The Department for Work and Pensions has explained major changes it is vowing to make after being urged to set out the ‘rationale’ behind them
The DWP has issued an update on ‘major’ changes planned to the Child Maintenance Service (CMS). The DWP says the reforms will create a ‘fairer’ system that will put an end to ‘significant shortcomings’ with the existing set-up – but they would mean new charges for many parents.
The department is aiming to scrap Direct Pay. This is the process that allows parents who have split up to arrange child maintenance payments between them after the CMS has calculated the amount.
The system was introduced in 2012 but the government says it is not working effectively and is unsafe for many parents. At the moment, the government’s data shows 55% of all CMS arrangements use Direct Pay, with 43% using the alternative Collect and Pay system which sees the CMS act as a middle man to process payments.
Recent official figures show there were 450,000 Direct Pay arrangements in place. Now a new system being planned would see charges introduced for those parents who currently pay nothing to the CMS. However, the planned changes to the roughly 350,000 Collect and Pay arrangements would see many people using this service pay a lot less.
The DWP accepts that the new system would lead to new charges for many parents. It says: “The headline for a compliant paying parent is a cut from a 20 per cent charge to 2 per cent. The trade off is that everyone loses the fee-free Direct Pay route, so parents who currently pay each other directly at no cost would start paying the 2 per cent instead.”
The intention behind Direct Pay was to encourage parents to work together and reduce reliance on the CMS. Yet DWP research published last year found just 60 per cent of receiving parents got all of the maintenance they were owed. And only 40 per cent of receiving parents said they always got their money on time.
Despite these issues, the government said many people were not reporting problems to the CMS. More than a third of receiving parents, the research found, did not report a late or missed payment.
What is wrong with current CMS Direct Pay payment system?
The DWP also said that 71 per cent of receiving parents and 51 per cent of paying parents in Direct Pay said they had suffered domestic abuse from the other parent. The government has announced that it wants to end Direct Pay, possibly by 2027 – although it stresses that for now the existing rules remain in place.
If Direct Pay does end, officials want to replace it with a single service where the CMS collects the money from the paying parent and gives it to the receiving parent. The single parents website Gingerbread has supported the reform, which it has described as a ‘major shake-up’.
Yet it said the change must be made ‘with extreme care’ and has warned: “The CMS is in urgent need of reform. Single-parent families need a clear timeline of when the government is going to bring forward the changes it has promised.”
The matter has been put under the microscope after Edward Morello, Lib Dem MP for West Dorset, asked the DWP “what the rationale is for the proposed abolition of Direct Pay arrangements within the Child Maintenance Service.” He also asked “what alternative approaches to reforming Direct Pay have been considered, and how the department will ensure that children do not lose out financially as a result of any changes.”
The questions come amid criticism from some in the sector. The website Both Parents Matter says the government should keep the Direct Pay system. It says the government’s current plan is ‘deeply flawed’. On Tuesday last week, Lilian Greenwood, Parliamentary Under-Secretary (Department for Work and Pensions), issued a response to explain why the government changes are expected to go ahead.
She said: “Evidence gathered by the Department has highlighted significant shortcomings with Direct Pay. Under Direct Pay, the CMS is unable to routinely monitor whether payments are being made in full or on time, meaning non-compliance can go undetected until a parent reports a problem. Research tells us that only 60% of receiving parents in Direct Pay reported getting all of the child maintenance they are owed, and only 40% of them reported receiving it always on time.
“This places the burden on receiving parents to chase payments. The current arrangement can also create opportunities for economic abuse, including situations where maintenance is withheld, paid late or manipulated as a means of exerting control over a former partner. In many cases, parents may also need to maintain contact with an ex-partner to resolve payment issues, which can be distressing and particularly harmful for victims and survivors of domestic abuse.
“However, moving to a single service where the CMS monitors and transfers payments will address these longstanding issues. Our proposals for the new service will be underpinned by a fairer fee structure. Fees offset the investment needed to make the reforms and contribute to the cost of using enforcement powers to re-establish compliance and reduce the burden on the taxpayer.
“We considered how best to address the shortcomings of Direct Pay and concluded that a single service model, with CMS oversight of all maintenance payments, would provide greater transparency, improve compliance and better support children to receive regular maintenance.”
‘Concern’ over plan to end Direct Pay
The House of Lords Public Services Committee Report on Reforming the Child Maintenance Service last year raised doubts on the proposals. It said: “We are not persuaded by the Government’s case for the removal of the Direct Pay service.
“We are concerned that the removal of the Direct Pay service and transfer of all child maintenance cases to Collect and Pay, without further investment in staffing or CMS resources, will result in an already overstretched CMS delivering poorer results. While we acknowledge that reforms will improve visibility of non-compliance in CMS arrangements, we are not persuaded that the Government have adequately evidenced that this approach will lead to higher compliance in child maintenance payments.”
That report came just weeks after broader questions were asked about the CMS itself. The BBC programme Panorama said in August that the CMS was pushing many parents to ‘breaking point’.
It reported cases of mums struggling to get payments from ex-partners, with one forced to use food banks after being left £10,000 in arrears. Another mum said she had been forced to skip meals.
Why UK government wants to end CMS Direct Pay
The government says on the website childmaintenance.org.uk that the key reason for the change is safety. It notes: “Direct Pay relies on the two parents being in contact about money, which can give an abusive parent a way to exert control, or force a victim to chase the person who harmed them. Routing every payment through the CMS removes that direct contact.”
Parents who currently do not use Direct Pay can use Collect and Pay. This sees the CMS collect the money and pay it to the receiving parent. But it does involve a significant charge.
Currently a paying parent using Collect and Pay pays 20 per cent extra on to the CMS. Under the new system being proposed, this would fall to just two per cent if paid on time. However, it would remain at 20 per cent for paying parents not paying on time. Under the current Collect and Pay system, the receiving parent is charged four per cent. This would drop to two per cent under the change that is planned.
For example, a paying parent now paying £100 a week would go from paying £20 on top to CMS to paying £2 on top if paying on time. A receiving parent would get £98 in this scenario – a two per cent fall from £100 – rather than £96 (a four per cent fall) under the existing rules.
In addition, under the changes, parents paying through a deduction from benefits would not face the 20 per cent non-compliance charge, the government says. To see more details on the proposals, visit the childmaintenance.org.uk government website. For more information on the current system, visit the House of Commons Library.
