Consultation outcome

Child Maintenance: modernising and improving our service

Updated 14 March 2022

Applies to England, Scotland and Wales

Glossary of Terms

Child Support Agency (CSA)	Administrative body for the 1993 and 2003 schemes of child maintenance.
Child Maintenance Service (CMS)	Administrative body for the 2012 scheme of child maintenance.
Paying parent	The parent who does not have main day-to-day care of the qualifying children, and is responsible for the payment of child maintenance. Otherwise known as the non-resident parent.
Receiving parent	The parent who has main day-to-day care of the qualifying children, and should receive child maintenance. Otherwise known as the parent with care.
Unearned income	Certain taxable income such as income from savings and investments, land or property or other miscellaneous sources.
Her Majesty’s Revenue and Customs (HMRC)	UK’s tax, payments and customs authority.
Income tolerance	Sets the level a parent’s income needs to change to enable their calculation to be re-assessed.
Deduction from earnings Order (DEO)	A method to secure payments of child maintenance and, or, arrears direct from a paying parent’s salary. The employer deducts the amount directly from salary at source.
Variation	Variations allow some circumstances to be considered which are not taken into account in the normal maintenance calculation rules. If agreed to, a variation can lead to an adjustment to the maintenance calculation.

Executive summary

1. The consultation seeks views on a number of proposed legislative changes aimed at modernising and improving our service.

Unearned income

2. We want to ensure that the child maintenance calculation accurately reflects the income sources of paying parents.

3. Access to information reported to HMRC allows the CMS to obtain a wider range of income information. This allows the CMS to calculate liabilities more quickly and accurately. Whilst 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 fully reflected in current processes.

4. We are seeking views on making changes in legislation that enable the child maintenance calculation to include unearned income we may not currently be able to capture in the child maintenance calculation. This would reduce the scope for parents to organise their financial affairs to reduce their financial liability for their children.

Self-employed evidential requirements

5. Rules for when income changes can be taken account of are different for employed and self-employed parents.

6. We are seeking views on legislative amendments that could allow self-employed income changes outside of the annual review, where there has been a loss of income and a new tax return reflecting the loss of income has not yet been submitted to HMRC. We plan to do this through the discretionary use of income estimates.

7. These changes will benefit the self-employed by ensuring that their income is more accurately reflected in the child maintenance calculation.

Extinguishing low level debt

8. We would like to introduce powers that will allow the CMS to extinguish small volumes of low level child maintenance arrears in specific circumstances. This proposal relates to small amounts where the value of the debt is substantially less than the cost of collecting it.

9. Current powers do not allow us to extinguish these low level arrears which leaves debt on CMS IT systems, at cost to the taxpayer. Without a change in regulations, this cost could continue for decades and cases would remain open.

Maintenance not collected when an employer becomes insolvent

10. We are seeking views on our approach to cases where a deduction for child maintenance has been made from the paying parent’s earnings, known as a Deduction from Earnings Order (DEO), but the employer has become insolvent and the amount deducted has not been paid to the CMS.

11. Currently, under these circumstances, the paying parent is required to lodge a claim with the insolvency practitioner in order to obtain a refund of the amount deducted via the DEO but not yet paid over to the CMS.

12. This means that if the paying parent is unsuccessful recovering the amount from the insolvency practitioner, the receiving parent will not receive the payment. This amount will be treated as arrears and will remain enforceable by the CMS.

13. We propose that in all cases the CMS will have responsibility to lodge a claim directly with the insolvency practitioner. The CMS is not guaranteed to receive payment. If only part or none of the arrears are recovered, the arrears will be extinguished and parents notified.

CMS notifications to be sent, received and accessed digitally

14. We are committed to continually improving the services we provide our customers. We now want to further modernise the CMS by making changes in legislation to enable more CMS notifications to be sent, received and accessed digitally.

15. Currently, our legislation requires us to serve some letters via a postal method. We would like to communicate with our customers via their preferred method so we propose making changes in our regulations to enable the CMS to serve customer notifications via our online service.

16. We will retain our postal service for customers for whom an online service is not appropriate and for important letters about enforcing debt that detail serious consequences.

17. To ensure we maintain our commitment to reduce the burden on employers, we also plan to make changes in legislation to enable the CMS to send notifications via digital methods to employers and third parties.

Information Regulations

18. We want to streamline our service to make it easier for our customers and third parties. With this in mind we would like to expand the list of organisations required to comply with requests for information to private pension providers, academy proprietors ^{[footnote 1]}, the Motor Industry Bureau and all types of companies that offer, promote or sell investment management services or facilitate share trading.

19. Powers to request information are used to gather information which is necessary for purposes such as calculating maintenance or enforcing arrears.

20. Our proposal will enable us to reduce the time it takes to obtain information which in turn should allow for parents to receive payments sooner.

Introduction

21. The Child Maintenance Service (CMS) was introduced in 2012. The reformed service is designed to overcome many of the problems associated with the Child Support Agency (CSA) and be more cost-effective to administer.

