Self-certified Impact Assessment: The Child Maintenance (Deduction Orders) SI 2018/1279

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Self-certified Impact Assessment
Title of measure The Child Maintenance
and Other Payments Act
2008 (CMOP) (bringing
into force secondary
legislation as outlined in
this Act to enable
Deduction Orders from
joint and unlimited
partnership business
accounts)
DWP Ref Department for Work and
Pensions

Planned coming into force /implementation date November 2018
Origin (Domestic/EU/Regulator) Domestic
Policy lead Sheena Taylor / Paul
Ryder
Lead analyst Valerie Christian
Departmental Assessment Self-certification

Summary Intervention and impacts
Background
Child maintenance refers to financial and non-financial support that the parent
without the main care of a child (the non-resident parent or NRP) provides to the
other parent (the parent with care or PWC).
Prior to 1991, maintenance was a matter for the courts. This was expensive, slow,
produced a wide variation in decisions, and poor enforcement. The Child Support
Act 1991 sought to improve this by replacing the courts with a statutory scheme
which uses a formula to assess maintenance due. Since 1993 there have been
three statutory schemes in place to determine, and where appropriate, collect
maintenance liabilities.
Where a maintenance liability is not paid, arrears accrue which the Child
Maintenance Service (CMS) can collect through a range of available enforcement
actions.

Rationale for Intervention
The current rate of compliance of NRPs using the CMS is 57%
1 and has been
roughly static for the past two years. The current standard administrative
enforcement tool used by CMS to collect maintenance and arrears is a Deduction

1 The number of Paying Parents due to pay child maintenance in the last three months who have.
Child Maintenance Service: Aug 2013 to Dec 2017 (experimental) table 6. Available at :
[https://www.gov.uk/government/statistics/child-maintenance-service-aug-2013-to-dec-2017-
experimental ]

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from Earnings Order (DEO). Although this is an effective measure there are a
number of NRPs for whom a DEO will not work. These include NRPs who are self-
employed, who work cash in hand, or who have an income but no employment.
There are also parents who are known to switch jobs whenever traced by the
CMS, and those who, as owners of their own company, pay themselves a low
wage whilst taking the bulk of their income in other ‘in-kind’ forms of
reimbursement.
For these individuals the preferred option is a different type of deduction order
(DO). These are administrative orders which enable the Secretary of State to
compel banks and building societies to remove on-going child maintenance or
arrears from an NRP’s account and pass it to the CMS which then passes it onto
the PWC. Deductions from accounts can be made on a regular basis via a regular
deduction order (RDO) or via a one-off lump sum deduction order (LSDO).
The Child Maintenance and Other Payments Act 2008 (CMOP) amended the Child
Support Act 1991 to include the primary powers to make DOs against bank
accounts. It also made provision for the Secretary of State to make secondary
legislation prescribing DOs on bank and building society accounts held solely by a
NRP. This power was brought into force in 2009 for solely held accounts, and
since then deduction orders have been successful in recovering significant
amounts of child maintenance arrears and ongoing maintenance.
CMOP also made a provision enabling deduction orders to be made against jointly
held bank accounts, including unlimited partnership business accounts. However
this provision was not brought into force at the time, as it was important to first test
the use of DOs against solely held accounts.
Following two public consultations
2, CMS now seek to bring these additional
powers into force to enable arrears to be removed from joint accounts including
unlimited partnership business accounts.

Intended effects
The aim is to eliminate cases where the non-paying NRP is able to prevent the
CMS from recovering child maintenance owed by placing their funds into
alternative accounts that are not currently covered by a DO.

Viable policy options (including alternatives to regulation)
The following options have been considered:
Option1: Do minimum / retain existing powers – i.e. retain current scope of DOs
and other enforcement powers.

