Feeling luckier? By Paul Gosling

18 Jan 07
The game is up for the Child Support Agency. But will its new replacement do a better job at collecting the missing billions of pounds in maintenance? Paul Gosling investigates

19 January 2007

The game is up for the Child Support Agency. But will its new replacement do a better job at collecting the missing billions of pounds in maintenance? Paul Gosling investigates

When Work and Pensions Secretary John Hutton announced the impending demise of the Child Support Agency last July, he made it clear to Parliament what a new regime would look like. 'I want the CSA, now and in the future, to come down like a ton of bricks on absent fathers – it is usually absent fathers, but let us say absent parents – who are not discharging their legal and moral duties to support their children.'

He has been true to his words. A new organisation C-Mec – the Child Maintenance and Enforcement Commission – has been created. Its remit is not merely to be more efficient than the CSA, but also tougher. Much tougher.

Non-paying parents will face the loss of their passports and driving licences, without necessarily being taken to court. C-Mec will be given powers to apply for curfews and recover money from bank accounts and from the estates of deceased absent parents. It will be empowered to co-operate with credit reference agencies to trace parents and recover money.

'Our proposals to get visibly tougher on enforcement send out a clear signal that non-payment of maintenance will not be tolerated,' explains Hutton. 'The proposals set out the way forward for a completely new child maintenance system. They establish and enforce clear rights and responsibilities. They offer better value for money for the taxpayer.' But, above all, he says, they will deliver a system that properly meets the needs of the parents with care responsibilities and the children who depend on it, 'helping to ensure that families and children do not slide into poverty when parents split up'.

Analysis of the old CSA, conducted for the government by former Liverpool City Council chief executive Sir David Henshaw, was withering. A system intended to recover the cost of welfare benefits from recalcitrant parents actually cost taxpayers £200m more a year to run than it collected. Large amounts of resources were tied up in administering small monetary transfers between parents who did not even want to be involved with the CSA. By June last year, according to the National Audit Office, there was a backlog of £3.5bn of uncollected maintenance – of which 60% would probably never be collected.

Operational and IT weaknesses prevented the CSA from ever working properly. Private Finance Initiative contracting was the wrong approach for an ambitious IT project, the NAO concluded. The work and pensions select committee expressed strong unhappiness both with the EDS contract and the way it was managed by the Department for Work and Pensions. The committee, the NAO and a child support white paper from as long ago as 1999 – six years after the CSA was established – concluded that the assessment system was too complex, each case requiring more than 100 pieces of information.

The objectives of supporting the parent with primary care responsibility and lifting more children out of poverty were not met, because until 2003 every pound the CSA collected was taken from the family's state benefits. As a result, there was no incentive for either parent to co-operate with the CSA. Even when the system was reformed – giving new applicants on benefits £10 a week from the recovered money – the scheme 'performed no better', said the NAO.

Now we will start again. The name, senior staff, structure, IT equipment and design of the system will all be replaced. Not that this will happen overnight – C-Mec will be formed next year, but only in 2012 will it have taken on all outstanding child support cases.

C-Mec is more than a new moniker on an old body. It will not even be an executive agency, as the CSA is. The theory behind the Thatcherite creation of executive agencies was that they would provide an arm's-length relationship between Whitehall departments and their service delivery vehicles. Not long enough, it seems, for ministers today. C-Mec is to be structured as a quango – or non-departmental public body, as they are properly called – with an independent board.

The DWP explains that this is to create 'a more arm's-length relationship'. In other words, it will be more difficult to blame ministers if things still go wrong. The DWP's spokesman added that being an NDPB 'will ensure the independence of its governance structure, which will in itself ensure that C-Mec's board is entirely focused on efficient and effective service delivery'.

The infamous EDS IT system will therefore continue to operate for a while yet. The CSA is tied into the contract for another three years. It will be up to C-Mec whether it takes over the system and reforms it, or procures a new one.

One thing is clear: maintenance assessments will be simplified when C-Mec takes over. In future, the focus will be on encouraging parents to make private agreements, with rewards for those who do. From 2008, all parents with care responsibilities will keep up to £10 a week of their maintenance without losing benefits, not just those who joined the system post-2003. This amount will rise from 2010. Any lone parent who claims benefits will no longer be forced to use the state maintenance assessment system, if they instead opt to make their own arrangements with the absent parent.

The most radical and headline-grabbing new powers to be given to C-Mec will be for recovering unpaid maintenance. A recommendation from Henshaw that the £3bn or so of arrears be written off was rejected by ministers, bar a mere £50m owed where there has been parental reconciliation, the absent parent has died, or recovery is otherwise impractical.

Despite this knock-back, Henshaw is happy with the DWP's response to his proposals. He told Public Finance: 'The government accepted nearly all the recommendations, including that applications should be made again. I am very content indeed. Part of the problem is that the CSA doesn't know exactly what the debt is. I suggested looking at writing off some of this. I thought this could be a good approach, but this is a matter for government.'

