Fines are the most commonly used sentence in magistrates' courts. In 2002, three quarters of all cases sentenced by magistrates in England and Wales resulted in a fine being imposed. Just under one million fines (approximately 927,000 [Endnote 1]) were imposed in England and Wales in 2001 and in 2002/03 the total value of all financial penalties (which include prosecution costs and compensation awards) was £425 million. However, performance in enforcing financial penalties is currently poor. In 2002/03 only £236 million of financial penalties were collected. £82 million was cancelled by the judiciary because of changes in the offender's circumstances and £67 million was written off [Endnote 2], in most cases because the offender could not be traced [Endnote 3]. The ultimate sanction for default is imprisonment. 1,455 defaulters were imprisoned in 2001 [Endnote 4]. Home Office research on a sample of 2,396 closed cases drawn from 20 magistrates' courts found that while 26% of offenders paid without enforcement action of any kind, 37% paid after enforcement action was taken and the remainder paid nothing [Endnote 5].
Despite recent improvements in fine enforcement methods, such as obtaining information from the Department for Work and Pensions about defaulters' addresses, innovative payment methods and an injection of £18 million extra over 2 years from a netting off scheme, ring-fenced for enforcement from April 2002, more needs to be done to improve performance. A performance management framework is addressing some of the issues, but the existing system remains inflexible, and there is a clear need to reduce the problem of default.
The National Audit Office Report, The Collection of Fines and Other Financial Penalties in the Criminal Justice System, published in March 2002, and the subsequent Public Accounts Committee Report (68th Report of session 2001-02) published in November 2002 highlighted the shortcomings of the present arrangements and made a number of recommendations for improvements, including:
that the government should 'review the scope for legislative change to enable the courts to offer incentives to encourage the timely payment of financial penalties';
'strengthen arrangements to obtain information on offenders' means';
'review the scope to permit further delegation to enforcement staff of responsibility for taking enforcement action', and
'review whether the current range of sentencing options is wide enough to minimise the imposition of uncollectable fines'.
These recommendations are all addressed in the package of measures now before Parliament.
The effective enforcement of financial penalties imposed by the court is essential for:
upholding the authority of the courts;
sustaining public confidence in the criminal justice system;
maintaining confidence in the imposition of a fine as a sentence and so reducing the pressure on prisons;
and ensuring victims and prosecutors receive their compensation or costs.
The fines collection scheme set out in the Courts Bill is based on three clear principles. The first is that the enforcement of court orders is primarily an administrative process and there is no need for magistrates to deal with every stage in a case. The second is that the scheme should provide every opportunity for the offender to co-operate and to pay the fine promptly, while cracking down hard on persistent defaulters who try to play the system. And the third is that those who need help to organise their payments or who are genuinely struggling to pay can get support.
Existing Courts Bill Measures
Clause 36 will allow us to appoint specific staff, working on behalf of the court, who will be responsible for making sure that fines and compensation orders get paid.
Schedule 3 provides that, within the terms of the collection order made by the magistrates, these 'fines officers' will have discretion to vary payment terms, but only on application by the offender (who will be expected to provide supporting evidence), and will be able to impose sanctions on defaulters who refuse to co-operate, without the need for further court hearings.
There will be a discount for payment in accordance with agreed payment terms (but only where there is no outstanding default on other current fines).
Where an offender defaults, a financial increase will be applied. A defaulter can avoid the increase by agreeing and keeping to a new schedule of payment. If there were no further default the increase would be rescinded.
But if the offender then defaults on new payment terms, or makes no contact with the Fines Officer, the increase would stand and the fines officer could move to further sanctions.
These include ordering the clamping (and eventual sale) of a vehicle registered with the offender; registering the fine along with civil debt judgments; authorising bailiffs to seize the offenders goods; ordering deductions from the offender's pay or benefits; or issuing a summons for the defaulter to be brought back before the court.
The sanctions are aimed at those who appear to refuse to pay, not at those who clearly cannot pay.
Clause 95 will put the onus on the defendant to declare what his income and expenditure is, so that courts can match the fine to the offender's ability to pay. If he fails to provide this information, the court will be able to make assumptions about the offenders' ability to pay and fine accordingly.
In parallel with the legislative programme we are developing a network of support and advice, to be piloted alongside the measures in Schedule 3, for those who need help in organising their payments or who are genuinely struggling with multiple debts.
The system is designed to encourage payment, with strong incentives for offenders to stay in touch with the court during the 'lifetime' of the fine, making it easier for the court to trace them, and deal with them, should they default. The new regime will be severe on those who have the means and will not pay, or who attempt to play the system.
The legislation provides for piloting the new system so that the best package of arrangements can be introduced nationally in the light of experience. The pilots will take place following Royal Assent.
Imprisonment will remain as the ultimate sanction for offenders wilfully refusing to pay, but the aim is to provide a series of graded sanctions and incentives short of invoking this threat.
