BRIEFING PAPER Number 7776, 27 January 2021

Child maintenance: The By David Foster, Philip write-off of arrears on Child Loft

Support Agency cases (UK)

Contents: 1. Introduction 2. Policy development 3. Procedure: parent with care 4. Procedure: Government 5. How is the write-off progressing? 6.

www.parliament.uk/commons-library | intranet.parliament.uk/commons-library | [email protected] | @commonslibrary 2 Child maintenance: The write-off of arrears on cases (UK)

Contents

Summary 3 1. Introduction 4 1.1 The child support schemes 4 1.2 The 2018 write-off programme 4 2. Policy development 5 2.1 2012-2017 Strategy 5 2.2 2018 strategy 6 2.3 2018 regulations 7 3. Procedure: parent with care 8 3.1 Which cases are involved? 8 3.2 Informing the parent with care of a decision to write-off arrears 9 3.3 Representations by parents with care & non-resident parent 9 What is the timescale for responding? 10 3.4 What happens if the parent with care asks the CSA/CMS to collect a debt? 11 3.5 How does the CSA/CMS evaluate “collectability?” 11 3.6 Can part-payments be accepted? 12 3.7 What if a case involved arrears owed to both the Government and a parent with care? 13 3.8 Complaints 13 3.9 DWP flowchart of the write-off process 14 4. Procedure: Government 15 4.1 Why are there arrears owed to the DWP? 15 4.2 How are the arrears being written off? 15 5. How is the write-off progressing? 16 5.1 Parent with care representation 16 5.2 Non-resident parent representation 17 5.3 CSA debt written off 17 5.4 National Audit Office commentary 18 Complaints 19 6. Northern Ireland 20 6.1 Arrears 20 6.2 Policy background 20 6.3 Process 21

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3 Commons Library Briefing, 27 January 2021

Summary This briefing describes the UK Government’s policy to write-off arrears The separate arising from the 1993 and 2003 child maintenance schemes. These scheme in Northern schemes are closed to new applicants and ongoing maintenance cases Ireland is described have been transferred to the 2012 scheme. in section 6. Post-2018 Write-off policy Following a consultation, in 2018 the UK Government announced a new policy to bring the estimated £3.7 billion of child maintenance arrears accumulated under the 1993 and 2003 schemes within scope of a write-off programme. Of the estimated £3.7 billion, the Government calculated £2.5 billion was owed to parents with care (c. 970,000 cases)

and £1.2 billion was owed to the Government (c. 320,000 cases). In deciding to take this approach, the Government said arrears had accumulated due to the “significant policy, operational and IT issues” of the 1993 and 2003 schemes. The consultation document also highlighted the costs associated with collecting the arrears and maintaining them on Child Support Agency (CSA) IT systems,, and the relatively low level of collection expected (around £0.1 to £0.6 billion). The resulting Strategy said that the Government would-write off in full the £1.2 billion owed to the Government. Between 18 December 2018 and 30 September 2020, around 579,500 cases with non-paying historical debt have had the debt adjusted or written off. System records showed these had a total debt value of £1,935.5 million, of which £853 million was owed to government only

(DWP, CSA: September 2020, January 2021). Writing off arrears owed to Parents with care In December 2018, the CSA/CMS began writing to eligible parents with care to ask them if they wanted a last attempt to be made to try and collect the debt owed to them. The DWP said that by September 2020 all eligible persons on the CSA computer system had completed the care with representation process and 89% of contacted parents with care either did not respond to the letter or told the CSA that they did not want them to collect the debt. By the end of September 2020, 112,100 parents with a case on the CMS system have also been contacted (DWP, CSA: September 2020, January 2021). Where the parent with care requests the CSA/CMS collects the debt, the service conducts checks to establish whether there is a realistic chance of its collection. If there is, the service contacts the non-resident parent. By March 2020, all 13,700 cases on CSA systems had completed the non-resident parent representation process and 98% of these cases were transferred to the CMS to collect the debt. These figures do not include cases which were already on the CMS system before December 2018. At September 2020, 17,800 CSA cases already held on CMS systems had started the non-resident parent representation process and 82% of these cases have been transferred for on-going attempts to collect the debt (DWP, CSA: September 2020, January 2021). 4 Child maintenance: The write-off of arrears on Child Support Agency cases (UK)

1. Introduction 1.1 The child support schemes There are currently three statutory child support schemes operating in Great Britain under the Child Support Act 1991: • 2012 scheme (also known as CS3) is the current scheme and open to new applicants. It is administered by the Child Maintenance Service (CMS); • 1993 and 2003 schemes – these are closed to new applicants. All cases with ongoing maintenance liabilities have been transferred to the 2012 scheme. Only “arrears-only” cases continue to operate on the legacy scheme although, as this briefing explains in more detail, the Department for Work and Pensions (DWP) is implementing a large-scale write-off of arrears that accrued under these schemes. These legacy schemes are administered by the Child Support Agency (CSA).