But elsewhere there has been a sceptical response. The Public and Commercial Services union says the Cabinet Office has assured it that the transfer of responsibilities to C-Mec will be conducted under the Transfer of Undertakings Regulations – so that most staff will keep their jobs, and their pay and pensions. While the union is relieved by this, it is unhappy at the structural changes and fearful of what will happen later.

PCS negotiator Dave Wilkinson says: 'It should sit within the DWP and not as an NDPB. This represents to us a key welfare responsibility, which is being removed from political control. That does concern us quite a bit. So [the possibility of] future privatisation is a worry for us.'

Former welfare minister and leading CSA critic Frank Field MP is equally distrustful of the reforms. He also believes that the structure chosen for the organisation and its method of operation are wrong. The CSA should never have been an executive agency and a quango is equally inappropriate, he believes. 'John Hutton will get away with this if it works,' Field told Public Finance. 'But he won't if it doesn't.'

Field suggests that C-Mec should be structured in the same way as Revenue & Customs, as a government department accountable to Parliament through the Treasury. He argues that in the same way as R&C has shown itself, as a tax collecting body, incapable of effectively administering benefits (even if they are called tax credits), so the DWP is incapable of overseeing the efficient collection of money that is effectively a tax.

The reforms are an opportunity missed, he says, with the wrong solution again adopted. The US set up a similar organisation to the CSA, with similar results. 'Where there has been a pretty hopeless case, like the Americans, they have shown you can reform in this area,' argues Field. 'They went straight to automatic collection. The Americans have just used muscle – with a stick.' He is unimpressed with Hutton's use of incentives, believing that taxpayers won't accept the spending of huge sums without a result.

'The whole point of having this agency was to curb taxpayer liabilities,' he says. 'The sooner we get to realise this is a tax on people who don't pay their maintenance the better, and then think about how do we recover this tax. The simplest way is automatic recovery through income. Where people claim not to have employment, we should have commissioners with the power to decide locally how the tax should apply.

'For those who claim to have no income, but have a very high standard of living, the commissioners would just instruct recovery of assets. You don't have to do this many times for people to realise the name of the game has changed.'

Nor do C-Mec's powers of enforcement please Field. 'The CSA already has the power to take driving licences away from people – about three have been taken away so far.' The focus, says Field, should not be on removing passports and driving licences, but on getting money from non-payers. In support of this, he favours the use of private debt collectors to recover outstanding maintenance.

Former fellow Labour MP Chris Pond, now chief executive of lobby group One Parent Families, also criticises the reform proposals – but from the opposite viewpoint. Pond believes that more of the maintenance should go to support the children and primary carers.

'We are pleased that 50,000 more children will be lifted out of poverty by allowing parents on “the old scheme” to keep £10 of their maintenance if they are on benefits, but twice this number could have been lifted out of poverty if all maintenance against benefits had been disregarded,' he says. 'Giving parents the option of making their own child maintenance arrangements is right, but the major problem of non-payment must be dealt with, and we need a strong and competent agency which will step in at once if a lone parent requests it. Do-it-yourself child maintenance will not work for everyone.'

Philip Hammond, the Conservatives' work and pensions shadow secretary, was also critical. He argues that no 'attempt [has] been made to address the real root of the CSA's problems – the inability of the current system to accurately assess how much maintenance an absent parent should pay'.

It might have been expected that having failed to get to grips with the CSA during ten years in office, the government could at least have achieved agreement on what to do next. But the real irony is that the CSA was one of those rare examples of cross-party consensus in its initial incarnation – and look where that got us.

How did we get into this mess?

The Child Support Agency was set up in 1993 as a result of the 1991 Child Support Act to deal with the problem of large numbers of non-resident parents — mostly fathers — who failed to meet their financial liabilities. It was steered through the House of Commons with cross-party support, but little parliamentary discussion, by the then social security minister Alistair Burt, who told Public Finance he was no longer prepared to discuss in public the CSA's failings.

The agency's wide-ranging duties included contacting non-resident parents; arranging the resolution of paternity disputes; assessing child maintenance using a determined formula; notifying non-resident parents and the people caring for their children of the amount of maintenance to be paid; arranging for payments; collecting and forwarding maintenance payments at the request of either party; recovering arrears and re-establishing payment where necessary; reviewing maintenance assessments; preparing and presenting appeals to the independent Child Support Appeal Tribunal Service; and liaising with the Benefits Agency to adjust social security payments.

Although the public perception of the CSA was that it was designed to help lone parents left without support by their former partners — who might be working and earning a good wage — this was never the underlying rationale for politicians. 'The main purpose of the agency is to ensure that parents who live apart maintain their children whenever they can afford to do so, thus minimising the burden on the taxpayer,' explained a National Audit Office report.

From the very beginning the complexity of the workload and ineffective working systems meant that things went wrong.

Even in its early years, the CSA miscalculated maintenance levels in the vast majority of cases — 87% in 1999/2000 — while most of its interim maintenance calculations were uncollectable because they were set at punitive levels.

A sign of the crisis afflicting the CSA has been its propensity to lose chief executives. Founding CE Ros Hepplewhite lasted little more than a year. Ann Chant was in place for just over two years. Doug Smith stayed longer, from 1996 to 2005. Current CE Stephen Geraghty has been in office since then.


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