2 Public consultations in 2016 and 2017/18. Consultation to recover CM arrears from joint accounts of
NRPs – 30 June ’16 - 25 August ’16; Child Maintenance: a new compliance and arrears strategy –
14 Dec ‘17 to 8 Feb ‘18

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Option 2In addition to existing powers, bring further powers into force to enable
child maintenance arrears to be collected from jointly held bank accounts including
unlimited partnership business accounts.
Option 2 is the preferred option because it allows collection of outstanding
arrears, and where necessary, ongoing maintenance, and increases the rate of
NRP compliance from the current rate of 57%
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Initial assessment of impact on business/ Description and scale of key
monetised costs and benefits by ‘main affected groups’

New powers to issue DOs from personal joint and unlimited partnership business
accounts will only be initiated if the following apply:
• The NRP has either failed to pay their child maint enance liability or failed to
get in touch with CMS to set up a payment method to pay it; and
• The CMS is unable to collect child maintenance dir ectly from the NRPs
salary via a DEO; and
• No solely held accounts with sufficient funds are identified.

Where issued they will impose new costs on business/financial institutions such as
banks and building societies related to administrative costs of operating the DO.
In the case of LSDOs the costs are on a one-off basis and estimated to be around
£40 per order. In the case of RDOs, one-off set up and shut down costs as well as
ongoing deduction and amendment costs are incurred if money is successfully
recovered. On the basis of a successful RDO being in place for around four
months, the estimated costs are also around £40.
Approximately 60% of all DOs have been successful in either paying arrears or on-
going maintenance since the inception of the CMS when they have been applied
to single accounts. A similar success rate is assumed for RDOs and LSDOs
issued to joint accounts.
In ‘equivalent annual net direct cost to business’ terms [EANDCB in 2016 prices],
the average annual cost is estimated to be £11,000, evaluated over a 10 year
period. These costs are low relative to the total child maintenance arrears and
annual maintenance that is currently expected to be recouped. This is estimated to
be around £350,000 annually; £3.5m over a 10 year period.
Departmental Policy signoff (SCS): Julia Gault Date: 15/06/18
Economist signoff (senior analyst): Laura Webster Date: 14/06/18
Better Regulation Unit signoff: Prabhavati Mistry

3 The number of Paying Parents due to pay child maintenance in the last three months who have.
Child Maintenance Service: Aug 2013 to Dec 2017 (experimental) table 6.

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The policy issue and rationale for Government intervention
The problem this policy is designed to address is t he avoidance of payment of child
maintenance by non-resident parents (NRPs), which s ubsequently affects children’s
outcomes by reducing the financial support availabl e to the parent with care (PWC).
The proposed extension of enforcement powers for DOs to include joint and unlimited
partnership business accounts will provide addition al sources of income from which
deductions can be made and therefore increase the n umber of children who are
financially supported by their NRP.
Policy options considered, including alternatives to regulation
1. Option1: Do minimum / continue to apply existing powers – i.e. retain current
scope of deduction orders and other enforcement powers.
Option 2: Bring additional powers into force to en able child maintenance
arrears to be collected from jointly held bank acco unts including unlimited
business partnership accounts where the NRP is name d as a joint account
holder.
2. Option 2 which brings new powers into force is t he preferred option. Without
these powers NRP’s will be able to continue to take advantage of loopholes
that exist in the system by moving their funds into jointly held bank accounts
and unlimited business partnerships. Option 2 is in tended to close these
loopholes and increase the proportion of child maintenance due being paid and
consequently increase the number of children benefi tting. The British Banking
Association response to the 2016 consultation
4 indicates such an extension to
include joint accounts presents no difficulties

Policy objectives and intended effects
Public Consultations:
3. The Government consulted 5 on regulations to support a new child maintenance
compliance and arrears strategy including the exten sion of DOs to unlimited
partnership business accounts. Government’s respon se will be published in
June 2018. Personal joint accounts were consulted on separately in 2016, with
Government’s response published in October 2017 6.

4 Consultation to recover CM arrears from joint accounts of NRPs – from 30 June ’16 - 25 August ‘16
5 Child Maintenance: a new compliance and arrears strategy – 14 Dec ‘17 to 8 Feb ‘18
6https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/65
4279/government-response-to-consultation-on-deduction-orders-against-joint-accounts.pdf

Supporting Evidence

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4. In line with public responses to these consultat ions, DOs on both private and
business joint accounts are now being brought into force. This regulatory impact
assessment quantifies the impacts of:
• extending existing powers to allow deductions from jointly held
personal accounts; and
• extending existing powers to allow deductions from a type of joint
business bank account called unlimited partnership business
accounts.

