C-MEC details

The Government has accepted Sir David’s principal recommendations. Based on these it has established four new principles for the reform of the child maintenance system. These are to:
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help tackle child poverty by ensuring that more parents take responsibility for paying for their children and that more children benefit from this;
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promote parental responsibility by encouraging and empowering parents to make their own maintenance arrangements wherever possible, but taking firm action – through a tough and effective enforcement regime – to enforce payment where necessary;
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provide a cost-effective and professional service that gets money flowing between parents in the most efficient way for the taxpayer; and
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be simple and transparent, providing an accessible, reliable and responsive service that is understood and accepted by parents and their advisers and is capable of being administered by staff.

to use latest tax-year information as a basis for calculating a child maintenance liability, unless current income differs by at least 25 per cent;
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to move away from the current system whereby small changes in income can change maintenance awards. Instead we propose a system of fixed-term awards of one year, with some exceptions for significant change of circumstances;
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to use gross, rather than net, weekly income as a basis for calculating a child
maintenance liability; and
• once the future scheme starts, to increase the flat rate of maintenance paid by most non-resident parents on benefit from £5 to £7 per week, and to review this rate, and other formula rates, at regular intervals.

enforce the surrender of a non-resident parent’s passport or impose a curfew on them if they fail to pay maintenance;
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remove the requirement to apply to the courts for a Liability Order before proceeding with enforcement action and replace it with a swifter more effective administrative process;
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examine the scope for further streamlining and strengthening the enforcement process by removing the requirement to apply to the courts for a Charging Order;
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pilot withholding wages as the first means of collecting maintenance, working closely with business during the development of the pilot;
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make much more use of information exchanged with, and drawn from, financial institutions and credit reference agencies in order to trace non-resident parents and collect and enforce maintenance; and
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explore the scope for introducing powers to collect maintenance directly from accounts held by financial institutions.

increasing enforcement in existing cases by applying the new powers;
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ensuring, in conjunction with Jobcentre Plus, that all parents with care can take advantage of the £10 a week benefit disregard where maintenance is being paid, by extending this to cases on the original child maintenance scheme; and
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enabling parents to make their own child maintenance arrangements by removing the requirement that parents with care who claim benefits be treated as applying for child maintenance and helping them make an active choice by providing new information and guidance services.

reduce the amount of information required from the non-resident parent to make an assessment;
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speed up the assessment process so that arrears do not build up; and
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ensure that cases are kept up to date and that there is regular and accurate
communication with parents about their assessment.

We also intend to base a non-resident parent’s liability on their gross, rather than net, weekly income. This means that deductions of income tax and National Insurance contributions will no longer need to be made as part of a maintenance assessment.
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Because gross income is higher than net income, we will reduce the percentage rates of income that are payable for each qualifying child in cases where the gross weekly income of a non-resident parent exceeds £200 per week. It is anticipated that, where there are one, two or three or more qualifying children, instead of rates of 15, 20 and 25 per cent respectively, the rates will be 10, 15 and 20 per cent. Appropriate adjustments will be made to the reduced-rate regime for those non-resident parents whose income is between £100 and £200 a week.
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One important consequence of moving to previous tax-year information is that tax credits will no longer be taken into account as income for the non-resident parent. It would not be appropriate for a liability to be based on a combination of tax credits that are currently being received and income from a previous period. Including tax credits from the previous year would complicate, rather than simplify, the way in which maintenance is assessed. Accordingly, and to reduce the complexity of administrative arrangements, we have concluded that tax credits should no longer be included as income.

a basic rate: this would apply to non-resident parents whose gross income is £200 a week or more, with new rates of 10, 15 and 20 per cent where there are one, two or three or more qualifying children;
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a reduced rate: this would apply if the non-resident parent has gross income of more than £100 a week but less than £200 a week. We will maintain a series of tapers, so that a child maintenance liability steadily increases up to the basic rate threshold;
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a flat rate: this would continue to apply to non-resident parents whose income is £100 a week or less, or who are in receipt of certain prescribed benefits. We believe that it is essential to embed the principle that all non-resident parents, except for a few who fall into certain categories, should be financially responsible for their children. In recognition of the importance we attach to this principle, we propose to set the level of the flat rate at £7 a week, compared with the current level of £5 a week in the scheme introduced in 2003; and
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a nil rate: this would apply to non-resident parents who fall into certain categories, such as a student in full-time education or where their income is less than £7 a week.

Information about whether or not maintenance is being paid is not currently used to help other organisations make financial decisions about either parent. We intend to enable information on a non-resident parent’s liabilities and payment record to be made available to credit reference agencies so that other organisations, such as lenders, can assess the value of this information and see whether it should be taken into account when making decisions. We believe that this would encourage compliance among non-resident parents. We anticipate that compliant non-resident parents would have the opportunity to opt out.

We consider it to be in the interests of children that, where arrears of maintenance are owed and the non-resident parent has died, the arrears should be recovered from the estate of the deceased non-resident parent. We intend to clarify the legislation by inserting an express provision to enable recovery of arrears in these circumstances.

Parents may also agree between themselves that ongoing maintenance or arrears may sometimes be paid ‘in kind’ rather than as a direct payment to the parent with care. This may occur, for example, if a non-resident parent agrees to pay an urgent utility bill on behalf of the parent with care. We also propose to introduce legislation that would enable such payments to be taken into account against the maintenance liability.