Proposed Government Amendments
Amendments are proposed in four areas:
wider use of use of Attachments of Earnings and Deductions from Benefits within the fines collection scheme
creating a new offence penalising those who fail to provide means information and/or the financial details necessary to allow an attachment order to be made
fines payment work for those unable to pay a fine
allowing the fines officers' role to be outsourced.
The proposals relate to fines (including unpaid Fixed Penalty Notices registered as fines), costs and compensation orders. They do not cover maintenance or lump sum orders, or confiscation orders.
The new measures are designed to ensure there are strong incentives for the offender to stay in contact with the court during the "lifetime" of the fine, making it easier for the court to trace an offender in the event of default.
The government intends to pilot the measures to test their effectiveness and to enable a full assessment of the costs and impact prior to any decision to roll them out nationally. The pilots are currently under development. On current plans the pilots will cover approximately 8 Magistrates Courts' Committees (MCCs) with different elements of the scheme being tested in each MCC area, and will last for a minimum 6 months. If the pilots demonstrate that elements of the package do not achieve the desired result, provisions in the Courts Bill will enable the scheme to be modified (subject to affirmative resolution). Proposals for the debt advice network and fines payment work, which will be piloted alongside the measures in Schedule 3, will be implemented with the capacity and funding of the advice and voluntary sectors respectively in mind.
Performance in enforcing financial penalties is currently poor. In 2002/03 only £236 million of financial penalties were collected of the £425 million owed (inclusive of prosecution costs and compensation awards). Of this, £82 million was cancelled by the judiciary because of changes in the offender's circumstances and £67 million was written [Endnote 6], in most cases because the offender could not be traced [Endnote 7]. The payment rate in 2002-3 was 55%, which reflects poorly against the 68% target. The problem of enforcement of financial penalties does not lend itself to straightforward analysis. Many factors influence whether a financial penalty will be paid, but as yet no research has yet been carried out to identify the breakdown of factors affecting performance. The most significant are:
the ability of the offender to pay (and the court's knowledge of the offender's means when setting the level of the fine);
the incentives and sanctions that the offender faces;
the enforcement options open to the court;
the efficiency of courts in using these options; and
the ease with which offenders can be traced.
Ministers are committed to improving enforcement rates and to reducing opportunities for offenders to evade punishment. As part of a multi-strand approach to addressing these issues, the focus is now on those Magistrates' Courts Committees (MCCs) whose performance is significantly below the national average. The Department for Constitutional Affairs is working with the magistrates' courts community in taking forward a programme of work aimed at bringing performance up to the levels achieved by the best. However, it is widely recognised that acting solely within existing legislative constraints is insufficient. Without the measures put forward in this legislation there is a risk that significant progress will not be made towards cracking the complex and intractable problem of default.
The National Audit Office Report on the Collection of fines and other financial penalties in the criminal justice system (published in March 2002) noted that "none of the existing computer systems used by MCCs are capable of providing the support needed by an effective fines enforcement system", and these constraints make it extremely difficult to make reliable estimates of the likely impact of the proposals. Therefore, while the estimates which follow are based on the best available information, they should be treated with caution.
The proposals are for a package of measures set out at option 2 below. For ease of reference, the package has been broken down into eight components, a-h. Decisions on implementation of all or part of the package would be taken following assessment of pilot schemes.
There are currently limited incentives for offenders to pay their fines promptly. Courts may seek information on means but there is no penalty for failure to provide the information. Magistrates have sole responsibility for authorising enforcement actions, eg issuing distress warrants, attachment of earnings, deductions from benefits and summonses.
All defendants are required to provide information about their means to the court prior to sentence to assist it in imposing a financial penalty at an appropriate level. This would usually involve completing a means enquiry form. However, currently this is seldom complied with or enforced.
Under Clause 95 of the Bill if an offender fails to provide the necessary information the court would be entitled to assume that he had sufficient money and fine him accordingly. It will also be an offence knowingly or recklessly to make a false statement of means to a fines officer, or knowingly fail to disclose any material fact. The penalty is a fine not exceeding level 4 on the standard scale (currently £2,500).
Amendments to be introduced at Commons Committee Stage will create a new offence which will supplement these measures and will penalise offenders who, without good reason fail to provide information about their income and expenditure. The penalty for not providing means information will be a fine not exceeding level 2 on the standard scale (currently £500). This will also apply if the offender fails to provide sufficient details of employment or benefits for the purpose of making an attachment of earnings or deduction from benefits order (see option 2b below). The new fine will be consolidated with the fine for the original offence.
Offenders in employment or on benefit will be told that an attachment of earnings or deduction from benefits order will be imposed a specified short period after sentence unless they comply with their agreement with the courts.