Box 1: Child maintenance terminology Below is a list of common terminology on child maintenance employed under the Child Support Act 1991 (the 1991 Act) and in CMS literature: • Non-resident parent (“Paying parent”): a parent of the child who does not live with the child. • Parent with care (“Receiving parent”): the person with whom the child has their home and who usually provides day-to-day care of the child. The parent with care does not have to be a parent of the child or have parental responsibility for them • Qualifying child: the child for whom child maintenance is payable. • Relevant child (or “relevant other child”): a child other than a Qualifying Child for whom is payable to the non-resident parent (or their partner). • Child in /Child Applicant: in Scotland, a child aged 12-19 may apply for maintenance if they are in full-time, non-advanced education or approved training; • Duty to Maintain: Section 1 of the 1991 Act states that “each parent of the Qualifying Child is responsible for maintaining [them]” and “where a maintenance assessment made under this Act requires the making of periodical payments, it shall be the duty of the absent parent with respect to whom the assessment was made to make those payments”. • Gross weekly income: the non-resident parent’s income calculated as a weekly amount before any deductions for tax but after any contributions to approved personal or occupational pension schemes have been made. • Direct Pay: where the CMS calculates the rate of maintenance, and payments are made directly between parents. • “Collect and Pay”: where the CMS calculates, collects and passes on payments between parents. • (CMG): the post-2012 successor to the Child Maintenance and Enforcement Commission.

1.2 The 2018 write-off programme Following a consultation, in 2018 the UK Government published a new Compliance and Arrears strategy, which set out plans to write-off arrears arising from the 1993 and 2003 child maintenance schemes, organised through the CSA. Child maintenance cases with ongoing maintenance claims previously collected by the CSA have been transferred to the CMS. This briefing provides information on this policy, including its development and implementation to date. 5 Commons Library Briefing, 27 January 2021

2. Policy development 2.1 2012-2017 Strategy In 2013, the DWP document, Preparing the future, tackling the past, set out the child maintenance arrears and compliance strategy for 2012- 2017. The Strategy included an estimate that around £3.8 billion was owed in arrears on CSA cases by 2012.1 The Department said its “aim [was] to collect as much as we can”. It added, however, that that older debt was “harder and more expensive” to collect and the collection of money owed to children with ongoing maintenance arrangements would be its priority.2 The 2012 Strategy was criticised by several organisations, including the single-parents charity Gingerbread and the National Audit Office (NAO), who both said the Government had not allocated sufficient resources to recover arrears accumulated under the 1993 and 2003 schemes.3 Limited powers to write-off arrears Before 2012, the DWP has no power to write-off child maintenance arrears; the only option was to “suspend” their collection indefinitely. Legislative changes that came into force in October 2012, through amendments of the Child Support Act 1991 , introduced the power to write-off debts but only in certain prescribed circumstances.4 As the DWP explained, these were that: • the receiving parent (or child in Scotland, who can apply for maintenance in their own right) has requested that they no longer wish the arrears to be collected. • the receiving parent (or child in Scotland) has died. • the paying parent died before 25 January 2010, or there is no further action that can be taken to recover arrears from their estate. • [The DWP] have previously advised the paying parent that [it] would never take any further action to collect the arrears, for example [they] had have written to the paying parent and told them their debt no longer exists. • the arrears relate to liability for child support maintenance for any period in respect of which an interim maintenance assessment was in force between 5 April 1993 and 18 April 1995.5

1 DWP, Preparing for the future, tackling the past, 2013, pp3, 21, para 2.2 2 Ibid, January 2013, pp6, 21 para 4; DWP, CSA Quarterly summary of statistics for Great Britain, March 2016, p39 3 Gingerbread, Missing maintenance, 2016, p3; National Audit Office (NAO), Child Maintenance: Closing cases and managing arrears on the 1993 and 2003 schemes, 2017, para 3.3. 4 By the addition of Section 41E of the Child Maintenance and Other Payments Act 2008 5 DWP, Child Maintenance: A New Compliance and Arrears Strategy – Public Consultation, December 2017, pp20–1, para 91 6 Child maintenance: The write-off of arrears on Child Support Agency cases (UK)

2.2 2018 strategy Following a consultation, in December 2018 the UK Government published a new child maintenance and arrears strategy, which set out plans to write-off arrears arising from the 1993 and 2003 child maintenance schemes, organised through the CSA.6 The strategy estimated that £3.7 billion of arrears had been accumulated under the two legacy schemes, of which £2.5 billion was owed to parents with care (c. 970,000 cases) and £1.2 billion was owed to the Government (c. 320,000 cases).7 The DWP said the new strategy intended to offer “a final chance at collection where this is possible at a reasonable cost to the taxpayer” before writing off outstanding historic arrears.8 The DWP set out several reasons for this new approach: • Much of the debt on the CSA system was old, with many of the impacted children now adult. The Department said “currently 30% of the debt is in relation to a case where the ‘child’ is now over 25 years old”;9 • The DWP said “operational experience is that we have unreliable data for lots of the parents in these cases”;10 • Keeping the CSA computer systems running, the DWP estimated, would incur running costs of around £30 million a year;11 • Moving all the debt to the CMS system would cost an estimated £230 million;12 • Attempting to collect all the £3.7bn CSA debt “would cost around £1.5bn”;13 • The DWP estimated that it “might be able to collect between £0.1bn and £0.6bn”, with the £0.6bn figure based on achieving 100% compliance in the cases in which it could recover. It noted this was “highly unlikely to be the case”;14 • The Department said it had not “received a payment since before 1 January 2012 on 64% of the debt”.15 The DWP said the new approach brought certainty to parents and was realistic about the likelihood in the collection of outstanding arrears: With the final closure of CSA cases approaching, it is the right time to seek a solution for these CSA arrears. Considering all the evidence, we have developed an approach that seeks to provide certainty for parents whilst reducing public spending on debt that