22. The intent of the 2012 child maintenance reforms was to increase levels of cooperation between separated parents, and encourage parents to meet their responsibilities to provide their children with the financial support they need to get a good start in life.

23. Wherever possible, the CMS continue to support separated parents to work together in the interests of their children and set up their own family based child maintenance arrangements, with Child Maintenance Options providing free and impartial information to help with this decision. Where a family based arrangement is not suitable, the Child Maintenance Service (CMS) administers a statutory scheme for parents who need it. The calculation of a child maintenance liability is based on information about the non-resident parent’s income from Her Majesty’s Revenue and Customs (HMRC).

24. Since the introduction of the 2012 Child Maintenance service we have completed our programme of case closure, ending all liabilities on the old CSA systems. Following on from this we have also implemented the Compliance and Arrears Strategy. The strategy sought to end decades of uncertainty of parents by addressing over £3.8bn arrears across the UK that built up under the CSA schemes whilst introducing tougher new enforcement measures to the 2012 scheme.

25. The UK Government are committed to further improve the current child maintenance scheme to make it fairer and more affordable for both parents.

26. We are interested to hear thoughts on the proposals in the consultation document and whether they strike the right balance between the interests of parents and children. We are also keen to hear any ideas you may have for further modernising our service. We welcome views from people wherever they live including Northern Ireland, although the specific areas covered in this consultation relate to Great Britain only.

About this consultation

Who this consultation is aimed at

27. The consultation is open to voluntary and community sector organisations, as well as CMS customers and members of the general public.

Purpose of the consultation

28. The consultation is to inform the Government’s proposed changes to Child Maintenance Regulations. Depending on the outcome of the consultation and subject to parliamentary timetables, following publication we will aim to change regulations to enable:

• unearned income held by HMRC to be included in CMS calculations alongside paying parents’ earned income
• evidential requirements for self-employed parents to be eased where a change that has breached the income tolerance has been reported
• small volumes of low value debt to be extinguished where the value of the debt is substantially less than the cost of collecting it
• arrears to be extinguished where:
  • child maintenance has been deducted from a parent’s earnings where their employer has gone into administration; and
  • we are unable to recover the outstanding arrears from the trustee handling the companies’ insolvency
• all CMS notifications to be sent, received and accessed digitally
• the following organisations to provide information when requested to do so in a timely manner: private pension providers, academy proprietors, the Motor Insurers’ Bureau and all types of companies that offer, promote or sell investment management services or facilitate share trading

Scope of consultation

29. This consultation applies to England, Wales and Scotland, although we welcome comments from across the United Kingdom.

Duration of the consultation

30. The consultation period begins on 18 June 2021 and runs until 6 August 2021.

How to respond to this consultation

31. Please send your consultation responses to:

DWP consultation co-ordinator
3rd Floor South Zone D
Quarry House
Quarry Hill
Leeds
LS2 7UA

Email: cm.consultation@dwp.gov.uk

Background information and details of proposed changes

Unearned Income

32. Since the introduction of the 2012 scheme the CMS have increased the information we have access to, which includes information reported by HMRC. This has enabled the CMS to obtain a wider range of income information that was previously not available.

33. Having access to this information has enabled us to calculate liabilities more quickly and accurately. This system works well for the majority of our clients. We are however aware, some paying parents have additional unearned income that is not included in a parent’s maintenance calculation. This additional income is only included if either parent reports it and requests a variation.

34. Unearned income currently used in variation requests includes:

• property income (where not received as part of a self-employed business)
• savings and investment income – including dividends
• taxable income from other miscellaneous sources

35. Analysis has shown that 3% of tax returns made to HMRC include income from property. Income tax liability statistics published by HMRC show the expected percentage of total income tax liabilities to be 7.4% from dividends in the year 2020 to 2021. Tax from savings interest is projected at 0.9% of the total. Taxable income from other miscellaneous sources are also below 1%.

36. Although figures change with each reporting year, between 8% to 10% of total Income Tax liabilities recorded by HM Revenue and Customs are usually due on unearned income.

37. During a previous consultation on child maintenance we asked respondents what new powers we could introduce to further improve the current scheme. One suggestion was to automatically include unearned income in the maintenance calculation.

38. We have investigated this idea and propose introducing changes to allow for the paying parent’s unearned, as well as earned, income to be included in the CMS calculation. We also propose assessing existing cases in the same way at their annual review. Currently, we make calculations based on earned income information only.

39. In order to allow unearned income to be included within the standard maintenance calculation, at the point of application and for regular annual reviews, changes in legislation are required.

40. Consideration needs to be given to how any change would come into force for parents. This is especially the case for parents in the following groups:

• paying parents with unearned income who currently have an unearned income variation
• paying parents with unearned income who do not currently have an unearned income variation
• paying parents who have an ongoing application for an unearned income variation at the time of any change

41. At present, child maintenance legislation reviews the maintenance calculation on an annual basis. This annual review date is specific to each individual case. We propose to include protections for the above groups to use these existing annual review points to gradually introduce any calculation changes. These are often known as transitional provisions and are intended to prevent any unexpected mid-year calculation changes for parents.