They will be regarded as complying only if they:
pay the fine in full immediately; or
voluntarily agree to an immediate attachment order; or
agree, and subsequently stick to, credible repayment arrangements with the court or fines officer.
As stated above, it will be an offence if the offender fails to provide sufficient details of employment or benefits, punishable by a fine.
If offenders are found to be currently in default on any other court order, attachments will be imposed at once, unless they pay the fine in full immediately.
Fines officers for the unified courts administration would be appointed in every area. Their role would be to manage the collection of outstanding fines on behalf of the court. Fines officers would be empowered to reach binding agreements with offenders about payment method and timing where an offender was unable to meet the payment terms set by the court, and/or fell into default. They would be able to apply a range of sanctions (including distress warrants, attachments of earnings, deductions from benefits, registration of the fine, clamping) in the event of default. An offender could appeal to the court against discretionary decisions of a fines officer. The underlying principle of these legislative proposals is that payment is managed by officers not magistrates, thereby reducing repeated expensive enforcement hearings.
Following an independent review [Endnote 8] - commissioned in March 2003 - of the current enforcement strategies being operated in MCCs the government also intends to introduce amendments with the objective of allowing more flexibility in the administration of the scheme and of allowing better use of the expertise of the private sector enforcement industry. The amendments would:
allow the role of the fines officer, which under the current text of the Bill must be carried out by an employee of the Department for Constitutional Affairs, to be carried out by a contractor. However the arrangements for such contracting out will be subject to the safeguards (paralleling existing arrangements in the Court Service) that the work to be eligible for contracting out must be specified in an order, and the senior judiciary must be consulted on the terms of this order.
allow the fines officers (whether or not contracted out) more scope to agree variations in the terms of payment of fines (though not in the total amounts due) in the event of change of an offender's circumstances.
Failure to pay on time would result in an increase being applied to the fine (but not to compensation or costs). The increase could be disapplied should the offender meet certain conditions as to future payments. An increase could also be applied where an AEO or DB has ceased (ie because an offender has left his employment or ceased to collect benefits) and the offender fails to contact the fines officer or to make further payments.
There would be a discount for prompt payment or payment in line with agreed terms (but no discount on compensation or costs; or for offenders with concurrent default).
A discount will be applied to a fine either if the offender pays the fine immediately, or if the offender makes arrangements to pay the fine and sticks to these arrangements. The level of the discount will be set in secondary legislation, and is limited to 50%. Different levels of discount will be piloted to assess the optimum level.
The Court and fines officers would have power to register a fine in the new combined register of judgments and fines (thereby potentially affecting the defaulter's credit rating), in the event of continued default.
The Court and fines officers would have power to order the clamping of any vehicle registered to the defaulter, subject to certain safeguards, in the event of continued default. The safeguards, which will be set out in secondary legislation will include checking vehicle registration to the offender with DVLA, and ensuring that vehicles e.g. displaying a disabled sticker etc are not clamped.
For defaulters who are on the point of committal to prison for failing to pay fines, measures included in the Criminal Justice Bill will enable the courts to impose a community punishment, curfew order or a driving disqualification.
Fines payment work
There will be some cases where the offender is unable to pay the fine, and other collection mechanisms available to the court are inappropriate or impracticable (for example because the offender is unemployed but not claiming benefits, or self-employed, or where maximum deductions from benefit are already being made. An offender can also be fined before means information becomes available, or his circumstances might change after sentence).
For these people - and it will be only that group for whom no other option is available - we propose to give the courts the power to convert a fine into unpaid work. This power will be available to the courts at point of sentence, and it will also be available post-sentence, as an option to be exercised by the court if the fines officer subsequently establishes that the offender simply does not have the means to pay the fine.
When the work is done, the fine will be regarded as having been paid. Where it is not done, more serious consequences will ensue, which could include imprisonment.
The rate at which fines convert to work will be set in secondary legislation.
For the work itself and the arrangements for monitoring and reporting back to the court, we shall be looking to the voluntary sector.
Outside government the sectors likely to be affected by these proposals are:
Advice agencies. It is likely that there would be increased numbers of offenders seeking help in providing means information to the court; in negotiating payment terms with fines officers and in managing their debts. The precise numbers of fines offenders currently seeking debt advice is not known. (A recent DTI National Debtline survey indicated that fines came into the category of "Others" seeking advice, which constituted 18% of their total debt advice provision. The precise percentage of offenders with fines within that group is not known, but it may be assumed that a proportion of fines offenders would also be seeking advice under other categories.)
Enforcement agents - bailiffs and wheelclampers. Fewer distress warrants might be issued, depending on the effectiveness of the increase as an incentive to pay the fine, or the use of alternative sanctions. (See Annex 1) Clamping vehicles for fine default may provide new business. The effect on enforcement agents is not known and will be tested during piloting.