6 DWP, CSA: Information for parents with historical debt, 14 December 2018 7 DWP, Child maintenance: A new compliance and arrears strategy, 2017, para 31 8 DWP, The child maintenance compliance and arrears strategy: Government response to the consultation, July 2018, p3 9 DWP, Child maintenance: A new compliance and arrears strategy (consultation), December 2017, p7, para 83 10 Ibid, p7 11 Ibid, para 33 12 Ibid, paras 84 and 94 13 Ibid, para 84 14 Ibid, para 84 15 Ibid, para 82 7 Commons Library Briefing, 27 January 2021

is neither cost effective nor realistic to collect. This would involve dedicating resources to do a final attempt at collection of debt where it appears that there is a realistic.16 Did the DWP consider alternative strategies? The DWP said it had previously considered selling the debt to collection agencies and it had conducted a part-payment trial, neither of which it deemed effective: • The consultation document argued that selling the debt to collection agencies was “not a commercially viable option”, citing a 2006 contract let by the CSA that involved two collection agencies and which “did not reach the anticipated rate of collection”.17 • A part-payment trial in 2016, the DWP said, “demonstrated that proactively contacting either parent about part payment was not a successful way to collect CSA debt and resulted in a small volume of agreements at great cost”.18 A report on the trial was published in 2017.19 Responses The single-parent charity Gingerbread argued that the write-off of debt was an “injustice” for parents and a “sober reminder that the DWP must up its game to avoid history repeating itself in the CMS”.20 The NAO in its report on the client funds account 2017/18 cautiously welcomed the proposal as an effective means to clear arrears, stating: The secondary legislation will go some way to reduce the remaining arrears balance, however, it is currently unclear by how much. The Department will need to revisit its assumptions around collectability to reflect its experience of the new write off powers”.21

2.3 2018 regulations In December 2018, new powers in The Child Support (Miscellaneous Amendments) Regulations 2018 to write off child maintenance arrears came into force. The legislation amended The Child Support (Management of Payments and Arrears) Regulations 2009 to allow additional circumstances where the Government may exercise the power to write off arrears. This legislation amended The Child Support (Management of Payments and Arrears) Regulations 2009 to allow additional circumstances where the Government may exercise the power to write off arrears.

16 Ibid, para 96 17 Ibid, paras 85-6 18 Ibid, paras 88-90 19 DWP and Government Social Research, Proactive use of part payment for child maintenance arrears, December 2017 20 Gingerbread, Government U-turn on child maintenance is “welcome but not enough”, 12 July 2018 21 DWP, Client funds account 2017/18: 1993 and 2003 child maintenance schemes, HC1807, December 2018, para 1.19 8 Child maintenance: The write-off of arrears on Child Support Agency cases (UK)

3. Procedure: parent with care 3.1 Which cases are involved? Since December 2018, the DWP has had powers to allow arrears accumulated under the legacy child maintenance schemes administered by the CSA to either be written off or for collection to be attempted, if certain criteria are met: Cases where attempts to collect debts may be made In December 2018, the CSA/CMS published guidance saying it would write to parents with care and ask them if they want the debt to be collected (to make representations) in cases where historic debt is: • over £500 and the case is less than 10 years old • over £1,000 and the case 10 years old or over The following must also apply: • the case is historical debt only and has no on-going liability • no payment has been made in the past 3 months • the debt has built up under the CSA (it may have now moved to the CMS as part of a CSA case closure) Cases where debts will be written off The debt will be automatically written off, if it is: • £500 or less and the case is less than 10 years old • £1,000 or less and the case is 10 years old or older If a case of debt subject to sequestration (Scottish insolvency), Regulations enable it to be written off when the sequestration expires. This applies to all child maintenance schemes if the debts become legally uncollectable due to the way in which sequestration operates.22

Box 2: Debates on the threshold for collection During consideration of the 2018 Regulations, the Government was criticised on its rationale for the thresholds used to determine whether parents would be asked if they wanted outstanding arrears to be collected. The then-Minister, Justin Tomlinson, told the then-Chair of the Work and Pensions Committee, Frank Field MP, that the thresholds were based on the cost of enforcement action: The thresholds we propose are based on the approximate cost of enforcement action. Depending on the actions we use, activity to attempt collection costs around £1,000 per case. Older debt is typically more difficult to collect. We have therefore set a higher threshold of £1,000 for cases over ten years old, and a reduce threshold of £500 for newer cases where the debt should be easier to collect.23

22 HC Deb, 12 November 2018, c5; The Child Support (Management of Payments and Arrears) Regulations 2009 (as amended), Section 13G; DWP, Guidance: CSA statistics: Publication strategy, 15 July 2020 23 Minister for Family Support to Chair of the Work and Pensions Committee, 9 October 2018 9 Commons Library Briefing, 27 January 2021

During its scrutiny of the legislation in 2018, the House of Lords Secondary Legislation Scrutiny Committee also said that it had expected a “more cogent explanation for the decisions about the various thresholds”.24 The DWP acknowledged issues in applying the proposed thresholds in its consultation on the 2018 Strategy. The DWP said its letters to parents would not “include debt balances for older cases or accrual periods”, with one reason being “the inaccuracies of older debt balances”.25 The DWP noted that many respondents to the 2017 consultation had disagreed with the proposed thresholds, but they did not offer alternative amounts and so the Department had decided to proceed with its proposals.26