Your views

Question 1. What is your view on including a paying parent’s unearned income alongside their earned income in the initial CMS calculation, rather than only when a variation is requested?

Self-employed evidential requirements

42. Around 33,000 paying parents with a CMS case are self-employed and 13,000 paying parents have income from both employment and self-employment ^{[footnote 2]}. To calculate child maintenance liability for a self-employed paying parent we generally use information about their gross taxable income for the latest available tax year provided by HMRC. We then review maintenance calculations annually to ensure they are based on the most recent taxable income figure possible.

43. The CMS rules for income changes are different for employed and self-employed parents. If an employed customer tells us their income has changed it must have changed by at least 25% before we can re-assess the maintenance calculation.

44. For self-employed customers, changes can only be taken into account outside of the annual review if they provide evidence of a more recent tax return they have submitted to HMRC.

45. This means we are only able to take self-employed income changes into account after the current tax year has ended and a new tax return is submitted. This can mean that we are unable to reflect income reductions in a self-employed parent’s child maintenance calculation.

46. We know the current rules might make it difficult for self-employed parents to meet their obligations to their children. CMS customers often have difficulties meeting the evidence requirements. We want to make sure child maintenance calculations provide an accurate reflection of a paying parent’s income, so as part of our ongoing commitment to improve the Child Maintenance Service we have reviewed our evidence requirements for self-employed paying parents.

New evidential requirements for those who are new to self-employment

47. Newly self-employed paying parents are currently required to provide their projected or estimated taxable profit for the current tax year by providing:

• profit and loss accounts
• business plans used to secure business loans or grants
• a statement of projected taxable profits

48. We plan to simplify the evidence requirements by accepting a statement of a paying parent’s projected profit instead. This will make it easier to ensure that the child maintenance liability more closely reflects the paying parent’s taxable income.

New evidential requirements for those ending self-employment

49. Where a paying parent ends self-employment, the evidence that we usually request to verify this includes:

• a bankruptcy or insolvency notice
• evidence that the business has been sold
• evidence from HMRC that the business has ceased
• documents from banks, building societies or solicitors

50. We intend to replace these examples with a declaration from the customer that they are no longer trading.

New evidential requirements upon income changes for self-employed parents

51. Our evidence suggests that self-employed paying parents experience more frequent and greater fluctuations in their income than employed parents. Between the end of the 2017 to 2018 tax year and the end of the 2018 to 2019 tax year, more than 55% of all self-employed paying parents reported a change in their income of more than 25% ^{[footnote 3]}.

52. Therefore, we are also exploring potential legislative amendments that could allow self-employed income changes, where there has been loss of income and a new tax return has not yet been submitted to HMRC, through the discretionary use of income estimates.

Your views

Question 2. What are your views on our plans to make a maintenance calculation based on a paying parent’s statement of their estimated income for the remainder of the tax year, until information can be obtained from HMRC at the annual review?

Question 3. What are your views on our proposal to re-assess a maintenance calculation where a self-employed parent’s income has changed before the end of the relevant tax year?

Extinguishing low level debt

53. The CMS introduced a number of arrears management powers in December 2012 to allow efficient management of child maintenance arrears owed to parents. Under those powers, arrears can be extinguished if one of the following criteria applies and the CMS is satisfied that it would be unfair or otherwise inappropriate to enforce collection of the arrears:

• 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
• we have previously advised the paying parent that we would never take any further action to collect the arrears, for example we 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

54. In 2018 we extended those powers to help manage historic arrears that had built up under the CSA schemes of 1993 and 2003, as well as for paying parents in Scotland whose debt has been sequestrated or discharged following the granting of a protected trust deed.

55. We would now like to introduce further powers that will allow us to extinguish child maintenance debt in specific circumstances.

56. We are seeking views on our approach to cases that have a low level of outstanding CMS arrears. These proposals relate to cases where there is no longer an ongoing liability to pay child maintenance and an arrears balance of less than £7 exists. Such amounts usually exist as a result of penny rounding at the end of the maintenance calculation or where the paying parent has paid slightly less than the full amount requested.

57. It is our proposal that in such cases and where it is clear that further collection is unlikely or unfeasible, the CMS can extinguish the arrears balance.

58. For a case to be in scope it must fit all of the following criteria:

• be an arrears-only case with no on-going liability
• be non-paying (3 month’s non-payment)
• have arrears of £6.99 or less

59. There are 2,800 cases ^{[footnote 4]} with arrears under £7. Of these cases 1,400 have arrears of under £1.

60. The value of the debt in such cases is substantially less than the cost of collecting it. Current powers do not allow us to extinguish the arrears which leaves uncollectable arrears on CMS IT systems, at cost to the taxpayer. Without a change in regulations, this cost could continue for decades with limited chance of collecting this money.

