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Child Maintenance and Other Payments Bill

This group of amendments enables us to discuss debt management powers. I hope that Members of the Committee will forgive a potentially somewhat lengthy explanation, but also that they feel that it is helpful. Amendment No. 184 concerns Clause 30, which provides a power to accept part-payment of arrears in full and final satisfaction. The provisions in Clause 30 will enable the commission to negotiate and accept settlements between parents where arrears of maintenance are due and a non-resident parent makes a reasonable offer to pay less than the total amount owed in full and final settlement of the whole debt. Amendment No. 184 would place on the commission a requirement to obtain the written consent of the parent with care before it accepts the part-payment of arrears in full and final settlement of the whole amount. This was raised in Committee in the other place, and a related issue has also been raised by the Delegated Powers and Regulatory Reform Committee concerning parent with care consent with regard to the sale of debt. In response to those concerns, it is my intention to table a government amendment on Report that will put into the Bill that PWC consent will need to be obtained under Clause 30, and under Clause 32, which provides for the power to transfer arrears. I trust that this step will help to allay any concerns which Members of the Committee may have on this issue. Amendments Nos. 185 and 186 relate to Clause 31, which provides the power to write off arrears. Amendment No. 185 would place on the commission a requirement to request and receive written consent from the parent with care before it extinguishes liability in respect of arrears. The CSA has a substantial amount of current debt: £3.7 billion. In his report, Sir David Henshaw recommended that we should seek powers to write off debt that may appear to be unrecoverable, but we decided against seeking such a broad power. There are, however, circumstances where it is appropriate to write off debt and where it would be unfair or otherwise inappropriate to try to enforce payment. It is therefore our intention to prescribe in regulations the precise circumstances where write-off can occur. The prescribed circumstances will be limited to cases where there is no continuing maintenance liability and the parent with care has expressly asked the commission not to take action to recover the arrears, where the parent with care has died, or where the non-resident parent has died and the debt cannot be recovered from the estate. I think Members of the Committee will agree that, in the circumstances I have just outlined, the commission will either be acting in accordance with the express wish of the parent with care, or will have no option other than to write off the arrears. As I have said, we will write off debt only where it would be ““unfair or otherwise inappropriate”” to enforce the arrears. The ““unfair or inappropriate”” test will usually be satisfied where the prescribed circumstances apply, but will also provide extra protection to ensure that the debt is written off only where the commission has properly considered all the circumstances of the case. For example, it might decide not to extinguish the debt if it suspects that the person with care has come under pressure from the non-resident parent. I assure Members of the Committee that the Government have absolutely no intention of writing off debt that is due to be paid to a parent with care against their wishes. However, there is already a sufficient safeguard in the Bill to provide that, where a parent with care wishes a debt to be recovered, it is not written off, and that the detail of the process of writing off debt should be set out in regulations. Amendment No. 186 would place on the commission a specific requirement to consider the welfare of the children in respect of whom the arrears are due when it decides to extinguish child maintenance arrears. I agree that the commission must consider the welfare of children, but it is unnecessary for this to be provided for in Clause 31, as we have discussed on a number of occasions today. Section 2 of the Child Support Act already goes wider than the proposed amendment. It requires the Secretary of State, when exercising any discretionary powers given to him by that Act, to have regard to the welfare of any child likely to be affected by his decision. That duty applies equally to all children in the households of both the parent with care and the non-resident parent. It will apply equally to the commission when it takes over the Secretary of State’s functions. This means that when a decision to extinguish maintenance arrears is taken, the existing child support legislation already safeguards the welfare of children affected by that decision, and we do not believe that there is a need to repeat what is already a statutory obligation to provide. Amendment No. 188 would provide for regulations to enable a parent with care to request the appointment of a named inspector to expedite recovery procedures when maintenance arrears have fallen behind by more than two months. As noble Lords will be aware, our intention is that the new commission should be an NDPB that has the flexibility to shape its services and adapt its policies in the light of developing experience. The new clause proposed in Amendment No. 188 would curtail that flexibility from the outset by obliging the commission to organise its work in a particular way. Not only would that place a restrictive burden on the new organisation before it starts, but it has practical implications