3.2 Informing the parent with care of a decision to write-off arrears When the DWP has decided to write-off arrears, it must inform the parent with care or, in Scotland, the Qualifying Child, and the non- resident parent, unless: • the arrears in question are less than £65; or • the parent with care or, where relevant, a Qualifying Child in Scotland, has not responded to the DWP’s request to make representations.27 In cases where DWP is required to inform the parent with care, the letter will include a statement of regret that the debt has been written off.28 The DWP said this figure of £65 was chosen “because it aligns with DWP policy for debt owed to Government” and sending letters would be “likely to cause confusion” for parents who may not be aware they had any debt.29

3.3 Representations by parents with care & non-resident parent If the DWP considers writing off arrears and the amount of arrears is sufficiently high to trigger the right to make representation, then the parent with care (and, if applicable, a Qualifying Child in Scotland) and the non-resident parent must be given written notice.30 The notice must:

24 Secondary Legislation Scrutiny Committee, 39th Report of Session 2017–19, HL 183 2017–19, 6 September 2018, p7, para 16 25 DWP, Child Maintenance: A New Compliance and Arrears Strategy – Government response to the consultation, 12 July 2018, p24, para 110 26 Explanatory Memorandum to The Child Support (Miscellaneous Amendments) Regulations 2018, para 10.13 27 DWP, CSA: Information for parents with historical debt, 14 December 2018 28 DWP, Child Maintenance: A New Compliance and Arrears Strategy – Government response to the consultation, 12 July 2018, p24, paras 110–111 29 Ibid, paras 114, 115 30 Section 13(H) of The Child Support (Management of Payments and Arrears) Regulations 2009, amended by The Child Support Management of Payment and Arrears (Amendments) 2012 and The Child Support (Miscellaneous Amendments) Regulations 2018 10 Child maintenance: The write-off of arrears on Child Support Agency cases (UK)

• “Specify the parent with care or, where relevant, a child in Scotland, in respect of whom liability in respect of arrears of child support maintenance has accrued”; • State the amount of arrears but only if the case started after 1 November 2008;31 • State why it appears to the Secretary of State (i.e. the DWP) that it would be “unfair or inappropriate to enforce liability in respect of the arrears”; • Offer the opportunity to make representations by post “as to whether the liability in respect of the arrears should be extinguished”. Any representations “must be sent by post to the Secretary of State within the period of 60 days beginning with the date the notice is received”; • Explain the effect of extinguishing i.e. writing-off child maintenance arrears under the relevant legislation under paragraph 1 of section 41E of the Child Support Act 1991 as amended.32 • Where a notice is sent to the non-resident parent, they must send representations within 21 days of receiving their notice; The DWP explained that the notice would not include a figure for the amount of arrears outstanding for eligible cases for notices that started on or before 1 November 2008, and also would not include the “accrual period” (i.e. the timeframe over which arrears were accumulated) for any case falling under the large scale write-off provisions because: We do not feel adding this information will help customers in their decisions making [for cases where representation can be made]. Also due to the inaccuracies of older debt balances, it is likely that we would see an increase in complaints from parents due to confusion this might cause.33 What is the timescale for responding? A parent with care/Qualifying Child in Scotland has 60 days beginning with the date the notice is received by them to make representations.34 During the consultation on the Strategy, the DWP said that it would send a reminder letter at 21 days.35 The non-resident parent has 21 days to make written representations.36

31 The Child Support (Miscellaneous Amendments) Regulations 2018, Part 4 32 The Child Support (Management of Payments and Arrears) Regulations 2009 as amended, regulation 13H(3) 33 DWP, Child Maintenance: A New Compliance and Arrears Strategy – Government response to the consultation, July 2018, p24, para 110 34 Section 13(H) of The Child Support (Management of Payments and Arrears) Regulations 2009, as amended by The Child Support Management of Payment and Arrears (Amendments) 2012, and The Child Support (Miscellaneous Amendments) Regulations 2018 35 DWP, Child Maintenance: A New Compliance and Arrears Strategy – Government response to the consultation, July 2018, p24, para 108 36 The Child Support (Miscellaneous Amendments) Regulations 2018, 13(H)(5) 11 Commons Library Briefing, 27 January 2021

3.4 What happens if the parent with care asks the CSA/CMS to collect a debt? The service will firstly carry out checks to establish if it is likely they can collect the debt. These checks can include locating the non-resident parent and establishing their financial status. If the CMS/CSA determines that it is unlikely the debt will be collected, they will write to both parents. If the CMS/CSA determines it could collect the debt, it will gather more information and allow both parents to make representations. This can include the non-resident parent providing reasons for why the debt cannot be collected or should be recalculated. The CSA/CMS will then write to both parents with their decision. If the non-resident parent is under sequestration (Scottish bankruptcy), then the CSA/CMS cannot collect any debt accrued up to and including the date the parent was sequestrated. If a debt is to be collected, the case will be transferred to the CMS and its collection and enforcement powers potentially applied (described in the Library Briefing Child Maintenance: Fees, enforcement and arrears).37