61. We propose to set the maximum amount for which arrears can be extinguished under these circumstances at £6.99. Due to the low amounts involved we do not propose writing to parents asking them to make representations if they still want the debt collecting.

62. Neither do we propose sending individual letters notifying parents that their debt has been written off. Instead parents would receive a letter telling them their case has been closed and there are no longer any arrears outstanding.

Your views

Question 4. What are your views on our plans to extinguish arrears balances in cases that meet the proposed requirements outlined in this paper?

Question 5. What are your views on our proposal to set the maximum limit for such cases at £6.99?

Maintenance not collected when an employer becomes insolvent

63. We are seeking views on our approach to cases where a deduction for child maintenance has been made from the paying parent’s earnings (known as a Deduction from Earnings Order, DEO) but the employer has become insolvent and the amount deducted has not been paid to the CMS.

64. Where a claim has been made by the CMS to the insolvency practitioner and they have been unable to secure some or all of the unpaid amounts through the distribution of the employer’s assets, we propose the CMS have the power to extinguish the debt balance.

65. For a case to be in scope it must fit all of the following criteria:

• be a case where the paying parent’s child maintenance is usually paid by DEO
• the paying parent’s employer’s business has become insolvent
• a deduction for child maintenance has been made from the paying parent’s earnings by the employer but has not been paid to the CMS
• a claim made by the CMS to the insolvency practitioner has not secured the outstanding debt

Current process

66. In Scotland when an employer goes into insolvency and withholds funds deducted from the paying parent’s employer under a DEO, the CMS can lodge a claim with the insolvency practitioner to claim the money. Any money recovered is paid to the receiving parent. If only part or none of the arrears are recovered Scottish law deems these arrears uncollectable.

67. In England and Wales, the process differs in that the paying parent is required to lodge a claim with the insolvency practitioner in order to obtain a refund of the amount deducted via the DEO but not yet paid over to the CMS.

68. This means that if the paying parent is unsuccessful recovering the amount from the insolvency practitioner, the receiving parent will not receive the payment. This amount will be treated as arrears and will remain enforceable by CMS.

Proposed new process

69. We propose that in all cases the CMS will have responsibility to lodge a claim directly with the insolvency practitioner.

70. The CMS is not guaranteed to receive payment. If only part or none of the arrears are recovered, the outstanding arrears will be extinguished and parents notified.

71. We understand that there is a risk that the receiving parent may lose some or all of their arrears owed if the CMS is not successful in recovering the money owed. Typically, such monies will be one month’s child maintenance.

72. As with the proposal to extinguish low level arrears, we do not propose writing to parents and offering the opportunity to make representations against the decision. However, parents will be notified that the arrears have been written off.

Your views

Question 6. What are your thoughts on our proposal to extinguish arrears balances in cases that meet the proposed requirements outlined in this paper?

CMS notifications to be sent, received and accessed digitally

73. The CMS is committed to continually improve and modernise the services we provide our customers. The Child Maintenance Service (CMS) has 3 online services introduced with the 2012 child maintenance scheme: Apply for Child Maintenance, My Child Maintenance Case and the Employer Portal.

74. These services enable parents to apply for and manage their child maintenance case online and offer management functions for employers who make payments through salary deduction.

75. The CMS offers various communication channels to their customers, including telephony, postal letters, SMS (text messages) and the online service (My Child Maintenance Case).

76. We now want to further modernise the CMS by making changes in legislation to enable more CMS notifications to be sent, received and accessed digitally. Currently, our legislation requires us to serve some letters via a postal method. These are generally letters that tell parents about their appeal rights or inform them we are planning to take action against them via our enforcement powers because of non-payment.

77. We want to communicate with our customers via their preferred method so we propose making changes in our regulations to enable the CMS to serve customer notifications via the online service (My Child Maintenance Case).

78. Letters that previously would have had to be sent through the post will be uploaded to the online service. When a letter is uploaded onto the account, customers will be sent an SMS or email to advise them that the letter has been uploaded. Some of these letters notify the customer of action they must take in regards to their Child Maintenance case and highlight the enforcement action the CMS can take or will be taking to recover unpaid child maintenance payments.

79. Some of our enforcement letters contain information about serious consequences if parents fail to pay outstanding child maintenance payments. These include letters informing parents who have consistently failed to pay their child maintenance liability we plan to apply to the Courts to have them committed to prison, disqualified from holding or obtaining a driving licence or passport ^{[footnote 5]}.

80. Because of the serious nature of these consequences we still plan to send these letters via a postal method as well as a digital method for customers who have told us they would prefer to communicate with us via a digital method. We plan to continually review this as the Government’s wider digital agenda moves forward.

81. We anticipate that for some customers, the online service will not be a suitable channel in which to receive communication on their case. Our overall policy aim is to ensure that the right channel is used at the right time for our customers. As such, these proposals give the CMS flexibility to meet the needs of vulnerable customers and their preferred method of communication.