The organisation maintaining the register of fines. Combining the fines register with the existing county court register may create additional work but also potentially create additional revenue from searches, depending on the value of the fines information to potential lenders. The effect is not yet known and will tested in pilot models set up by Registry Trust Ltd. As the Bill stands only a minority of fines will be registered, as a further sanction where there is persistent default. There will be negligible additional costs for government as these will be borne by the organisation managing the register and will be off-set by increased revenue from credit reference agencies.
Small businesses. Businesses will bear the costs of having to administer additional AEOs, which would include making the deduction from the employee's wage, ensuring that the protected earnings rate is not exceeded and sending payment to the court. This could prove burdensome to small businesses who employ 37% of all public and private sector workers. The additional costs to small businesses will arise from the additional AEOs which businesses will have to deal with, rather than an increase in the unit costs of dealing with an AEO. The breakdown of these costs is set out in more detail in paragraph 68.
Voluntary Sector. We are looking to the voluntary sector to provide the work opportunities for fines payment work, and to supervise completion and report back to court. It will be for the court to decide on the basis of means information provided to it whether the offender can pay or whether he should be allowed to work off the fine. However, we estimate that the maximum number of people involved each year would be 40,000.
The proposals would:
enable the courts to set fines at an appropriate level;
remove the need for a court hearing when an offender defaults on payment, or cannot meet the terms set, thus freeing up court time;
provide administrative staff with greater powers to manage the collection and enforcement function; and
provide the court and court staff with further sanctions for use in the event of persistent default.
by providing the courts with the option of ordering "fines payment work" for those offenders who are clearly unable to pay a fine, reduce the number of fines which cancelled or written off.
As noted above, it will be impossible to quantify these benefits in precise terms until the measures are piloted. At this stage it is possible to say that their value lies in the overall combined contribution they will make to improving enforcement and to increasing public trust and confidence in the criminal justice system.
Prior to piloting the measures, it is not possible to say what effect the proposed measures will have on the payment rate of fines. However, it can be said that the benefit to society from having a financial penalty paid in full is represented by the level of that fine. Therefore, using 2002-03 as a base year, each 1% improvement in the payment rate yields a benefit to society of £4.25 million.
It is not anticipated that the measures will result in a significant reduction to the numbers of fine defaulters imprisoned. This is because the numbers of defaulters imprisoned has been rapidly declining since 1995 (there were just over 20,000 imprisoned in 1995 compared with 1,455 imprisoned in 2001) as a result of a Queen's bench judgment in Cawley and others [Endnote 9] which clarified the legislative position, that all enforcement measures must have been actively tried or considered before imprisonment can be imposed by the courts (Section 82 Magistrates' Court Act 1980 provides for the same). Furthermore, Home Office research [Endnote 10] suggests that those defaulters currently imprisoned are the hardened cases who play the system. If there was a reduction in defaulters imprisoned, it is estimated that there would be a cost saving of £590 per offender, for an average sentence length of 6 days.
On the basis of figures presently available we can make only a partial assessment of the effect on the number of enforcement hearings. Only by piloting the measures will it be possible to assess the likely volume of appeals, or the extent to which use of the clamping provisions will result in the need for a decision by the court on whether to sell the vehicle.
The magistrates' courts service, enforcement agents and the judiciary are familiar with the current system. There would be no requirement to train court staff in new procedures or to bear the additional costs associated with changing the system of enforcement.
The new process would enable the court to reach a fair decision on means at the point of sentence and reduce the likelihood of default because the fine is set at the wrong level. The courts would also have better information about defaulters, making the task of contacting them and bringing them back to court less time consuming and more effective. Offenders with fines set at appropriate levels are more likely to co-operate and maintain contact with the court.
The primary benefit arising from extending the use of AEOs and DBs is likely to be an increase in the collection rate of fines. The Child Support Agency (CSA) operates AEOs and DBs to secure payment of child maintenance, and they have provided information on the success rate of their scheme. Using this information and the estimated numbers of orders likely to be made, it has been possible to make a forecast of the possible increase in revenue that additional use of AEOs is likely to yield. It is estimated that an additional 63,000 AEOs are likely to be made. Based on the average fine level being £134, the monetary value of these cases is estimated to be £8.4 million. The CSA indicated that the cash compliance rate of their orders was 80% (ie 80% of the monetary value of their orders was successfully recovered). If the success rate of fines administered by AEOs and DBs mirrors this, then it is estimated that an additional £6.8 million will be collected. This represents an improvement in the payment rate of fines of 1.6%.
Of course much depends on the duration of these AEO orders, and currently we do not have any indication as to how long on average AEOs last. If they last longer than a year on average then there will need to be some discounting applied to the amount collected, to reflect the fact that future benefits are valued less than present benefits.