3.5 How does the CSA/CMS evaluate “collectability?” During the Consultation on the 2018 Strategy, the DWP explained what factors would lead it to decide whether or not to attempt to collect a debt after it had received representations: • Whether we can establish where the paying parent lives. • What enforcement action we have already taken on the case previously. • What financial information we can gather through credit reference agencies. • If the paying parent has been sequestrated for any period of the debt.38 The DWP stated that “if there is a reasonable chance of collection we will make reasonable attempts to collect the outstanding debt”.39 On establishing whether to progress cases through to court-based enforcement powers, the Consultation noted: Some of the factors that caseworkers will consider when deciding whether to progress cases through our court based enforcement powers is the amount of debt and the likelihood of recovery. Decisions would also take into account value for money for the taxpayer. For example if we have evidence that suggests the paying parent owns a property on which we can get a charging order or take order for sale action on, the likelihood is that the

37 DWP, CSA: Information for parents with historical debts, December 2018 38 DWP, Child Maintenance: A New Compliance and Arrears Strategy – Government response to the consultation, July 2018, pp22-3, para 100 39 Ibid, p23, para 102 12 Child maintenance: The write-off of arrears on Child Support Agency cases (UK)

case will be progressed through our court based enforcement powers. 40 The DWP has stated that it would write-off arrears in these cases if “we have exhausted our enforcement options and have been unable to collect the debt in which case we will notify both clients”.41 More information on the collection and enforcement powers of the CMS can be found in Child Maintenance: Fees, enforcement and arrears.

3.6 Can part-payments be accepted? Under Section 41D of the Child Support Act 1991, as amended, the CMS may seek, or accept a proposal of, part-payment in satisfaction of liability for the whole arrear. The written consent of the parent with care (or Qualifying Child in Scotland) must be obtained before this is accepted (in the case that the arrears are solely to the DWP, no consent is required).42 Any decision to accept part payment on behalf of the Government will take account of, but not be limited to considering, the below: The welfare of any child likely to be affected by use of the powers, likelihood of success of further enforcement action, amount of debt owed, financial means of the non-resident parent and any other arrangements for child maintenance that are in place. Caseworkers will also consider any views previously provided by parents with care that may be relevant.43 The Government also stated that it reserves the right not to contact the parent with care with a part-payment offer if it “believes the offer to be clearly unreasonable, given the non-resident parent’s current circumstances”.44 In response to the 2012 consultation on the amendments to the 1991 Act, the Government stated that it would not “proactively solicit for offers of part payment”.45 Where an offer is made for part-payment fo arrears in full and final satisfaction, the DWP will give particular consideration to the likely success of any enforcement action and the ability of the non-resident parent to clear the full debt balance: The Department will give particular consideration to the likely success of any continued enforcement action for the full arrears amount and the non-resident parent’s ability to clear the full debt balance. Before negotiating with a non-resident parent on part payment full consideration of all the circumstances of the case will be taken into account. The Department may decide where offers for part payment are received from a non-resident parent, to insist on the full amount

40 Ibid, p23, para 105 41 Ibid, p23, para 106 42 The Child Support (Management of Payments and Arrears) Regulations 2009, Part 4A 43 DWP, The draft Children Support Management of Payments and Arrears (Amendment) Regulations 2012: Government response to consultation, October 2012, para 36 44 Ibid, para 40 45 Ibid, para 29 13 Commons Library Briefing, 27 January 2021

of the arrears being paid where it is clear the non-resident parent has the ability to pay the full amount and there is a reasonable prospect of recovering it.46 In the event a payment plan is not met, the liability persists.

3.7 What if a case involved arrears owed to both the Government and a parent with care? The consultation document on the new Strategy said that the debt owed to an individual will be dealt with separately: Where cases contain a mix of debt to receiving parents and debt to government, the debt to government would be written off and the debt to receiving parents would be handled as described above [in Section 4 of this Briefing].47

3.8 Complaints If a parent is unhappy with a decision the CSA/CMS makes or how their arrears have been managed, they make follow their complaints process: 1 Contacting the CMS 2 Asking the office managing the case to contact the Complaints Resolution Team 3 Asking the Complaints Review Team to examine the decision of the Complaints Resolution Team 4 Asking the Independent Case Examiner (ICE) to look into the case. An individual must have exhausted the full complaints process of the CMS before doing this.48 5 If an individual is unhappy with the ICE’s decision, they can ask their MP to ask the Parliamentary and Health Service Ombudsman to examine the case.49

46 Ibid, paras 30–31 47 Ibid, para 121 48 Independent Case Examiner, How to bring a case to the ICE, 24 February 2020 49 UK Government, Manage your CMS case, accessed 24 July 2020 14 Child maintenance: The write-off of arrears on Child Support Agency cases (UK)

3.9 DWP flowchart of the write-off process

Source: DWP, Child maintenance: A new Compliance and Arrears Strategy – Public consultation, December 2017, p24

