Sixth Report - Children in poverty: Child Maintenance Service

We welcome the Child Support Collection (Domestic Abuse) Bill and the Child Support (Enforcement) Bill and their aims. We provide information later in this Report on how these pieces of legislation will help improve the effectiveness of the Child Maintenance Service.

One of the purposes of the reforms introducing the Child Maintenance Service was to increase the number of effective arrangements between parents. There is a paucity of data on how many Direct Pay arrangements are effective, which in turn obscures the level of child maintenance not being paid. This inhibits the ability of the Department to demonstrate the ability of the system to meet policy objectives. The Department should proactively monitor the effectiveness of Direct Pay arrangements and report regularly on the number of such arrangements that are effective. An initial survey should take place no later than six months after the Direct Pay arrangement has commenced. Surveys should then take place at regular intervals, at least once every 12 months.

Cases moving from Direct Pay to Collect and Pay appear to have substantial arrears on average. The Department should more systematically and swiftly move ineffective Direct Pay cases into Collect and Pay. To do this, the Department should consider imposing a change to how cases are moved to Collect and Pay so that is triggered by child maintenance arrears reaching half of the current average arrears.

For many receiving parents child maintenance payments are vital to avoiding or at least stymying the effects of hardship but enforcement is currently slow and often ineffective. We have heard that, while enforcement on Collect and Pay has improved, for many receiving parents enforcement remains ineffective in securing maintenance. We support the aims of the Child Support (Enforcement) Bill to allow for more timely enforcement of maintenance payments and regard effective enforcement as remaining a key priority for improvement. In its response to this Report, the Government should set out plans to improve the effectiveness and speed of current enforcement measures.

Evidence to us has raised particular concern about the fraudulent practices employed by some paying parents to reduce maintenance calculations but the Department has not made an estimate of the level of undetected customer fraud and error within the system. We repeat the Public Accounts Committee’s recommendation that the Department should assess the risk of fraud and error within child maintenance and publish, as part of its annual report and accounts for the child maintenance scheme, a fraud and error estimate and reduction target rates.

The Department’s own assessment to the NAO “that around 50% of fraud referrals to its Financial Investigations Unit are unfounded” indicates that the system is not functioning as it should be, and, as we will return to later, demonstrates how conflict is encouraged. The Department currently requires evidence for referrals to its Financial Investigations Unit “to safeguard against vexatious claims”. An illustrative 46 Children in poverty: Child Maintenance Service list of the evidence required to make a referral to the Financial Investigations Unit should be made available to receiving parents, alongside guidance on where they might reliably find such evidence. The Department should also set out, in response to this Report, how it will reduce the number of unfounded claims reaching the Financial Investigations Unit, thus improving the experience for receiving and paying parents.

Cases are complex where the paying parent’s income is from self-employment or non- earned income. To ensure that a fair arrangement is reached for both receiving and paying parents in these circumstances, a specialist caseworker should be assigned to such cases supported by clear guidance on identifying income sources.

Competing priorities for the Universal Credit system, specifically work on fraud and error and the automation of processes to allow the expansion of the move to Universal Credit, mean the Department has not undertaken work to implement capability in the system to process partial deductions for child maintenance in the Universal Credit system. The Government should confirm that it plans to implement partial deductions for child maintenance, where this ranks in priority for work on the system and when this work is expected to be reached.

The Department should seek, as part of any future legislative change in the Child Maintenance Service system, the authority to process partial deductions from Universal Credit for child maintenance arrears.

Child maintenance currently ranks low on the priority list for Universal Credit deductions at twelfth, below deductions for DWP debt, such as advance payments. We disagree that pursuing such debt should hold a higher priority than child maintenance. Deductions for child maintenance should take higher priority than deductions for the payment of debt owed to the Government. Deductions for child maintenance should take higher priority than deductions for the payment of debt owed to the Government. To assist families, the Government should revise the deduction priority list so that child maintenance is above Government debt and should, in its response to this Report, set out the current deduction priority list and the rationale for Child Maintenance being twelfth.

We thank Dr Samantha Callan for her independent and detailed report on the Child Maintenance Service’s response to domestic abuse and we welcome the broadly positive approach the Government has taken in its response to that review, accepting most of the recommendations. The Government should, in its response to this Report, provide a timetable for the work arising from that review.

We strongly support the aims of the Child Support Collection (Domestic Abuse) Bill, which would allow domestic abuse cases to skip Direct Pay and move straight to Collect and Pay. We welcome the Government’s support for that legislation. In response to this Report, the Government should set out the intended timetable for commencing the provisions in the Child Support Collection (Domestic Abuse) Bill, should it be passed in the 2022–23 Session of Parliament.

The proportion of families with private arrangements has increased since the 2012 reforms but this has also been accompanied by an increase in the number of families without an arrangement. There is evidence that a significant number of Children in poverty: Child Maintenance Service 47 parents who do not have an arrangement want one. This means some children are avoidably missing out on maintenance which could help reduce child poverty. The Government should also produce an analysis of the reasons for the increase in the proportion of families without child maintenance arrangements.

Research like the Government’s 2022 separated families survey helps form a useful evidence base for effective policy formation. Research on why parents do not have maintenance arrangements but want one would be valuable. We recommend that the Government conduct further research on the reasons parents who want maintenance arrangements do not have one to allow for effective, evidence-based policy interventions, so as to help improve the operation of the child maintenance system and decrease poverty. The Government should also set out how it plans to reach out proactively to and support those families to make arrangements. (Paragraph 65) The perspective of paying parents

Government policy is to encourage work, returning to work and in-work progression as far as possible to help reduce poverty, however multiple reports have raised concern both about the affordability of maintenance payments and distorted the work incentives caused by the current maintenance levels. This poses a risk to work incentive objectives of Universal Credit.