It is estimated that an additional 29,000 DBs will be made as a result of extending their use. Based on an average fine level of £134 the monetary value of these cases is estimated to be £3.9 million. If there is a compliance rate of 80% for these cases then this indicates that an additional £3.1million will be collected as a result of extending the use of DBs. This represents an increase in the payment rate of fines of 0.7%.
Overall therefore, the extended use of AEOs and DBs is estimated to yield approximately £10 million of additional revenue, which represents an improvement in the payment rate of fines of 2.3%.
The proposal would provide administrative staff with powers to manage the collection and enforcement function and thus reduce the need for expensive court hearings. The main saving is likely to arise from fines officers having enforcement powers that were previously exercisable only by the enforcement court. We estimate that there are 280,000 enforcement court hearings per year, at a cost of approximately £8.5 million (ignoring the organisational costs in preparing for these hearings).
However, court hearings will continue to be needed in the following circumstances:
Where no collection order has been made and the offender defaults on payment (the court is still entitled to make an order outside the fines collection scheme, whereupon the court will retain control of the case, rather than the fines officer. In such cases any subsequent proceedings or actions will automatically be referred directly back to the court. It is expected that such cases will be rare);
in the event of an appeal against a discretionary decision of a fines officer;
where a fines officer applied for permission to sell a defaulter's vehicle after it was clamped;
where cases were referred back to magistrates for re-sentencing or for consideration of any further sanctions, including: Money Payment Supervision Orders (MPSO), Attendance Centre Orders, remission of the fine (full or partial), fines payment work or committal to prison.
An estimate of the numbers of cases that result in these sanctions being imposed can be made based on the findings of a Home Office paper in 1997 [Endnote 6]. This looked at a sample of 1,893 cases heard in 25 enforcement courts between the period July 1994 and May 1995, and contained information on the proportions of different types of sanctions used. Using these same proportions, it is estimated that at least 29,000 cases will require a hearing in court.
The likelihood that there would be a large volume of appeals against fines officers' decisions is small. The presumption would be that the fines officer's decision will stand unless the offender can provide evidence that the decision was unfair. If the offender cannot produce evidence of a change in circumstances to the satisfaction of the fines officer, it is likely that he will not be able to do so to the satisfaction of the court on appeal from that decision. The opportunity to use appeals from the fines officer as a delaying tactic is limited by the 10 working-days appeal timetable.
Existing staff in MCCs could become designated fines officers, with statutory powers. The introduction of this post is likely to require some re-organisation of the existing responsibilities of administrative staff, but is not expected to increase the overall salary bill. There would be an initial training cost, which should be offset by increased fine revenue or by lower costs associated with issuing, tracking and executing warrants, although the extent of any reduction in the volume of this work will need to be tested in the pilots.
The decision to contract out the role of files officer would only be taken where a benefit can be shown against a proven business case. Depending on the pricing structure of the contracts that are let, the costs of contracting out the role of fines officer could be offset by improved enforcement performance.
In a Home Office pilot in Leicester, a scheme providing enhanced training for enforcement staff in techniques for telephone and face-to-face interviews with defaulters produced a fourfold improvement in payment rates in a small sample of cases. Although it is not clear that this rate of improvement could be made or sustained by all MCCs, it suggests that the focus on identifying and chasing persistent defaulters which fines officers would bring would yield results.
The threat of an increase would act as an incentive for an offender to keep in touch with the court. If the offender co-operated with the court, and paid the fine in full, the increase would be disapplied. Those offenders who found themselves in financial difficulty would be able to provide evidence of their changed circumstances to the fines officer who may make a variation in their favour which will allow offenders to pay the fines at a rate which they can manage. They may also have access to support and debt advice.
Whilst this may lead to a decrease in fine revenue, this proposal would not be implemented nationally unless it was clear that the discount contributed to an increase in the payment rate. Incentives for prompt payment are commonly used in the private sector and Fixed Penalty Notices for parking offences offer a 50% discount for prompt payment. If the discount scheme encouraged prompt payment, the cost to the taxpayer is likely to be far less than the cost of time consuming and expensive enforcement measures. The system in the magistrates' courts is as yet untested. Various percentages of discounts will be tested during pilots to assess the appropriate level (up to a maximum 50% of the fine).
The threat of registration and the likelihood that offenders would find it more difficult to obtain credit in future may be an effective deterrent for some offenders who would otherwise default on payment of their fine.
The threat of losing the use of their vehicle and the knowledge that such a measure can and will be used to compel payment ought, in many cases, to be sufficient to persuade a defaulter to pay their fine. It is hoped that the threat of clamping will be as effective a measure in itself and once a few "examples" of clamping being enforced are known, the actual necessity to clamp will be reduced.
The availability of alternative sentencing options will ensure that offenders who are clearly unable to pay a fine will serve some form of punishment rather than slipping through the net, thus maintaining the credibility of the Criminal Justice System.