15 Commons Library Briefing, 27 January 2021

4. Procedure: Government 4.1 Why are there arrears owed to the DWP? Until 2008, for parents with care who were also in receipt of welfare benefits, child maintenance was offset against those benefits. This meant that they were no better off if the non-resident parent paid maintenance as every pound reduced their benefits by a pound, but it did mean that the Government’s welfare benefit bill was reduced.50 In such cases, if the non-resident parent did not meet their maintenance obligations, welfare benefits were paid to the parent with care to prevent hardship, and the non-resident parent accumulated arrears payable to the Government. The Labour Government changed this, firstly by introducing a disregard for welfare benefits of the first £20 of maintenance from July 2008, and then from April 2010 by fully disregarding child maintenance payments when determining a parent with care’s entitlement to welfare benefits and tax credits.51 This change meant that maintenance was paid in addition to welfare benefits, meaning that any arrears subsequently built up were only payable to the parent with care. The then-Labour Government said the 2008 change in policy: Would allow parents with care on benefit to keep every penny of their maintenance, where maintenance is paid. This should give both parents an even stronger incentive to make and keep to a maintenance arrangement. It will also chime with the public view that all of the maintenance paid should benefit the children.52

4.2 How are the arrears being written off? The current Government Strategy is to write off all debt owed to the Government, stating that “it is unlikely to be collectable at a reasonable cost to the taxpayer”.53 Since 1 April 2018, the DWP has been writing off debts owed to Government.54 No letters would be sent to affected parents if arrears owed to the Government had built up on their case. Instead, information would be provided on the DWP/CMS website to inform those affected that they no longer owe this debt.55

50 DWP, A new system of child maintenance, Cm 6979, 2006, paras 2.4-2.7 51 DWP, No one written off: reforming welfare to reward responsibility – Public consultation, Cm 7363, July 2008, p90, paras 71.14-7.15 52 Ibid, paras 4.15–4.16 53 DWP, Child maintenance: A new Compliance and Arrears Strategy: Public consultation, 2017, para 120 54 DWP, Client Funds Account 2017/18: 1939 and 2003 Child Maintenance Schemes, HC 1807, December 2018, para 1.19 55 DWP, Child maintenance: A new Compliance and Arrears Strategy: Public consultation, 2017, para 122 16 Child maintenance: The write-off of arrears on Child Support Agency cases (UK)

5. How is the write-off progressing?

5.1 Parent with care representation From 13 December 2018, when the new strategy began, to the end of All DWP figures in September 2020, the CSA had written to 242,200 parents with care to Sections 5.1-5.3 have ask if they wanted a last attempt to be made to collect the debt owed been rounded to the nearest hundred to them– this included all 134,700 parents with an eligible case on the CSA system and 107,500 parents with a case on the CMS system.56 Cases held on the CSA systems By the end of March 2020, all cases held on CSA systems and eligible for representation had competed the parent with care representation process.57 The first letters were sent to the parent with care in December 2018. At this time, there were 184,400 cases on CSA systems that had levels of debt that made them eligible for parent with care representation.58 A total of 143,700 cases went through the parent with care representation process on CSA systems by March 2020.59 At March 2020, 41,900 (23%) cases were found not eligible for representation. This was either because the debt was found to be incorrectly recorded and was adjusted to an amount below the eligibility threshold, the parent started to make payments, or the case had to be processed clerically.60 All 143,700 cases have completed the parent with care representation process. In 10% of cases (13,700) parents had asked the CSA to attempt collection of the debt. In 89% of cases (120,000), parents had either not responded within the 60-day deadline or had said they did not want the debt collected.62 As part of the CSA The CSA had been unable to trace the parent with care in 6,200 cases closure programme (4%) and was unable to proceed in 2,700 (2%) as the non-resident from 2014, non- parent had died.63 resident parents remained responsible Cases held on the CMS systems for paying any Around 112,100 cases held on the CMS systems and eligible for outstanding arrears. representation had started the representation process by the end of These cases were automatically September 2020. In 107,500 (96%) cases, the parent with care was transferred to the written to and in 17,800 (17%) cases they asked the CMS to attempt CMS.61 collection of the debt. The CMS was either awaiting a response or had been told not to collect the debt by 60% of cases (64,900) by parents with care.64

56 DWP, CSA Quarterly summary of statistics: September 2020, January 2021 57 Ibid 58 Ibid 59 Ibid 60 Ibid 61 DWP/Government Social Research, Survey of CSA case closure outcomes, 2016, p86 62 DWP, CSA Quarterly summary of statistics: September 2020, January 2021 63 Ibid 64 Ibid 17 Commons Library Briefing, 27 January 2021

5.2 Non-resident parent representation Cases held on the CSA systems As at March 2020, all 13,700 cases held on CSA systems and eligible for representation had completed the non-resident parent representation process. In 1,600 cases (11%), the non-resident parent was either unable to be traced or the CSA was unable to progress for another reason, such as the parent had died, had their debt deemed uncollectable, or a payment was received. The CSA made contact with the non-resident parent in 12,100 cases (88%). 11,800 cases (98%) had been transferred to the CMS system for ongoing attempts to collect the debt. In 200 cases (2%), the non- resident parent found evidence to reduce the balance below the threshold for representation.65 Cases held on CMS systems By the end of September 2020, 17,800 cases held on CMS systems and eligible for representation had started the non-resident parent representation process. In less than 100 cases, the CMS was unable to trace the parent or proceed for another reason, such as the parent had died, had their debt deemed uncollectable, or a payment was received.66 In the 17,700 (99%) of cases where the CMS has written to the parent, in less than 50 cases they produced evidence to reduce the balance below the threshold for representation, in 14,600 (82%) the case was transferred for ongoing attempts to collect the debt, and 3,100 cases (18%) were still within the time limit to respond.67