Details of implementation that apply to jointly held personal accounts and unlimited
partnership accounts:

5. The DO will apply where there is no solely held account in the name of the
NRP, or insufficient funds are held within such an account. Accessing joint
accounts would not be possible in Scotland and so this power would only be
applied in England and Wales.
6. Safeguards will be put in place to ensure only t he funds belonging to the NRP
are targeted. For example, detailed checks to establish ownership of the
funds to prevent funds that belong to the other account holders being
deducted. Where it is not possible to establish the exact sums held in the
joint account by the NRP there will be a default position where a proportionate
amount of the funds equal to the number of joint account holders will be
secured.
7. If deductions are pursued from a personal or unl imited partnership business
joint account, then all parties to the account will have the opportunity to make
representations in relation to the DO. As such, CMG will offer a 14-day
representation for RDOs and a 28-day representation for LSDOs

Detail of implementation – additional considerations For Unlimited Partnership
Business Accounts:
8. The objective is to identify wealth transferred by the NRP into an unlimited
partnership business account not necessarily to benefit the business, but to
hold the wealth in a “safe” place. If a flow of money from the NRP to the
account is identified which could be used to pay their arrears, without
preventing the business from meeting its costs, then that money should be
recovered. The value of any arrears that could be collected is therefore not
seen as a direct or indirect cost to the individual business, given the
safeguards that will be in place.

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Expected level of business impact-appraisal period and likely EANDCB
Overall appraisal period and expected level of impact:
9. The appraisal period for this policy is 10 years over which the likely financial
impacts on business (banks and building societies) are quantified.
10. In the case of personal joint accounts the equivalent annual net direct cost to
business (EANDCB in 2016 prices) is estimated to be around £7,300 per
year. In the case of unlimited partnership business accounts the equivalent
EANDCB is estimated to be around £3,500 per year.
11. The total 10-year costs to business of £92,900 (£0.1m) were estimated from
the volume of DOs expected to be issued against personal and business joint
accounts and applying estimated success rates and cost to business
assumptions to these volumes. The assumptions are explained in paras 27-
36.

For Joint (personal) Accounts - detail of expected costs12. Banks and building societies will incur additional costs when a DO is issued to
obtain monies owed by the NRP from their personal joint accounts.
13. Based on the sampling exercise described below in paras 27&28, it is
assumed that personal joint accounts can be identified for around 14% of all
requests where no sole personal account is available, resulting in 350
requested deduction orders in England and Wales per year.
14. Based on DOs for sole accounts in 2009-2017 it is estimated that 34% will be
LSDOs and the remaining 66% RDOs 7. With a four month median life-span of
a successful RDO which raised some money for sole accounts under existing
regulations, this four month duration was assumed to apply for the proposed
RDOs. LSDOs are one-off transactions so a duration period does not apply.
15. All costs for LSDOs will be one-off and comprise costs of disclosing
information about the joint accounts in question, deducting funds, and
discharging the LSDO. Estimates for the unit costs of disclosure, deduction,
and discharge were provided by the British Banking Authority (BBA) 8.
16. For RDO’s the disclosure and discharge costs are one off at set up/close
down of the RDO. In addition there are ongoing costs associated with each
deduction of funds and potential changes the order during its lifespan.
Estimates for the unit costs of disclosure, deduction, changes and discharge
were provided by the British Banking Authority (BBA)8.

7 Child Support Agency Quarterly Summary of Statistics for Great Britain March 2017 table 22 and
Child Maintenance Service: Aug 2013 to Dec 2017 (experimental) table 11.
8 British Banking Association response to the draft proposals for child maintenance deduction orders
for joint and partnership accounts

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17. With a duration of four months assumed for RDOs, a steady state is expected
to be reached by year 2. The estimated annual costs to business for applying
any deduction order to Joint (personal) Accounts are:
Year 1 Years 2 thru 10
£7,100 £7,400

18. The overall estimated cost to business using a 3.5% discount rate over 10
years is £63,000. A more detailed breakdown is given in table 2.