The use of fine payment work rather than more expensive enforcement sanctions is expected to result in a cost saving to the CJS. Home Office estimates set the cost of the initial hearing at £100 per offender, the cost to the voluntary sector of supervising the work will be £40 per offender (based on an assumption of 20 hours' work) and the cost of a default hearing for those who do not complete the work satisfactorily will be £30. The cost of enforcement sanctions which this measure will seek to avoid is set at £126 per offender. Therefore the total unit cost will be £140 for offenders who complete the work satisfactorily and £296 for offenders who do not complete the work satisfactorily. The additional costs of fines payment work are estimated to be £1.6 million (40,000 offenders * £40 per offender) which will be incurred by the Home Office in providing the necessary funding to the voluntary bodies. Based on an estimate of 40,000 offenders carrying out fines payment work and 75% (30,000) of these offenders successfully completing the work, the estimated savings to the department of the scheme are as follows:
The savings to the department where fines payment work is successful
are estimated at :
30,000*[(£100+£30+£126) - (£100+£40)]
= £3,480,000.
The savings where fines payment work is not successful are estimated
to be:
10,000*[(£100+£30+£126) - (£100+£30+£126+£40)]
= -£400,000
Therefore net savings = £3,480,000 + (-£400,000) = £3,080,000, or approximately £3 million.
The main cost will be continuing low levels of collection of fines. Whilst there were £425 million of fines and other charges imposed in 2002/03, only £230 million was collected (55% payment rate [Endnote 11]). This will also mean that victims and prosecutors will not receive compensation and prosecution cost orders, although there is no breakdown of collection rate for these costs. Furthermore, if the current level of arrears persist there is a threat to the credibility of the fine as a sanction and more generally to the integrity of the Criminal Justice System. This may lead to greater use of alternative sanctions such as imprisonment, thus putting pressure and additional costs on the prison service.
Baseline costs of AEOs/ DBs
Since AEOs and DBs are in operation currently it is possible to make
an estimate of the costs which are currently incurred by the Department
for Work and Pensions (DWP) and businesses of dealing with these orders.
MCCs also incur costs of setting up and monitoring AEOs and DBs, and
these have also been covered in the section below.
Deductions from benefits: Information provided by the DWP indicates that the unit cost of making a DB is £6.34 per deduction. Further analysis is currently underway to review the unit cost but this is the most accurate information currently available. This covers the cost of setting up the order on the computer system, making the deductions, sending payment to the creditor (in this case the court) and any additional costs incurred such as further investigation if there is an anomaly in the payment.
There is currently no information available on the average duration of a DB, which is needed to calculate the annual cost to the DWP of making additional deductions. The maximum deduction that can be made is £2.75 per week and Home Office research indicates that the average fine level is £134. Assuming that deductions from benefits are made until the fine is paid off, the average duration of an order can be calculated by dividing £134 by £2.75, which gives a figure of 49 weeks. Therefore, assuming that deductions from benefits are made on a 4-weekly basis, it can be assumed that for each offender an average of 13 deductions are made per year. It is recognised that this ignores the likelihood that fines imposed on offenders who are on benefits are lower than the average fine level as magistrates are obliged to take into account the offender's ability to pay when setting the level of any fine. Conversely, the average fine level may be higher than £134 because courts can consolidate two or more fines or compensation orders when making a request for deductions from benefit, which has the effect of increasing the average fine level and therefore the duration of an order.
Figures from the DWP indicate that in 2002 there were 18,500 Deductions from Benefits for fines. Taking the unit administration cost of £6.34 per deduction and assuming there are 13 deductions per offender on average suggests that the total costs are currently £117,300 per deduction or £1.5 million per annum.
Attachment of Earnings: The costs associated with dealing with AEOs fall on businesses and magistrates courts. We estimate that there are currently 9,300 AEOs made per year. This section will look at the costs per year incurred currently by businesses and by the courts of dealing with AEOs.
Employers can make deductions from earnings using:
Fully automated payment systems
Automatic payment systems which require manual intervention
Manual payment systems
The department has commissioned some research on the costs to businesses of administering AEOs. [Endnote 12] The breakdown of companies is summarised in the following table:
Table: Types of companies who calculate AEOs
|
Automatic
|
Automatic with manual intervention
|
Manual
|
This section separates the costs of dealing with AEOs between those dealt with by small businesses and those dealt with by all other public and private sector businesses. This is because small firms are likely to deal with AEOs in a different manner than other firms, with a higher proportion likely to calculate the deductions manually.
Employers incur costs:
In setting up the order
In making regular deductions
We estimate that the costs of setting up an order for a fully automatic payroll system is approximately £6.50 per case. [Endnote 13] The evidence indicates that the cost of making regular deductions varies by type of firm. In the analysis below the research results are used to estimate these costs. The costs to firms of making deductions also varies according to frequency of pay, with those who pay employees weekly incurring higher costs than those who pay their employees monthly. In the following cost section it is assumed that 30% of employees are paid weekly and 70% are paid monthly.