82. We also want to make sure we maintain our commitment to reduce the burden on employers. We have received feedback from some employers that they would prefer us to send them communications via a digital method so we also plan to make changes in legislation to enable the CMS to send notifications via digital methods to employers and third parties in the future.

Your views

Question 7. What are your thoughts on our proposal to use all forms of communication appropriate to customer needs including digital?

Question 8. What are your views on our plan to extend our existing online service for employers and look to communicating with third parties digitally in the future regarding Child Maintenance cases?

Information Regulations

83. We want to streamline our service to make it easier for our customers and third parties. With this in mind we would like to expand the list of organisations required to comply with requests for information, under regulation 4 of the Child Support Information Regulations 2008.

84. Our powers to request information are used when gathering information for the purpose of:

• tracing the paying parent
• calculating maintenance
• maintaining the case
• enforcing child maintenance arrears

85. Under regulation 4 of these powers there is a list of those persons who have a duty to provide the required information on request. This information is routinely requested and responded to in writing.

86. Where an organisation is not listed in the Information Regulations 2008, relevant information is requested from them on a voluntary basis. If information is not provided in the first instance, it will be necessary for an inspector to visit the premises, using powers of entry, where the information is held.

87. Our proposal is to include the following organisations within the Information Regulations which will mean they have a duty to provide information on request; private pension providers, academy proprietors, the Motor Insurers’ Bureau and all types of companies that offer, promote or sell investment management services or facilitate share trading.

88. In respect of academy proprietors (known as academy trusts), statutory responsibilities are generally applied through their Master Funding Agreement. There are information sharing duties between academy proprietors and local authorities under their funding agreements. Although there is already a duty on local authorities to supply information to the CMS under the Information Regulations, requiring academies to provide this information directly to CMS will allow CMS to obtain information more easily.

89. Our intention is that the proposal will enable us to reduce the time it takes to obtain information relevant to making child maintenance calculations and recovering child maintenance debt. This will enable us to ensure the parents receive payments sooner. It will also make it more convenient for these organisations to provide the necessary information and evidence required by the Secretary of State, without the need for inspectors to attend their premises using the power of entry. Responses can be returned in writing either by post or by electronic means, such as secure fax or email.

Your views

Question 9. Do you have any comments in relation to the inclusion of private pension providers, the Motor Insurers’ Bureau and all types of companies that offer, promote or sell investment management services or facilitate share trading to the list of persons and organisations who have a duty to provide information to the Secretary of State?

Question 10. Do you have any comments in relation to the inclusion of academy proprietors in the list of persons and organisations who have a duty to provide information to the Secretary of State when there is already a data sharing duty between an academy proprietor and local authorities?

Impact Assessment

90. All government departments are required to consider the impact any proposed regulatory measures will have on businesses, charities and the voluntary sector. The process of assessing this impact is called a Regulatory Impact Assessment. We have assessed that the following measures impact on business:

• proposals to extinguish debt where insolvent employers have made deductions from a parent’s earnings but have not paid them over to CMS
• changes to enable letters to be served via a digital method
• changes to the Information Regulations

91. The details of these impacts are included below in each of the individual Regulatory Impact Assessments.

Maintenance not collected when an employer becomes insolvent

92. The industries in 2019 to 2020 (pre-coronavirus (COVID-19) data) shown as experiencing the highest numbers of all administrations include manufacturing, construction, wholesale and retail trade, accommodation and food activities, administrative and support service activities.

93. High proportions of paying parents on the CMS with DEOs also work in these industries.

94. Using available data from 2019 to 2020 it is estimated that around 17,000 DEOs (around a third of all DEOs) were in place with paying parents working in these industries. It is estimated that less than 200 DEOs were set up with a company that actually went into administration in 2019 to 2020 in these high risk sectors.

95. The estimate of 200 equates to DEOs paid from companies going into administration. The actual number of paying parents affected in this way will be lower. In the period August 2019 to August 2020 the CMS were notified of just 4 cases where the paying parent’s employer had been taken under management of an insolvency practitioner.

96. However, this estimate, of less than 200, does not include any impacts of the COVID-19 pandemic and Brexit. The Bank of England forecasts that unemployment will peak in 2021 and GDP will not return to pre-pandemic levels until 2022. Such forecasts may impact businesses going into administration in the medium term.

CMS notifications to be sent, received and accessed digitally

97. The current process of sending physical letters to parents using the CMS costs an estimated £3.7 million annually for clerical and system-generated letters combined. Most of this cost comes from system generated letters which comprise the majority of all letters.

98. Staffing costs for clerical print and post add an estimated additional of £120,000 annually.

99. This totals an estimated saving, through moving completely from physical to electronic letters, of £3.9 million annually. There will be some ongoing costs for providing letters that are required for accessibility reasons but we expect this to be small.