5.3 CSA debt written off As of September 2020, the CSA had written off or adjusted historical debt on 579,400 cases, which had system records showing a debt value of £1.93 billion. These figures include cases on both the CMS and CSA systems.68 Cases held on the CSA systems As of March 2020, 410,400 cases on the CSA system had had their historical arrears adjusted or written off since the start of the new programme in December 2018. These had system records showing a total debt value of £1.48 billion. Of these: • 46,200 (11%) cases had records showing debt which was owed solely to the government with a total value of £651.5 million; • 58,300 (14%) cases had records showing debt owed to parents of £65 or under with a total value of £1.6 million;

65 Ibid 66 Ibid 67 Ibid 68 Ibid 18 Child maintenance: The write-off of arrears on Child Support Agency cases (UK)

• 174,600 (43%) cases had records showing debt owed to parents of £500/£1,000 or less (depending on the start date of the case) with a total value of £64.7 million; • 131,300 (32%) cases had system records showing debt owed to parents which was more than £500/£1,000 (depending on the start date of the case) with a total value of £765.4 million. In these cases, the CSA was either unable to trace the parent with care, they did not request the debt to be collected, the debt had been adjusted, or the debt was deemed uncollectable.69 CSA cases held on the CMS systems As of September 2020, there were 169,000 CSA cases on CMS IT systems which had their historical arrears adjusted or written off since December 2018. These had records showing a debt value of £452.3 million. Of these: • 58,900 (35%) cases had records showing debt which was owed solely to the government with a total value of £201.5 million; • 5,200 (3%) cases had system records showing debt owed to parents of £65 or under with a total value of £0.1 million; • 37,900 (22%) cases had system records showing debt owed to parents of £500/£1,000 or less (depending on the start date of the case) with a total value of £9.5 million; • 67,000 (40%) cases had system records showing debt owed to parents which was more than £500/£1,000 (depending on the start date of the case) with a total value of £241.2 million. In these cases, the CMS was either unable to trace the parent with care, they did not request the debt to be collected, the debt had been adjusted, or the debt was deemed uncollectable.70

5.4 National Audit Office commentary The DWP is responsible for publishing Annual client funds accounts, which report on the 1993 and 2003 statutory schemes. The National Audit Office (NAO) certifies these. The value of arrears reported in these accounts have been subject to successive qualifications by the NAO. The Accounting Officer for the DWP noted on the 2019/20 accounts that “accuracy remains an issue for the 1993 and 2003 schemes” due to “historic inaccuracies in maintenance assessments along with incorrect technical adjustments, and their impact on reported arrears”.71 In January 2020 the NAO said that the Government “need[s] to revisit its assumptions around collectability of arrears relating to the 1993, 2003 and 2012 Schemes to reflect its experience of the new write-off and enforcement powers, and report this transparently”. The NAO said that the Department did not yet have sufficient data to evaluate the effectiveness of the new powers (such as preventing non-paying parents

69 Ibid 70 Ibid 71 DWP, 1993 and 2003 child maintenance schemes: Client funds accounts 2019 to 2020, 16 December 2020, section 2.1 19 Commons Library Briefing, 27 January 2021

from holding or obtaining a UK passport for a maximum period of 2 years or making deductions from joint bank accounts) introduced in its Compliance and Arrears Strategy (2018).72 In the Clients Funds Account 2019/20, the DWP said it had commissioned Indesser, a private business, to assess collectability checks on representation cases where the DWP’s administrative collection processes had been exhausted. From a sample of 2,686 cases, Indesser and DWP extrapolation categorised around 34.6% of remaining 1993 and 2003 scheme arrears as having a “high” or “very high” likelihood of being paid.73 Complaints The NAO’s commentary on the 2018/19 Client Funds Accounts noted the large number of complaints received on the child maintenance system. It said that “child maintenance cases generate the largest volume of all correspondence received by the NAO”. The NAO stated that parents are often concerned about inaccurate arrears and the customer service received when parents query assessments or arrears across the 1993, 2003 and 2012 Schemes. In its audit of the 1993 and 2003 maintenance schemes, the NAO recommended that the Department: • Establish a clear process to support parents who are concerned that arrears balances now being collected are incorrect; and • Ensure adequate records and systems are maintained until all arrears are written off or collected, and the schemes can be brought to a full close.74 DWP figures state that from the quarter ending March 2019 to the end of September 2020, a total of 2,035 complaints were received relating to the compliance and arrears strategy on cases that were initially processed on the CSA system and 1,090 were received on cases processed on the CMS system. The DWP said that during the quarter of June 2020, the CMS experienced a “reduced level of service with a small number progressing through representation” due to the impact of coronavirus on CMS services.75

72 DWP, Client funds account 2018/19: 1993 and 2003 child maintenance schemes, HC 35, January 2020, p23 73 DWP, 1993 and 2003 child maintenance schemes: Client funds accounts 2019 to 2020, 16 December 2020, para 1.5 74 DWP, Client funds account 2018/19: 1993 and 2003 child maintenance schemes, HC 35, January 2020, p23 75 Figures rounded to nearest 5. DWP, CSA Quarterly summary of statistics: September 2020, January 2021, Table 10. 20 Child maintenance: The write-off of arrears on Child Support Agency cases (UK)

6. Northern Ireland

Northern Ireland operates a similar, but separate, system of child maintenance to the rest of the UK. It too had three statutory arrangements (1993, 2003 and 2012) and is seeking to extinguish outstanding arrears from the first two schemes.

