Ministers have been accused of acting like “loan sharks” after a record £16 million was raised in fees from those paying child maintenance. More parents than ever are using the Department for Work and Pensions (DWP) to arrange their payments through a service that charges a 24 percent levy.
Campaigners say the net effect of this levy is that each child – who is often living in a low income home – is being deprived of £320 a year on average.
The Coparent Coalition, a campaign group that will be launched in the new year to represent the interests of children whose parents have separated, said the government was “taking advantage of society’s poorest” who were more likely to use the scheme.
Most parents pay child maintenance fees directly to the other parent without the involvement of the DWP. But the number of parents using the government’s collect and pay service, where money can be taken directly from a salary, bank account or benefits has risen sharply.
The figure hit 289,300 by the end of September, which is up by 10,000 on earlier this year and compares to a figure of 54,400 in December 2015.
Parents can use the scheme if they do not wish to be in contact, or if one parent has fallen behind with payments in the past. It is often used by those on lower incomes or those who are more vulnerable.
Under collect and pay, the paying parent is charged a 20 percent fee on each amount of child maintenance, while the receiving parent has a 4 per cent fee taken away from each amount they are due to receive.
The DWP has previously said that making both parents liable for collection fees creates “an ongoing incentive for both parents to move their case into direct pay, where collection fees do not apply”.
The National Audit Office previously said that paying parents on low incomes are more likely to build up arrears, with 46 percent not earning enough to pay income tax.
The amount paid under collect and pay agreements in the three months to September was £64.4 million, bringing in £15.7 million in fees, up from £1.4 million in 2015.
It means the average amount being given to the government and not the child by a paying parent is £80 per quarter, or £320 a year.
If a paying parent is earning the average UK salary of £37,430 a year, and they have one child who they have overnight one or two nights a week, they could expect to pay about £319.64 a month in child maintenance.
The Coparent Coalition told the Times: “It’s shocking that the child maintenance service [CMS] and DWP are taking advantage of society’s poorest people by charging them interest rates that would even make loan sharks blush.
“Two thirds of those who are in arrears under a CMS scheme don’t even earn enough to pay income tax and over half of those paying are in receipt of benefits, yet they’re being treated as cash cows to plug holes in the government’s finances.
“The CMS is supposed to be there to support parents and their children through separation, not to exacerbate their poverty by handing their money to wasteful bureaucrats.”
The DWP said: “The government is committed to ensuring children get the support they need to have the best start in life.
“In the 12 months to March 2024, the CMS arranged over £1.4 billion in child maintenance payments. Collect and pay arrangements allow us to tackle non-compliance faster and, when necessary, take enforcement more quickly.”