Small businesses
Since 37% of all employees in England and Wales work for small businesses,
it is estimated that they currently deal with 3,400 AEOs, or 37% of
all AEOs. These AEOs are dealt with in the following manner:
Automatic deductions- 30% of small businesses
Manual deductions- 40% of small businesses
Automatic deductions with manual intervention- 30% of small businesses
It is estimated that the total set up costs of AEOs for small firms is approximately £6.50 * 3,400 AEOs = £22,100
Automatic Payroll firms
We estimate that approximately 1000 AEOs (30% of the 3,400 AEOs) are
administered by automatic payroll firms at a unit cost of £2 per
deduction. 30% of these deductions will be made on a weekly basis and
70% on a monthly (4-weekly) basis. This implies:
Weekly deduction costs: £2 per deduction * 300 AEOs* 52 deductions = £31,200 per year
Monthly deduction costs: £2 per deduction * 700 AEOs * 13 deductions = £18,200 per year
Total deduction costs = £49,400 per year
Employers are able to make a £1 deduction per pay period to cover their administration costs, so they recover £15,600 per year if they deduct weekly and £9,100 per year if they deduct monthly. Total amount recovered by employers is therefore approximately £25,000 per year
Net costs are therefore: £24,400 per year
Automatic, manually checked payroll firms
We estimate that 1000 AEOs (30% of 3,400 AEOs) are administered by automatic,
manually checked payroll firms at a unit cost of £5.40 per deduction.
This implies:
Weekly deduction costs: £5.40 per deduction * 300 AEOs * 52 deductions = £84,200 per year
Monthly deduction costs: £5.40 per deduction * 700 AEOs * 13 deductions = £49,100 per year
Total cost = £84,200 + £49,100 = £133,300 per year
Employers are able to make a £1 deduction per pay period to cover their administration costs, so they recover £15,600 per year if they deduct weekly and £9,100 for monthly deductions. Total amount recovered by employers is therefore approximately £25,000 per year
Net cost = £133,300 - £25,000= £108,300 per year
Manual Payroll firms
We estimate that 1,400 AEOs (40% of 3,400 AEOs) are administered by
manual payroll firms at a unit cost of £6.50 per deduction. This
implies:
Weekly deduction costs: £6.50 per deduction * 420AEOs * 52deductions = £142,000 per year.
Monthly deduction costs: £6.50 * 980 AEOs * 13 deductions = £83,000
Total cost = £225,000 per year
Employers are able to make a £1 deduction per pay period to cover their administration costs, so they recover £21,800 per year if they make weekly deductions and £12,700 per year for monthly deductions. Total amount recovered by employers is therefore £34,500 per year.
Net costs are therefore £225,000 - £34,500 = £190,500 per year
These calculations indicate that the current net cost to small businesses of dealing with AEOs is approximately £22,100 £24,400 + £108,300 + £190,500 = £345,000 per year.
Other businesses
The remaining 5,900 AEOs are dealt with by medium and large enterprises and by public sector employers. It is assumed that these firms will deal with these orders in a broadly similar manner and therefore they have been grouped together and costs have been estimated for these firms as a whole. Research carried out by IPPM Consultancy (Institute of Payroll and Pensions Management) indicates the following breakdown:
Automatic deductions- 82% of businesses
Manual deductions- 9% of businesses
Automatic deductions with manual intervention- 9% of businesses
It is estimated that the total set up costs of AEOs for these firms is approximately £6.50 * 5,900 AEOs = £38,400 per year
Automatic Payroll firms
We estimate that approximately 4800 AEOs (82% of the 5,900 AEOs) are
administered by automatic payroll firms at a unit cost of £2 per
deduction. 30% of these deductions will be made on a weekly basis and
70% on a monthly (4-weekly) basis. This implies:
Weekly deduction costs: £2 per deduction * 1400 AEOs* 52 deductions = £145,600 per year
Monthly deduction costs: £2 per deduction * 3400 AEOs * 13 deductions = £88,400 per year
Total deduction costs = £234,000 per year
Employers are able to make a £1 deduction per pay period to cover their administration costs, so they recover £73,000 per year if they deduct weekly and £44,200 per year if the deduct monthly. Total amount recovered by employers is therefore = £117,200 per year
Net costs are therefore: £116,800 per year
Automatic, manually checked payroll firms
We estimate that 540 AEOs (9% of 5,900 AEOs) are administered by automatic,
manually checked payroll firms at a unit cost of £5.40 per deduction.