6.1 Arrears The Department for Communities (DfC) is responsible for administering the statutory child maintenance scheme and must publish an annual statement of client funds account. The Northern Ireland Audit Office assesses these. Since 1993, the Northern Ireland Audit Office has issued a qualified audit opinion on the accuracy and completeness of the outstanding maintenance arrears. It was estimated that, as at 31 March 2019, outstanding maintenance arrears on all three maintenance schemes was around £29.7 million. This compared to an estimated £69.0 million at 31 March 2015.76 This fall is largely due to the Department using its powers that came in force in December 2018— around £13.9 million, due to the Department itself, was written off or restated in 2018/19.77 The Department estimated that around £7.6 million of the legacy arrears balance of £24.9 million is “likely” to be collected by 31 March 2019 —around 31% of legacy arrears.78 The Department for Communities Annual Report and Accounts for the year ended 31 March 2020 reports that in 2019/20 around £14.0 million was restated or written off on the three systems.79

6.2 Policy background The Child Support (Management of Payments and Arrears) Regulations (Northern Ireland) 2009 allowed the DfC to write off arrears in certain circumstances. These were extended in The Child Support (Miscellaneous Amendments) Regulations (Northern Ireland) 2018. The DWP issued a consultation on the 2018 regulations (with Northern Ireland being include in its scope) in 2017 on its proposed change in policy towards child maintenance arrears.80 Reasons cited for the shift towards writing-off arrears include the cost of IT systems and the collectability of many debts.81

76 Northern Ireland Audit Office, Report by the Comptroller and Auditor General [on child maintenance service], July 2019, fig 3 77 Ibid, para 25. ‘Restated’ means the arrears figure was changed following new information. 78 Ibid, para 29 79 DfC, Annual report and accounts for the year ended 31 March 2020, Annex (CMS accounts), November 2020, para 4.10 80 Explanatory Memorandum to The Child Support (Miscellaneous Amendments) Regulations (Northern Ireland) 2018, para 4.1 81 Ibid, paras 3.17-3.23 21 Commons Library Briefing, 27 January 2021

The DfCs’ Northern Ireland Child maintenance compliance and arrears strategy (March 2019) stated its objectives were: • Continuing to prioritise resources to benefit children of today • Addressing the historic arrears that built up under the 1993 and 2003 schemes • Avoiding taxpayers funding activity which won’t result in more money going to children.82 The Department argued that the costs of attempting the collection of historic arrears was high, and most of the debt was uncollectable. This resulted in the thresholds for collection (see Section 6.3, below): It is not cost effective to attempt collection on individual debts of less than £500 (or debts of less than £1000 where the case is ten or more years old). It costs on average between £500 and £1000 to investigate and take actions on these cases.83 Arrears owed to the Department accrued under the 1993 and 2003 schemes would be written off. The Department said this was because: Collecting this debt will not benefit families and is not a good use of Departmental funds, as it is not cost effective to collect or continue to maintain this debt.84

6.3 Process The NI Direct guide to Collecting child maintenance owed from the 1993 or 2003 schemes sets out the process by which debt be collected and/or written off: Child maintenance eligible to collect If you’re owed child maintenance from the 1993 or 2003 scheme and, the amount is: • over £500 and the case is less than 10 years old [November 2008] • over £1,000 and the case 10 years old or over [November 2008] You do not need to do anything, CMS will write to you and the paying parent about how much is owed. CMS will send you a representation form with their letter. You can ask CMS to try and collect the debt if: • the case is 1993 and 2003 scheme debt only • there hasn’t been any payment in the past three months Writing off child maintenance debt from 1993 or 2003 schemes CMS automatically writes off child maintenance debt from 1993 or 2003 schemes if the amount is:

82 DfC, The Northern Ireland Child maintenance compliance and arrears strategy, March 2019, p12 83 Explanatory Memorandum to The Child Support (Miscellaneous Amendments) Regulations (Northern Ireland) 2019, para 3.27 84 DfC, The Northern Ireland Child maintenance compliance and arrears strategy, March 2019, pp12-13 22 Child maintenance: The write-off of arrears on Child Support Agency cases (UK)

• £500 or less and the case is less than 10 years old • £1000 or less and the case is 10 years old or older If CMS writes off a child maintenance debt, they’ll write to the receiving and paying parent. If the debt is less than £65, CMS will write it off but don’t need to tell you. These cases can be written off without seeking representation if there has not been a payment in the previous 3 months.85 No notice is given for cases with arrears totalling less than £65 and where no payments had been received in the previous 3 months.86 Asking the CMS to collect the debt Once a letter is received by the parent with care, the representation form needs to be completed within 60 days. The CMS will send a reminder after 21 days. If no letter is received after 60 days, the CMS will write off the debt. Once the letter is received, the CMS will determine whether they can collect the debt. If they cannot, the debt will be written off. The non-resident parent will also be given an opportunity for

representation. The enforcement and collection powers of the CMS in Northern Ireland is set out on the following NI Direct pages: • Enforcement of non-payment of child maintenance; • Collection fees and enforcement charges 2012 scheme; and • Enforcement if paying parent lives in England, Wales or Scotland

85 Explanatory Memorandum to The Child Support (Miscellaneous Amendments) Regulations (Northern Ireland) 2019, para 3.26 86 Ibid, para 3.27

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