Fairness for families, children and taxpayers as new child maintenance system is launched
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
A new child maintenance system will support more families to work together and maintain a subsidised service for those who really need it.
A new child maintenance system comes into force today (30 June 2014) – supporting more families to work together, while maintaining a heavily subsidised service for those who really need it.
The phased closure of the Child Support Agency (CSA) now begins, as it gradually closes its cases over the next 3 years. These parents will now have the choice to make their own maintenance arrangements between themselves or use the new Child Maintenance Service.
Today also sees the introduction of new fees for families which choose to use the Child Maintenance Service, as well as tough new enforcement charges for the small minority of absent parents who try to evade their responsibilities – those who, for example, have to be pursued through the courts or have maintenance deducted from their earnings.
Work and Pensions Minister Steve Webb said:
Reform of the old broken system was absolutely necessary and today marks a key milestone in the government’s essential reform of the child maintenance system in Great Britain.
The old CSA was just not fit for purpose – it spent £503 million in 1 year to transfer £1.1 billion of maintenance and left more than 50% of children living in separated families with no effective financial arrangement in place at all.
The new system is helping more couples to work together to ensure the best outcomes for their children. We know that children do better when parents work together, even after separation, and I am very encouraged that the new child maintenance system is already making this a reality for thousands of families.
There will be a one-off £20 application fee to use the Child Maintenance Service and enforcement charges of up to £300 for absent parents who have to be pursued.
There will be no ongoing fees for families which use the Direct Pay service to set up direct payments between the parents. New figures released by the DWP show that, already, 39% of parents within the Child Maintenance Service are using this system, rather than relying on the state to collect and pay maintenance on their behalf.
Families unable or unwilling to come to a Direct Pay arrangement will have the option to ask the Child Maintenance Service to collect money from 1 parent and pay to the other – but there will be an ongoing fee for this service, which will be introduced in August.
The aim of the ongoing charges for parents who want the state to collect and pay maintenance on their behalf is to encourage parents to work together to make their own arrangements, freeing up the Child Maintenance Service to concentrate on the most challenging cases and get the money flowing where it hasn’t in the past.
Mother-of-3 Brenda Stirling, from Broxburn in West Lothian, is amongst the first parents to have been brought into the new system. She and her partner split up 10 years ago.
The hairdresser, who runs her own business, previously wasn’t receiving child maintenance payments, but since she and her former partner started using the Direct Pay service, she now receives maintenance on a regular basis.
Ms Stirling said the Direct Pay service was strengthening and improving their relationship as parents to their children, adding:
We have always talked but there has been a lack of trust between us. This system is good for us and I am using it to build the trust again with my oldest child’s father.
Written Ministerial Statement
A Written Ministerial Statement is tabled in Parliament today.
The application fee to use the Child Maintenance Service is a one-off charge of £20. Enforcement fees for absent parents who evade payment range from £50 to £300. There will be no ongoing fees for parents who co-operate and set up their arrangements using Direct Pay. Ongoing fees for using the Collect & Pay service will be introduced in August.
With Direct Pay the Child Maintenance Service works out an amount for parents to pay and provides guidance on setting up regular payments and payment is arranged between the parents. It will then only intervene if necessary to enforce missed payments.
The alternative is Collect & Pay, whereby the Child Maintenance Service calculates, collects and pays maintenance on behalf of the parents. Fees for using Collect & Pay will be introduced later this summer. The paying parent will pay a 20% surcharge of the maintenance assessed and the receiving parent will pay 4% of the amounts received.
Government research has shown that around half of receiving parents in the CSA could make family based arrangements with the right level of support. With a reduced caseload, the Child Maintenance Service will be able to concentrate on the most difficult cases, and it means that those parents who feel unable or unwilling to work together will benefit from a modernised and efficient system to help get the money flowing.
The old child maintenance system
The old system often took responsibility away from parents, encouraging conflict and hostility at huge expense to the taxpayer.
More than 50% of children living in separated families had no effective financial arrangement in place at all.
The CSA – managed by an arm’s length body – spent around £503 million in 2009/10 to transfer only £1.1 billion of maintenance.
Under the coalition government, the CSA spent £420 million in 2011/12 to transfer some £1.2 billion of maintenance. However, even with this saving, a continuing spend of over 35 pence to gain every £1 does not represent value for money.
The IT system was totally inadequate and notoriously riddled with defects. Cases were regularly disappearing off the system.
The number of expensively-managed clerical cases hit 100,000 and the IT system was costing £74 million a year in operating costs alone.
The new system
The government is determined to sort out the mess and ensure today’s children get a better service than their predecessors.
In 2012, we abolished the arm’s length body to give ministers more direct control, responsibility and accountability.
The reforms are a 2-pronged approach with:
- more support for separated families to reach an amicable, family-based arrangement – in addition to the support provided through Child Maintenance Options we are investing £14 million in support for separated parents to make this happen
- a new Child Maintenance Service (if parents are not able to reach an agreement), which will collect money on behalf of parents, but there will be a charge
The introduction of charging is designed to act as an incentive for parents to collaborate, encouraging them to think again before automatically putting in an application to the Child Maintenance Service and also fairness for the taxpayer who is currently picking up the bill for the service.
Parents who need to use the statutory service can avoid paying an on-going collection charge entirely by using the Direct Pay service, which only requires an upfront application fee of £20 and still steps in to enforce payments if they stop.
We will not apply the £20 application fee to victims of domestic violence and abuse or to applicants aged 18 or under.
The collect and pay service continues to be heavily subsidised by the taxpayer despite the charges.
We have worked with financial services providers to make sure everyone can use Direct Pay safely, securely and with anonymity if they need to, which includes victims of domestic violence and abuse.
We know that children do better when both parents are positively involved in their children’s lives and, in addition to our continuing investment in Child Maintenance Options, we are investing up to £14 million in support for separated parents to help make this happen. This includes money to fund counselling and specialist mediation work projects across the country as we look to see what works best in helping parents to collaborate.
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