100. Most written communication will be between parents and the CMS. However, the CMS may also need to communicate with third party stakeholders such as employers. There are currently 27,000 employers who may, if accessibility requirements are met, use online portal services. Around a quarter of these (7,000), had signed up for such use by March 2021.

101. All letters currently sent by post are also stored within a system allowing for letters to be accessed via a portal. This means that moving to exclusively electronic means would not incur extra costs.

102. However, it should be noted that at least 1% of our caseload are individuals who have disclosed specific disabilities and so we are aware may be less able to access communication via the Portal. As such, these proposals give the CMS flexibility to meet the needs of vulnerable customers and their preferred method of communication.

Information Regulations

103. The annual estimate of costs on private pension providers, academies, Motor Insurers’ Bureau and companies that offer, promote or sell investment management services or facilitate share trading who will now be required in law to give us information when we request it, is around £7,000 per year. This will involve requests for information for 147 cases each year that currently result in CMS inspectors carrying out a visit to the organisation’s premises.

104. The proposed legislative changes will place a legal requirement on these organisations to give us information when we request it. This will remove the need for inspectors to visit providers, with repeated visits in around half of cases when providers are not ready to provide information at the first visit. Also, once providers know their legal responsibility, they are likely to be more efficient. This is because responses can be returned in writing either by post or by electronic means, such as secure email.

105. Note: This legal obligation on suppliers may result in them making these processes more efficient, reducing their costs further from the £7,000 estimated. However, efficiency savings have not been assumed in our calculations.

Government response

106. The CMS will publish the government response to the consultation on GOV.UK.

107. The report will summarise the responses.

How we consult

Consultation principles

108. This consultation is being conducted in line with the revised Cabinet Office consultation principles published in January 2016. These principles give clear guidance to government departments on conducting consultations.

Feedback on the consultation process

109. We value your feedback on how well we consult. If you have any comments about the consultation process (as opposed to comments about the issues which are the subject of the consultation), including if you feel that the consultation does not adhere to the values expressed in the consultation principles or that the process could be improved, please address them to:

DWP Consultation Coordinator
2nd Floor
Caxton House
Tothill Street
London
SW1H 9NA

Email: caxtonhouse.legislation@dwp.gov.uk

Freedom of information

110. The information you send us may need to be passed to colleagues within the Department for Work and Pensions (DWP) and published in a summary of responses received and referred to in the published consultation report.

111. All information contained in your response, including personal information, may be subject to publication or disclosure if requested under the Freedom of Information Act 2000. By providing personal information for the purposes of the public consultation exercise, it is understood that you consent to its disclosure and publication. If this is not the case, you should limit any personal information provided, or remove it completely. If you want the information in your response to the consultation to be kept confidential, you should explain why as part of your response, although we cannot guarantee to do this.

112. To find out more about the general principles of Freedom of Information and how it is applied within DWP, please contact the Central Freedom of Information Team. Email: freedom-of-information-request@dwp.gov.uk

Annex A

Analysis of CMS paying parent employment status and income changes: methodology and data tables

To understand the scope and explore possible effects of proposed changes to the evidential requirements for self-employed paying parents, analysis of the employment status and income changes of paying parents using the CMS was conducted.

The analysis used administrative data on paying parents’ CMS arrangements in combination with income data from the Registration And Population Interaction Database (RAPID).

RAPID provides a single coherent view of citizens’ interactions with DWP and HMRC within a tax year for the UK. RAPID is based on 100% extracts of various DWP benefit systems and is supplemented with 100% data extracts from HMRC systems. RAPID collates information on individual activities (and the income generated from those activities) within each tax year, including all benefit, employment and in-work benefit interactions, for example Universal Credit, Tax Credits and Housing Benefit.

The analysis of employment status and income changes refers to the 2017 to 2018 and 2018 to 2019 tax years: the most recent period for which reliable information on income from self-employment was available in RAPID at the time of conducting the analysis.

Using CMS administrative data, all paying parents with active child maintenance arrangements at both the end of the 2017to 2018 tax year and the end of the 2018 to 2019 tax year were identified. These records were subsequently matched to RAPID using a unique identifier. For all cases where a matching record was found, the employment status of paying parents was determined based on the sources of income recorded on RAPID over the period of analysis. Employment status was categorised as follows:

• employed: where a case has recorded income from employment but not self-employment
• self-employed: where a case has recorded income from self-employment but not employment
• dual-employed: where a case has recorded income from both employment and self-employment

Benefit income and unearned income was excluded from the total income amount because these are not currently used in the standard Child Maintenance calculation.

For all employed, self-employed and dual-employed cases where a snapshot of annual income data was available in both 2017 to 2018 and 2018 to 2019, the percentage change in gross annual income between these 2 years was calculated. The analysis assumes that each case only has one change to income between 2017 to 2018 and 2018 to 2019 and therefore does not perfectly represent the CMS process in which multiple income changes can be recorded and maintenance recalculations made in year.