For Unlimited Partnership Business Accounts – additional detail of expected costs:
19. Based on the sampling exercise described in paras 39-42, it is assumed that
Unlimited Partnership Business accounts can be identified for around 7% of
DO’s requested which would result in 170 deduction orders in England and
Wales.
20. Estimates of the volumes, durations of LSDOs and RDOs and their
associated administration costs were derived in the same manner as for joint
personal accounts (paragraphs 14 &15).
21. With four months duration for RDOs, a steady state is expected to be reached
by year 2. The estimated annual costs to business for applying any deduction
order to unlimited partnership business accounts are:

Year 1 Years 2 thru 10
£3,400 £3,500

22. The overall estimated costs to business using a 3.5% discount rate over the
10 years are £29,900. A more detailed breakdown is given in table 3.

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Table 123. Summary of Annual Costs to banks and building societies in England & Wales
over 10 years – annual steady state assumed from Year 2
Year 1 Years 2 through
10
Overall totals –
over 10 yrs (3.5%
discount rate
Personal Accounts* £7,100 £7,400 £63,000
Unlimited
Partnership
Business Accounts*

£3,400 £3,500 £29,900
Totals*,** (£s) £10,500 £10,900 £92,900
Totals** (£m) £0.01 £0.01 £0.1
* Rounded to the nearest £100
** All summed & rounded totals derived from unrounded monthly estimates

24. Detail of costs over 10 years – annual steady state assumed from Year 2:

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Table 2For Joint (personal) Accounts
Year 1 Years 2-10
Number of LSDOs set up (34% of all DO's) 120 120
Number of LSDOs successful in deducting funds
(60% success rate) 70 70
Number of LSDOs unsuccessful in deducting
funds (40% failure rate) 50 50
Number of RDOs set up (66% of all DO's) 230 230
Number of RDOs successful in getting funds
(60% success rate) 140 140
Number of RDOs unsuccessful in getting funds
(40%) 100 100

Cost of LSDOs £(volume x £41 unit cost) 3300 3300
Cost of unsuccessful RDO's £(volume x
(disclosure +discharge costs)) 1000 1000
Cost of successful RDO set up £(volume x set up
cost) 800 800
Cost of RDO deductions £(volume x frequency of
deduction x deduction cost) 600 600
Cost of RDO change of circs £(volume x
frequency of change x change cost) 1000 1100
Cost of RDO discharge £(volume x cost of
discharge) 400 500
Total (joint accounts) 7100 7400

*#s rounded to nearest 10; costs rounded to nearest £100
**All summed and rounded totals derived from unrounded monthly estimates

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Table 3For Unlimited Partnership Business Accounts
Year 1 Years 2-10
Number of LSDOs set up (34% of all DO's) 60 60
Number of LSDOs successful in deducting funds
(60% success rate) 30 30
Number of LSDOs unsuccessful in deducting
funds (40% failure rate) 20 20
Number of RDOs set up (66% of all DO's) 110 110
Number of RDOs successful in getting funds
(60% success rate) 60 60
Number of RDO's unsuccessful in getting funds
(40%) 50 50

Cost of LSDOs £(volume x £41 unit cost) 1600 1600
Cost of unsuccessful RDO's £(volume x
(disclosure +discharge costs)) 500 500
Cost of successful RDO set up £(volume x set up
cost) 400 400
Cost of RDO deductions £(volume x frequency of
deduction x deduction cost) 300 300
Cost of RDO change of circs £(volume x
frequency of change x change cost) 500 500
Cost of RDO discharge £(volume x cost of
discharge) 200 300
Total (joint accounts) 3400 3500

*#s rounded to nearest 10; costs rounded to nearest £100
**All summed and rounded totals derived from unrounded monthly estimates