in that it is more likely to slow down the recovery process than enhance it. We intend that the commission should be able to develop its own operating model and have the flexibility to harness the skills of private and voluntary sector partners in delivering its services. Should the commission find that it wishes to contract out part of its recovery service, the requirement in the Bill for an employer-named individual would be an unnecessary obstacle. In summary, the new clause would prove a burden to the organisation and in practice would not improve the customer’s experience or the recovery process. The final amendment in this group is Amendment No. 200, which concerns Clause 40. This clause relates to the: "““Extinction of liability in respect of interest and fees””." The amendment would require the commission, when writing off liability due to unpaid fees or interest, to give the parent with care written notice and a right of appeal to a tribunal on the grounds that extinguishing the debt would not be in the best interests of the child for whom the liability is due. I should explain the background to this clause. Regulations made in 1992 under the 1991 Act provide for the charging of interest on maintenance arrears and the charging of fees in respect of the assessment and collection of child support maintenance. The agency stopped charging fees and interest in the mid-1990s, and these regulations were repealed in 2001. On the debt that had built up as a result of parents not paying remains, the total amount of debt from unpaid interest is around £1.9 million, but we expect that in individual cases, the amounts will be very small. In the case of debt as a result of fees charged, the amount is around £12 million, which would accrue to the Secretary of State. The purpose of the power in Clause 40 is to ensure that interest or fees that accrued under the 1992 regulations will be extinguished. In effect, it is a one-off tidying-up provision. It is our intention to notify parents when debt from unpaid interest is written off, as we believe it would be unfair to raise the unrealistic expectations of parents with care that such debt could now ever be recovered. Creating a right of appeal against this decision would only introduce yet another stage and make the whole process protracted and drawn-out without any reasonable prospect of ever recovering this debt, which could be over 10 years old. It would therefore be inappropriate to give a right of appeal to a parent with care in the context of what are in essence good housekeeping provisions that will enable the commission to manage debt more effectively. I shall pick up on some of the other points that were made. The noble Lord, Lord Kirkwood, commented on Clause 32 and the transfer of debt. A bit of market testing was done around this issue to see if the market had an appetite for taking on a tranche of the agency’s current debt and whether it was likely to provide value for money. Bearing in mind that if it were possible to get some cash to parents while the children are still young, that might be something to be welcomed. However, perhaps not surprisingly, the result of the work showed that while there may be some market interest, it was more keen on what might be called the low-hanging fruit, which would need to be parcelled up with liability orders and thus would be relatively easy to collect. With the wider range of powers that the commission will have, it should be much better placed to enforce such orders. We discussed the benefit of retaining the clause. On balance, we believed that it was appropriate to hang on to that prospect, but who knows what will happen in future? The noble Lord is right to probe. One acknowledges that there is no great and early appetite to see this as any significant solution to collecting the money. However, given that we want to keep open as many options as possible to get more money, we thought it was worth continuing to include it. The transfer of debt should be distinguished from the use of external agencies to recover debt on our behalf. As the noble Lord, Lord Skelmersdale, said, that has certainly happened; at December 2007, debt collection agencies had collected more than £9.3 million in child support arrears. We also know that a seven-day warning letter, which is sent by the agency to inform clients that their case is about to be transferred to debt collection agencies, can produce quite a good response. That itself triggers collection, and gets more money to more children. I do not have a ready figure on the number of cases involved, but we will certainly see whether we can provide one. My noble friend Lady Hollis asked about the scale of recoverable debt. I agree with her analysis. As we discussed a little earlier in Committee, we do not see the solution as a broader, wholesale write-off of big chunks of debt—we think that it is important to have the engagement of parents with care—but perhaps there should be resort to the accounting mechanism that we discussed, which we will provide against the debts rather than write them off. Obviously there are particular issues to address, which is why we want there to be the opportunity to negotiate in cases where interim maintenance assessments have been in place. Such assessments were to some extent penal assessments to encourage a response, and it is important to get some sense there. I hope that the noble Lord will be comforted by that response, and will feel able to withdraw the amendment. However, engaging with and securing the consent of parents with care is important, and we propose to table amendments to these two clauses so that that is put into the Bill.