The RAPID gross income amounts from employment, self-assessment tax returns, self-employment income from tax credit returns and pensions income, including occupational and State Pension, were included in the gross income amount. Parents with income from pensions are only included if they also have income from employment or self-employment and are counted in those categories. A small number of parents whose income was exclusively from pensions were excluded from the analysis.

Recorded income changes (between 2017 to 2018 and 2018 to 2019) were subsequently banded to demonstrate the distribution of income changes observed relative to the tolerance level (25%). Counts of CMS paying parents by observed income change band and employment status are presented in Table 1. Proportions provided in the text are also based on these counts.

Table 1: CMS paying parents by observed income change band (2017 and 2018 to 2018 and 2019) and employment status, Great Britain

Income change band	Employed	Self-employed	Dual-employed	All
Change more than 25%	81,140	18,270	8,430	107,840
Change less than or equal to 25%	159,800	14,660	5,060	179,510
Total	240,940	32,930	13,480	287,350

Source: CMS administrative data, Registration and Population Interaction Database. Note: Figures may not sum to totals due to rounding.

Analysis of CMS paying parents with unpaid child maintenance (arrears)

Paragraph 59 of the consultation quotes figures on the number of CMS paying parents with unpaid child maintenance (arrears) below £7. The figures are based on information available in CMS administrative data as at December 2020. The figures are for Great Britain only. Table 2 provides a breakdown of CMS paying parents by banded value of unpaid child maintenance.

Table 2: CMS paying parents with unpaid child maintenance (arrears) collected through Collect and Pay arrangements and the value of those arrears – December 2020, Great Britain.

Arrears value band	Number of cases
No arrears	325,000
Over £0 to £1	1,400
Over £1 to £2.50	400
Over £2.50 to £5	600
Over £5 to £6.99	400
Over £6.99	173,700

Source: CMS administrative data. Note: Figures are rounded to the nearest hundred.

Analysis of CMS notifications to be sent, received and accessed digitally: methodology and data tables

Issue – There is a policy intention to change most of the communication between the CMS and its customers away from those (a minority) who still receive a postal service to electronic means. This will utilise the 3 on-line services: Apply for Child Maintenance, My Child Maintenance Case and the Employer Portal, which all CMS clients have access to and will increasingly be encouraged to make use of. This analysis quantifies the monetary savings if all of the remaining communications which are still sent as clerical or system hard copies in the post are transferred exclusively to electronic means via clients’ Portals. It is however acknowledged that in a minority (1%) of cases, such as where users have disclosed specific disabilities to the CMS, that hard copy communications should continue be retained. This will ensure fair access.

Key findings – Overall the annual 2019 to 2020 costs for printing and posting CMS communication was estimated at £3.9 million. This included staff costs at over £0.1 million.

Methods, caveats and analysis

July was generally assumed as an average month as the associated printing costs were closest to the median for the calendar year 2019.

Figures for the financial year 2019 to 2020 were generally used, based on the assumption of this being the most recent year with services provided as business as usual.

Data were sourced internally from different business areas and not all time periods coincided exactly.

Staff FTE resources were provided based on 2017 costs – this was recalculated using uprated 2020 to 2021 pay bands

Clerical print costing was only calculated for one printer provided by the print and post team for one month (July 2019). It is possible that other printers which were not costed are also used for clerical print and post. This value is also likely to be an under estimate as the cost of running printers (for example, maintenance and raw materials such as ink) were not included.

Overall clerical post volumes were known but cost per letter could not be provided (for example, the number of sheets enclosed in a particular letter may vary). The average cost of clerical post was therefore estimated by applying the ratio of system print and post onto clerical print.

The post contract price used was not for July 2019 but came from the average of the financial year 2019 to 2020. This is because the July 2019 cost was above the average monthly cost and so not regarded as typical.

There were clear records of pricing for system generated letters, both values included are for July 2019.

Data table 1: Hard copy communication still dispatched by the Child Maintenance Service – Monthly costs (£, rounded) – 2019 to 2020

	Clerical (£)	System (£)
Print	1,300	75,000
Post	3,300	201,000
Contracted post services	30,100	–
Monthly sub-totals	34,700	277,000
Monthly employee costs – Clerical and system (£)	10,200
Overall annual costs – Clerical and system (£)	3,900,000

Sources: CMS and DWP internal Management Information

Analysis of maintenance not collected when an employer becomes insolvent: methodology and data tables

Issue – Where a deduction for child maintenance has been made from a paying parent’s earnings (DEO) and the employer has become insolvent, the amount deducted may not be paid to the CMS. Currently, the paying parent is required to lodge a claim with the insolvency practitioner in order to obtain a refund of the amount deducted via the DEO.

The proposal is to introduce legislation for England and Wales (Scotland already has this in place) for CMS to have responsibility to lodge a claim directly with the insolvency practitioner. Where a claim has been made by the CMS to the insolvency practitioner and they have been unable to secure some or all of the unpaid amounts through the distribution of the employer’s assets, the CMS will have the power to extinguish the debt balance.

