The Department for Work and Pensions (DWP) is preparing to scrap the Direct Pay system within the Child Maintenance Service (CMS), moving all arrangements to a single service model where the CMS monitors and transfers payments. The overhaul will introduce new fees for receiving parents who currently pay nothing, while reducing charges for compliant paying parents.
Direct Pay Shortcomings Cited
DWP minister Lilian Greenwood said evidence gathered by the Department has highlighted significant shortcomings with Direct Pay. Under the current system, 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.
Greenwood said research shows only 60% of receiving parents in Direct Pay reported getting all of the child maintenance they are owed, and only 40% reported receiving it always on time. She said the current arrangement can 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.
New Fee Structure
There are currently around 450,000 Direct Pay arrangements in place across the UK. Under the proposed new system, receiving parents in these agreements would need to pay the CMS. The DWP said the changes would help fund enforcement powers when the system is overhauled.
Greenwood said the proposals will be underpinned by a fairer fee structure, adding: "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."
For paying parents using Collect and Pay, the charge would drop from 20% to 2% provided payments are made on time. It would stay at 20% for those who miss payment deadlines. Receiving parents would see their charge reduce from 4% to 2%. For example, a paying parent currently paying £100 a week would see the additional CMS charge drop from £20 to £2, while a receiving parent would receive £98 instead of £96.
Concerns Raised
Edward Morello, a Dorset MP, questioned the DWP over the potential consequences of the charges on children whose parents do not currently pay them. DWP figures indicate many arrangements are currently paid in full and on time, yet these cases will still be subject to CMS charges under the new system.
The House of Lords Public Services Committee Report on Reforming the Child Maintenance Service stated it was unconvinced the proposals would succeed, saying: "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."
The website Both Parents Matter said achieving the objectives of reducing arrears, tackling non-compliance and getting more money to children cannot be achieved until there is fundamental reform of the calculation system, which too often produces unaffordable calculations. The single parents' website Gingerbread has supported the changes but warned they must be made with 'extreme care'.
