Recommendation 7

The Department’s ability to collect child maintenance is limited by the affordability of payments and the system risks creating a poverty trap for some Paying Parents. More than two-thirds of Paying Parents on Collect & Pay and over a quarter of those on Direct Pay say the payments are not affordable. Low income Paying Parents (those that do not earn enough to pay income tax) make up 46% of Paying Parents and 62% of those with unpaid arrears. The rate at which these arrears can be recovered from those with the lowest incomes is limited, particularly where the Paying Parent is on benefits and has other debts. The amount Paying Parents pay is based on a taper that is higher for those on higher incomes and a flat rate of £7 a week for those with the lowest income. However, the income thresholds at which those rates increase have not been changed since they were set out in legislation in 1998, and inflation means that higher rates apply to those with lower incomes than originally intended. We heard from non-resident parents who told us they had experienced distress and hardship after being asked for maintenance payments they considered to be unfair, or inaccurately-calculated. Serious constraints on parents’ ability to pay the maintenance will inevitably hamper the effectiveness of any effort, however well-administered, to collect maintenance or enforce the collection of arrears. But some Paying Parents face a poverty trap where there is little incentive for them to work more. Some parents can face ‘taper rates’ of benefits, child maintenance and council tax reductions equivalent to an effective marginal tax rate up to 100% as their earnings increase. Recommendation: As part of its Treasury Minute response, the Department should set out its plans to review the affordability of Child Maintenance Payments and the appropriateness of the current award calculations, including the earning thresholds.