The unaffordability of maintenance for some parents is causing severe hardship and distress. It also forms a barrier to compliance. Updating maintenance levels and thresholds should therefore be seen as a priority. We recommend the Government completes its analysis of the affordability of maintenance payments and make proposals as an urgent priority no later than six months after our Report has been published.

As part of its work on affordability, the Department should also seek to rebalance legislation so that changes, such as uprating maintenance thresholds, can be made more readily, for example through secondary legislation.

The Department’s work on maintenance calculations should prioritise the interests and welfare of the impacted children. In particular the potential implications of changes to maintenance levels on the number of children in poverty must be carefully considered and the implications for other policies (such as state support for parents with children) should be considered alongside changes to maintenance calculations.

We have heard that the current child maintenance system incentivises parental conflict under a “winner takes all system” and there appear to be strong arguments in favour of reform away from such a system. However, reform towards an alternative model, such as an income share model, would require careful consideration and preparation. Once the urgent work on maintenance affordability is finished, the Department should consider a model which incorporates both parents’ income. We suggest that the key criteria the Government use to evaluate any such proposal should include the potential effect on compliance, the scope for any proposals to tackle incentives to parental conflict and potential impact on child poverty. In its response to this Report, the Government should set out when such work will begin. (Paragraph 85) 48 Children in poverty: Child Maintenance Service

The CMS should ensure its guidance is clear on situations of 50/50 day-to-day care and that, where court orders are made under the expectation of care being equally split, no maintenance is deemed to be due. The use of child benefit to determine that maintenance is indeed due appears to us to be a blunt tool and recommend that the CMS should not use child benefit as an effective proxy to determine whether child maintenance is due.

Presently it is not possible for child benefit to be split between parents, even in cases of equally shared care. The Department should work with HMRC to enable parents with shared care to split child benefit between them.

We are concerned about the prospect that the Child Maintenance Service is pursuing arrears inherited from the Child Support Agency that cannot be properly evidenced, although we acknowledge not collecting such arrears would impact the relevant receiving parent. We request that the Department, in its response to this Report, set out what its strategy is for such arrears and investigate the potential to seek alternative ways of dispensing with arrears that are poorly evidenced, to ensure that both parents have faith in the sums being pursued.

We have received evidence critical of the correspondence provided by the Child Maintenance Service. For example, paying parents reported asking for details on how substantial arrears had accrued and receiving no effective information in response. This risks exacerbating hostility by preventing paying parents from having confidence in the debts being pursued. (Paragraph 92) Matters of interest to both receiving and paying parents

We have heard evidence that was strongly critical of the effectiveness of Collect and Pay fees. Such fees are particularly pernicious for parents on low incomes and we recommend that the Government should introduce a system for the means-testing of Collect and Pay fees.

It is particularly difficult to understand how fees, intended to incentivise the use of Direct Pay, can be justified in cases where the Department appears to have accepted such arrangements are not appropriate, such as in cases of domestic abuse. The Department should introduce a mechanism to waive Collect and Pay fees for customers who have been subject to domestic abuse, or whose children have suffered abuse, be they paying or receiving parents. The evidence base for this should be the same as the evidence base that the Government sets out for cases to skip Direct Pay and move straight to Collect and Pay.

We strongly support the Child Maintenance Service’s plans to move to having a named caseworker, initially for customers in abusive situations before eventually being rolled out to all customers. The experience of having to recount one’s story multiple times was a particular issue we heard about in our inquiry and the Department’s plans have the potential to improve customer service outcomes substantially. We would welcome data being provided to the Committee quarterly to demonstrate progress against assigning customers named caseworkers. (Paragraph 110) Children in poverty: Child Maintenance Service 49

We have heard that perceptions of the levels of customer service of the CMS continue to be poor for both paying and receiving parents. The Department should develop its management information to allow it to demonstrate it is delivering good customer service and report publicly on this regularly. We recommend the Department should publish this information on a yearly basis as part of the Department’s annual customer experience survey returns.

We acknowledge that staff working for the Child Maintenance Service can have a difficult caseload and come across difficult and distressing situations routinely as part of their work. To ensure that staff are able to support customers, appropriate training and support is essential. The Government should review, within six months of this Report being published, the support and training provided to CMS staff and report its findings to the Committee, alongside the actions it will take in response to remedy any issues identified.

The current opening hours of the CMS helpline were criticised in our roundtable discussions, particularly from parents who had work commitments. We recommend the Government trial different opening hours for the CMS, to include weekends. This could be achieved by reducing the opening hours on some weekdays.

Customers only being able to contact the CMS via letters or telephone is slow and antiquated. The CMS should introduce an electronic messaging system, or at least an ability for customers to contact them by e-mail to provide greater levels of customer convenience.

In summary: Our inquiry has found a number of issues with the Child Maintenance Service that need to be addressed. Receiving parents continue to report great frustration at ineffective and slow enforcement. Paying parents have described distress and being pushed into poverty by the unaffordability of child maintenance payments. This harms the effectiveness of a system with an important role to play in tackling child poverty in separated families. (Paragraph 116) 50 Children in poverty: Child Maintenance Service