The 2012 child maintenance scheme was introduced to resolve these problems and encourage private arrangements. Since November 2013 all new applications have been made to the 2012 scheme. The Department began to tell parents in 2014 that their 1993 and 2003 scheme cases would close and that they would have to apply to the new scheme or make their own family-based arrangements. It plans to end payments on 799,000 cases with continuing child maintenance by December 2017, and then close these cases and a further 588,000 where continuing maintenance payments are no longer due, but arrears have built up. Some parents told the NAO that closing long-standing 1993 and 2003 scheme cases can be disruptive and lead to confusion about the amount owed.
The key findings of this investigation are:
- It is taking the Department longer than expected to close 1993 and 2003 scheme cases. By September 2016 the Department had closed 33% of active cases – those with continuing payments, against an expectation of 50%. The number of cases where the Department needs to finalise arrears before closure had grown to 163,000 by September 2016.
- Fewer parents than the Department originally expected are applying to the new scheme when their 1993 and 2003 scheme cases are closed. The Department estimated that 63% of parents who had their active case closed would apply to the 2012 scheme. Only around one-fifth of parents with cases closed by April 2016 had done so. The Department’s research also shows that three months after case closure around half of parents have no arrangement in place, compared with the 16% it originally expected.
- The Department has assessed that around three-quarters of the £4 billion arrears balance is uncollectible. It assesses arrears as uncollectable when there has been no recent contact with the non-resident parent and no payment against arrears in the last six months. The Department has not yet set out how it will manage the £3 billion of uncollectible arrears.
- The Department actively promotes a choice to write off older arrears. The Department has the legal power to write off arrears in limited circumstances. As part of the case closure process it sends a letter to parents advising them they can make a fresh start by writing off arrears owed to them. As a result, in 2015-16 parents asked the Department to write off £12 million in arrears, 8% of arrears on cases closed in 2015-16.
- Parents do not always understand how and why the Department has calculated arrears when it closes 1993 and 2003 scheme cases. The Department’s research found some non-resident parents were dissatisfied with how the Department calculates arrears. This was due to: not being told earlier that arrears had been building up; not enough information on how the arrears had built up and a slowness to answer queries; and delays in being told how to repay.
- Since 2012 the Department has reduced its overall enforcement actions to recover arrears on the 1993 and 2003 schemes, in excess of the reduction in case volumes. When a parent owes arrears the Department can deduct up to 40% of their salary after tax, using a deduction from earnings order. It issued 69% fewer orders between 2012-13 and 2015-16. The Department is also taking fewer actions to have debt recognised by a court, which allows, for example, the case to be referred to bailiffs. The Department does not fully review the impact and outcomes of its enforcement activities.
- The Department does not tell non-resident parents that it will consider lowering repayments if they cause financial hardship. The Department told us that it has a number of safeguards in place to review the affordability of maintenance payments and caseworkers can also use a debt negotiation tool to agree lower repayments where appropriate. The Department told us that it does not tell people who have arrears about this option unless asked in order to encourage payment of arrears.