DWP update as it plans 2 per cent CMS charge for many UK parents in 'major shake-up'

DWP update as it plans 2 per cent CMS charge for many UK parents in 'major shake-up' The Department for Work and Pensions has issued an update as it moves forward with plans to reform child maintenance The DWP has released an update on 'major' reforms planned for the Child Maintenance Service (CMS). The department claims the overhaul will create a 'fairer' system that will address 'significant shortcomings' in the current set-up - but the changes would result in new charges for many parents. The department is looking to abolish Direct Pay - the process that enables separated parents to arrange child maintenance payments between themselves once the CMS has calculated the amount owed. The scheme was introduced in 2012, but the government now says the system is not functioning effectively and is unsafe for many parents. Current government data reveals that 55% of all CMS arrangements use Direct Pay, while 43% rely on the alternative Collect and Pay system, which sees the CMS act as an intermediary to handle payments. Recent official figures indicate there were 450,000 Direct Pay arrangements currently in place. Under the newly proposed system, charges would be introduced for those parents who currently pay nothing to the CMS. However, the planned reforms to the roughly 350,000 Collect and Pay arrangements would see many people using this service paying considerably less, reports Wales Online. The DWP acknowledges that the new system would result in fresh 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 aim of Direct Pay was to motivate parents to collaborate and lessen their dependence 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 concerns, the government noted that many people were failing to report problems to the CMS. More than a third of receiving parents, the research revealed, did not flag a late or missed payment. What is wrong with CMS Direct Pay payment system as it is? The DWP also revealed that 71 per cent of receiving parents and 51 per cent of paying parents in Direct Pay said they had experienced domestic abuse at the hands of the other parent. The government has announced its intention to scrap Direct Pay, possibly by 2027 - although it stresses that for now the existing rules remain in place. Should Direct Pay be abolished, officials are keen to replace it with a single service whereby the CMS collects payments from the paying parent and passes them on to the receiving parent. The single parents' website Gingerbread has backed the reform, describing it as a 'major shake-up'. However, it said that the change must be made 'with extreme care' and 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 issue has been thrust into the spotlight 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 further 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 queries come amid mounting criticism from some within the sector. The website Both Parents Matter argues the government should retain the Direct Pay system, describing the current proposals as 'deeply flawed'. On Tuesday last week, Lilian Greenwood, Parliamentary Under-Secretary at the Department for Work and Pensions, issued a response setting out why the government intends to press ahead with the changes. 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' voiced at plan to end Direct Pay Doubts were raised over the proposals in the House of Lords Public Services Committee Report on Reforming the Child Maintenance Service last year. It stated: "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 arrived just weeks after wider concerns were raised about the CMS itself. BBC programme Panorama revealed in August that the CMS was pushing many parents to 'breaking point'. It highlighted cases of mothers struggling to secure payments from former partners, with one left having to rely on food banks after falling £10,000 into arrears. Another mother revealed she had been left with no choice but to skip meals. Why the UK government wants to abolish CMS Direct Pay The government says on the website childmaintenance.org.uk that the primary motivation behind the change is safety. It explains: "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 do not currently use Direct Pay have the option of Collect and Pay. This arrangement sees the CMS gather the funds and pass them on to the receiving parent. However, it does come with a considerable charge. At present, a paying parent using Collect and Pay is charged an additional 20 per cent on top of their payments to the CMS. Under the proposed new system, this would reduce to just two per cent if payments are made on time. However, it would remain at 20 per cent for paying parents who fail to pay on time. Under the current Collect and Pay system, the receiving parent is charged four per cent, which would drop to two per cent under the planned changes. For instance, a paying parent currently paying £100 a week would see their additional CMS charge drop from £20 to just £2, provided they pay on time. In this scenario, a receiving parent would receive £98 - a two per cent reduction from £100 - rather than £96 (a four per cent reduction) as is the case under the existing rules. Furthermore, under the proposed changes, parents paying via a deduction from benefits would not be subject to the 20 per cent non-compliance charge, according to the government. To find out more about the proposals, visit the childmaintenance.org.uk government website. For further details on the current system, visit the House of Commons Library.