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Key assumptions/sensitivities/risks
For both joint accounts - Personal and Unlimited Partnership Business
25. A sampling exercise was undertaken in 2014 with five banks (Barclays,
Santander, RBS, HSBC and Lloyds TSB) to identify how many additional DOs
could be made if CMS were able to target personal or business joint accounts.
26. Of the 993 previously unsuccessful information requests sent to the
participating banks (approximately 200 per bank), 1 37 personal joint and 70
partnership accounts were identified.
27. In seven years (March 2009 to March 2016) on average 2,742 failed information
requests were made 9 each year (i.e. requests that did not identify any
individually owned accounts), 93% are expected to b e located in England and
Wales. The proportion of these failed requests that are likely to have a joint
account, as from the sample exercise, were applied to estimate likely numbers
of transactions involving joint accounts which coul d impact on the costs of
banks and building societies.
28. The result is that up to 350 personal joint accounts and 170 business accounts
estimated to have DOs applied in England and Wales.
29. Assumptions about the success rate of DOs, the proportion that would be
LSDO /RDO and the volume of changes in RDOs while active are taken form
published statistics on existing sole account DOs. Further assumptions about
the frequency of deductions and length of RDOs are derived from operational
MI on the existing RDO’s for sole accounts. These are set out in table 4 with
sources listed.
30. Financial Institutions must undertake several administrative steps when
applying or attempting to apply a DO, meaning there are cost to businesses
associated with both successful and unsuccessful DO’s. These have been
estimated by the British Banking Authority and are also outlined in table 4.

31. A key uncertainty is the length of time RDOs remain in place, as there is
known to be great variability from weeks to several years for RDO’s on sole
accounts. Here we have used the median of four months, with the estimate of
two amendments during this time due to changes in circumstance on the case
which could affect the deduction amount 10 .
32. While RDOs can have indirect positive outcomes, such as prompting NRPs to
re-establishing compliance, there may also be the risk that these regulations
will reduce the likelihood of clients depositing funds into joint accounts,
thereby limiting the effectiveness of DOs against such accounts.
33. A summary table of all assumptions and their source, is shown below:

9 Child Support Agency Quarterly Summary of Statistics for Great Britain March 2017
10 2012 CMS statistics, December 2017 – Table 4 (number of CM arrangements); Table 14 (change
of circumstances over quarter)

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Table 4assumptions
Issue Assumed
estimate
Source
1 Deduction Orders [DOs]
which failed to be
implemented each year
Annual
average of
2,742
CSA Quarterly Summary
Statistics; March 2017, Table 22,
09/10 to 15/16
2 E&W as a ratio of GB 93% CMS regional statistics, Sept. ‘17
3 Proportion of RDOs which
successfully yield arrears
&/or ongoing charges.
LSDOs have a similar
success rate (60%)
58% unpublished CMS data for RDOs
– as RDOs are the majority
(61%) of all DOs the success
rate for RDOs applied to all joint
accounts
4 % of DOs that are Lump
Sum Deduction Orders
[LSDOs]
34% CSA Quarterly Summary
Statistics; March 2017, Table 22,
09/10 to 15/16
5 Disclosure (unit) cost £6 British Banking Authority [BBA],
now ‘UK Finance’ since July ‘17
BBA provided range for
Disclosure Costs (£8-£14). We
assume joint accounts most
expensive and sole least
expensive - so £6 equals
additional costs incurred by a
joint account after non-availability
of an appropriate single account
had been assessed.
6 Freezing money for LSDO £0 None provided by BBA; ‘0’
assumed
7 Unfreezing money for
LSDO
£0 None provided by BBA; ‘0’
assumed
8 Deduction cost from LSDO £ 31 BBA - £4-£31
9 Deduction cost from RDO £1.20 BBA – per deduction
10 Proportion of RDOs that
are monthly
18% DWP internal MI (DO Team)
11 Proportion of RDOs that
are weekly
82% DWP internal MI (DO Team)

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Issue Assumed
estimate
Source
12 Duration of time RDO in
place
4 months Unpublished CMS data - varies
from weeks to several years –
median 4 months
13 Change of circumstance
cost for RDO
£4 BBA response
14 Change of circs per RDO 2 2012 CMS statistics; from
number of CM arrangements and
number of changes in
circumstance
15 Discharge costs £4 BBA response
16 Training costs £0 No new procedures for banks to
follow, deposit takers should
already be carrying out identical
process
17 IT costs £0 As above
18 Familiarisation costs £0 As above
19 Reclaim amount £0 No mention from BBA, assume
nil.
20 Overall unit costs per
successful LSDO
£41 This assumes one-off setup and
discharge costs
21 Overall unit costs per
successful RDO
£38 This assumes RDO in place for 4
months with 2 changes of
circumstance

Wider Impacts

Benefits to Children34. The policy intention of these new orders is to impose financial responsibilities
for children on their NRP and to increase the flow of money to the parents
with care of these qualifying children. The relatively small impacts on business
are considered to be proportionate.