Key findings – Fewer than 200 DEOs were set up with a company that actually went into administration in 2019 to 2020 in these high risk sectors. The actual number of paying parents affected in this way will be lower, with this worse-case scenario known to be realised in just four cases during 2019 to 2020.

Methods and Analysis

Insolvencies were identified by Standard Industrial Classification (SIC) sector for the year 2019 to 2020. This is the most recent year in which business as usual could be assumed.

Proportions of Paying Parents working in each sector were identified. This was based on 3 year averages of available FRS data from 2016 and 2017 to 2018 and 2019.

The number of Paying Parents on statutory schemes working in each sector had various proportions (for example, those with Collect and Pay arrangements, with a DEO method of payment) applied to them. This allowed for the calculation of the overall proportion of DEOs contributed by each sector.

The proportion of all insolvencies by sector was also calculated.

If a sector made up greater than 5% (arbitrary value chosen by analysts based on distributions seen when graphed) of DEO Paying Parents in each sector and of all insolvencies within that sector, then the sector was deemed at risk of double deductions occurring.

The percentage of insolvencies that actually occurred was calculated from within each of the key sectors identified (manufacturing, construction, wholesale and retail trade, accommodation and food service activities, administrative and support service activities).

The estimated volume of Paying Parents actually working in this sector was calculated using official statistics from the Labour Force Survey. This was multiplied by various proportions (per cent of those in a separated family, on a Statutory Scheme, on Collect and Pay, on DEO). This value was multiplied by the per cent of insolvencies which actually occurred within each sector (calculated above), to produce the number of DEO Paying Parents in each sector in a company at risk of entering insolvency. These values were summed for each of the sectors of interest to produce a value of 150 (or as rounded in write-up policy, ‘less than 200’).

We are aware that this estimate of 150 equates to DEOs paid from companies going into administration. In the period August 2019 to August 2020 the CMS were notified of just 4 cases where the Paying Parent’s employer had been taken under management of an insolvency practitioner.

Table 1: Insolvencies England and Wales, 2019 to 2020

Industry	Monthly average
Agriculture, forestry and fishing	5
Mining and quarrying	2
Manufacturing	121
Electricity, gas, steam and air conditioning supply	6
Water supply, sewerage, waste management and remediation activities	10
Construction	262
Wholesale and retail trade, repair of motor vehicles and motorcycles	199
Transportation and storage	46
Accommodation and food service activities	195
Information and communication	69
Financial and insurance activities	32
Real estate activities	37
Professional, scientific and technical activities	98
Administrative and support service activities	146
Public administration and defence, compulsory social security	1
Education	12
Human health and social work activities	32
Arts, entertainment and recreation	28
Other service activities	77
Activities of households as employers, undifferentiated goods and services, producing activities of households for own use	0
Activities of extraterritorial organisations and bodies	0
All others	24

Table 2: Paying Parents by key sector and child maintenance arrangement type

	Statutory arrangement	Non-statutory arrangement	No arrangement
Manufacturing	19%	56%	26%
Construction	15%	62%	23%
Wholesale and retail trade, repair of motor vehicles and motorcycles	15%	65%	20%
Accommodation and food service activities	15%	45%	40%
Administrative and support service activities	23%	51%	26%

Source: Family Resources Survey – average 2016 to 2017 and 2018 to 2019.

Table 3: Overall estimates of Paying Parents at risk of employment in company becoming insolvent – Estimate of Paying Parents in vulnerable sectors

Industry	Employees (assuming male Paying Parents) per typical month during 2019 to 2020	Separated families to all families	On statutory schemes	On Collect and Pay schemes	On DEO schemes	% insolvent (2019 to 2020)	Estimates of Paying Parents at risk of employment in company becoming insolvent
Manufacturing	2,232,759	280,968	42,145	15,172	4,552	1.06%	48
Construction	2,036,845	256,314	38,447	13,841	4,152	0.92%	38
Wholesale and retail trade, repair of motor vehicles and motorcycles	2,135,172	268,688	40,303	14,509	4,353	0.61%	27
Accommodation and food service activities	812,193	102,206	15,331	5,519	1,656	1.49%	25
Administrative and support service activities	818,533	103,003	15,450	5,562	1,669	0.76%	13
Total							150

Sources: Office for National Statistics – Table EMP13: Males in employment by industry; Separated families publication – Table 1: The number of separated families and children in separated families; Child Maintenance statistics quarterly publication; The Insolvency Service – Table 2: New company insolvencies by industry to two-level Standard Industrial Classification (SIC 2007).

1. Academies in England. ↩

2. Annex A provides the methodology and data tables for this analysis. Figures quoted are for Great Britain only. ↩

3. Figure for Great Britain only. See Annex A for full methods and data tables. ↩

4. Figures correct as at December 2020. A data table is provided in Annex A. ↩

5. This power only applies to paying parents living in England, Scotland and Wales. ↩