP now proposes to allow the removal of passports as further and additional sanction for the non-paying NRP. It is difficult to see how someone who has been unimpressed by the threat of imprisonment would be terrified into payment by the threat of being unable to travel legally abroad.
4. Recovery of arrears
The next section of the consultation document deals with the managing of historic Child Support Agency arrears. The published CSA client fund accounts to the year 2016, as the document acknowledges, make it clear that £3.1 billion of CSA debt is uncollectable. DWP estimates that to try to collect the whole £3.7 billion CSA debt would cost about £1.5 million, and concedes that it is highly unlikely that all of that sum would actually be recovered.
DWP has considered selling the debt to collection agencies, but this has proven not to be a commercially viable option.
There was also an experiment of part payment. If the NRP and parent with care (PWC) could agree that an arrears payment could be discounted on the basis of immediate payment, then DWP would write off the arrears. This was not a great success either.
If DWP wishes to lower the amount of unrecovered debt, it may be that it must adopt the simple expedient of writing much of it off. Its preferred option is to dedicate resources to make a final attempt at collection where it appears that there is a reasonable chance of success. The proposal is to write to PWCs who have debt over £500 if the case is less than 10 years old and over £1,000 if the case is older. If the PWC does not respond then debt will be written off.
This surely requires DWP to be very certain that they have a failsafe system of contacting such PWCs and that their records are fully up to date. Every family solicitor will have had the experience of clients informing them that they themselves have informed the statutory child support authorities of information which was simply not noted anywhere. This proposal, while very convenient for DWP, may cause injustice to PWCs who have been waiting for many years for the statutory system to do its job properly. The consultation document at para 116 includes a useful flowchart, which may not be a great comfort to those mothers who have waited years for money which had been due to them and which the statutory system has failed to collect.
The consultation document does ask for views about recovery and writeoff. We should note that DWP is not proposing to offer PWCs the chance to make representations about writeoff if the debts are less than £500 and less than 10 years old, or £1,000 where the case is older. All debt below that level will be written off and DWP estimates that there are 360,000 cases in the category. Do we think this is reasonable? That may be something which solicitors who are involved in child support cases will wish to comment on at some length. The arrears discussed above are those which are owed to the PWC. About £1.2 billion of the total maintenance arrears is owed to the Government, and we are told that DWP is seeking approval to write off that debt in cases in which there is no current payment and which are unlikely to be collectable “at a reasonable cost to the taxpayer”.
The child support system has not been the success that the original policy document Children Come First" envisaged. Various statutory, administrative and regulatory changes,, some major and some minor, over the years have addressed particular issues with mixed success and the system has a low level of public trust.
Clearance of arrears by writing them off is not a sign of success. On the other hand it may be that proper collection of maintenance genuinely due will be more likely in the context of a significant increase in the Financial Investigation Unit and the expansion of the collection criteria to include notional income from assets, although not on the draconian lines of reg 18 of the 2000 Regulations.
The consultation period began on 14 December and runs until 8 February. Responses may be sent to:
John Fotheringham is a consultant with Morton Fraser LLP
Child Maintenance Policy Team
Ground Floor North Zone E
Leeds LS2 7UA