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Personal Joint Accounts35. Bringing into power personal joint account DO regulations should increase
successful DOs and collection of unpaid maintenance. It is estimated that
annually 70 successful LSDO’s would each collect £2000 each and 140
successful RDO’s would each collect £800 of additional child maintenance
collections. This totals around £237,400 annually in additional maintenance
collected. With, on average, 1.5 children befitting per casegroup around 300
additional children would benefit per year.

Unlimited Partnership Business Joint Accounts36. Similarly it is estimated that annually 30 successful LSDO’s and 60 successful
RDO’s from Unlimited Partnership Business Joint Accounts would result in
additional child maintenance collections of around £112,600 annually, with
around 150 additional children benefitting from some financial support from
their NRP each year due to these powers.

Impact on Protected Groups37. This section considers if protected characteristics of separated families are
likely to be impacted disproportionally by the extension of DOs to jointly held
bank accounts, including unlimited partnership business accounts.
38. Protected groups according to the Equality Act 2010 are:

Age

Disability

Gender

Race

Gender Reassignment

Pregnancy and Maternity

Sexual Orientation

Religion or Belief

Marriage and Civil Partnership
39. The main data source is Management Information from the CMS and its
predecessors. These are held specifically to enable these statutory systems
to function and are not routinely available for disability, gender reassignment,
sexual orientation, religion / belief, or marriage / civil partnership status.
40. As far as possible, impacts are considered and determined by whether the
individual is a Parent with Care (PWC) or a Non Resident Parent (NRP).
Impacts will be kept under review as the new powers are implemented, but at
this stage and with available information, we consider overall benefits of
increasing parental responsibility and financial support to qualifying children to
outweigh any costs.

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41. There are also safeguards in place as outlined earlier in paras 6 & 7 which
offer protection against unfair application of these powers.
Age
42. While the NRP with an ongoing liability is on average older than the PWC
most separated parents with dependent children are of working-age. The
modal age range for NRP is 36-40 years and for PWC 31-35 years.
43. The new extension to personal and business joint accounts is therefore more
likely to affect working-age individuals than pensioners. However this impact
is not expected to be disproportionally changed by the new policy.

Gender
44. The overwhelming majority (95%) of NRPs on the current statutory system
(CMS) are men while 96% of PWCs are women. This means arrears owed
are almost exclusively due to women, with the burden of unpaid child
maintenance on men.
45. The impacts of extending DOs to personal and business joint accounts will
largely be benefits to the PWC (usually the mother) and costs to the NRP
(usually the father), but we do not have evidence to suggest there will be any
greater gender bias than already exists in the wider CMS population.

Race
46. The ethnic classifications of CMS clients are largely representative of the
wider population of Great Britain, with almost 90% of both NRPs and PWCs
White.
47. It should be noted that latest data show a slightly higher percentage of Black
CMS clients and a lower percentage of Asian CMS clients compared to their
representations in the population. However these minority groups make up
very small proportions of the entire caseload and firm conclusions cannot be
drawn from one snapshot of data.
48. There is no evidence to suggest the CMS population of joint account holders
differs by ethnicity and therefore the extension of DOs to such accounts are
not expected to disproportionately impact ethnicity to any greater extent than
already exists.

Pregnancy / Maternity
49. One key aim of the CMS is to support parenthood / motherhood by increasing
both financial support for qualifying children and collaboration between
separated parents.
50. While it is not possible to quantify currently, this new policy may impact
negatively on the ability of the NRP to support any children in their current
household – whether these children be the NRPs own or those of a
subsequent partner. However maintenance due to any qualifying child are

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calculated at a reduced rate to take into account such additional
responsibilities.

Life Chances and Impacts on Children:

51. Issues potentially impacting most widely on the life chances of children are
covered above in paras 37-50. However, these need to be considered in the
context of expected and accepted parental responsibility, with appropriate
planning of one’s current and future family commitments. This new policy will
continue to be monitored through implementation.

Family Test:

52. The extension of DOs to personal and business joint accounts is estimated to
achieve a higher NRP compliance rate with more child maintenance paid to
support the qualifying child(ren). While this additional responsibility may
impact negatively on the NRP’s ability to form a new family, we consider this
to be justified.