This implies:
Weekly deduction costs: £5.40 per deduction * 160 AEOs * 52 deductions = £45,000 per year
Monthly deduction costs: £5.40 per deduction * 380 AEOs * 13 deductions = £26,700 per year
Total cost = £45,000 + £26,700 = £71,700 per year
Employers are able to make a £1 deduction per pay period to cover their administration costs, so they recover £8,300 per year if they deduct weekly and £5,000 if they deduct monthly. Total amount recovered by employers is therefore approximately £13,300 per year
Net cost = £71,700 - £13,300= £58,400 per year
Manual Payroll firms
We estimate that 540 AEOs (9% of 5,900 AEOs) are administered by manual
payroll firms at a unit cost of £6.50 per deduction. This implies:
Weekly deduction costs: £6.50 per deduction * 160 AEOs * 52 deductions = £54,100 per year.
Monthly deduction costs: £6.50 * 380 AEOs * 13 deductions = £32,100
Total cost = £86,200 per year
Employers are able to make a £1 deduction per pay period to cover their administration costs, so they recover £8300 per year if they make weekly deductions and £5000 per year for monthly deductions. Total amount recovered by employers is therefore £13,300 per year.
Net costs are therefore £86,200 - £13,300 = £73,000 per year
These calculations indicate that the current net cost to all other businesses of dealing with AEOs is approximately £38,400 + £116,800 + £58,400 + £73,000= £287,000 per year.
Costs to magistrates courts
Magistrates courts incur costs from having to set up and monitor AEOs
and DBs. We estimate that the cost of setting up an order is £2.80
per case, which covers the cost of inputting details of the order on
the computer system including the normal deduction rate (NDR) and the
protected earnings rate (PER), generating copies of the attachment order
and forwarding it onto the offender's employer or the DWP together with
an explanatory letter. MCCs need to monitor their AEOs and DBs to check
whether payments have been made. The following figures on the processes
and costs incurred have been provided by one MCC (currently performing
at 68% quarterly and yearly rolling), which monitors its AEOs and DBs
every 6 weeks.
The monitoring costs are split into 2 categories:
cases which just require reminder letters and phone calls. The MCC concerned estimated that 28% of cases checked required this action to be taken. The estimated unit cost of taking such action is £2.80 per case checked (costs broken down as £1.40 for a chase-up letter and £1.40 for reminder telephone call).
cases which require further actions to be taken by the court because the employer has provided an unsatisfactory explanation as to why payments have not been made. One MCC estimated that 7.5% of cases required further action to be taken. We estimate the unit cost of follow up action in these cases also to be £2.80 per case checked (the cost of issuing a summons if no satisfactory explanation can be provided for non-payment).
We estimate that magistrates' courts currently administer approximately 27,800 AEOs and DBs (9,300 AEOs and 18,500 DBs). This implies:
Set up costs of £2.80 per case * 28,000 AEOs and DBs = £78,000 per year
Monitoring costs: It is estimated that 2,600 AEOs (28% of AEOs) currently require reminder letters and phone calls at an estimated cost of £63,000 per year (note this assumes that every time magistrates courts check their current AEOs and DBs in operation 28% of cases require follow up letters and phone calls).
Monitoring costs: It is estimated that 700 AEOs (7.5% of AEOs) currently require further warning notices to be sent and some form of additional action, at an estimated cost of £17,000 per year
Total cost is therefore estimated to be £158,000 per year
It should be emphasised that these costs have been calculated on the basis of the unit costs of one Magistrates Court Committee (MCC) which performs to target (quarterly and rolling yearly figures = 68%) and so may not be an accurate reflection of the costs incurred by all MCCs. Furthermore, we do not have any indication of the costs of monitoring deductions from benefits since there has been no breakdown provided of the actions required to monitor a DB. However, in the absence of any other information, this provides the best indication of the costs which are currently incurred by MCCs in setting up and monitoring AEOs and DBs.
No Change- Total Costs
In the basecase therefore, total costs are currently £2.3 million,
primarily consisting of the costs to businesses and magistrates' courts
of dealing with AEOs. This is calculated as £1.5 million (DBs)
+ £345,000 (AEOs- small businesses) + £287,000 (AEOs- other
businesses) + £158,000 (MCCs) = £2.3 million.
A means form for use on a national basis has been developed by HM Magistrates' Courts Service Inspectorate, in conjunction with the Criminal Enforcement Policy Advisory Group. The number of defendants requiring assistance in completing this form and the impact on advice agencies would need to be evaluated as part of the pilots scheme. (The Home Office piloted the introduction of fines clinics in Swindon on the day of enforcement court hearings, in which offenders met a case worker from the Citizens' Advice Bureau and were then interviewed by court staff. During the pilot, 29% of offenders took up the offer of assistance (although the structure of the pilot affected take up of the offer). This resulted in a 10% improvement in payment rates.
Policy in this area is still being developed, and we are only able to make tentative estimates in advance of detailed discussions with the advice sector. For illustrative purposes, across England and Wales, the number of fines dealt with might be around 750,000 (some offenders have multiple fines). If an advice session lasted approximately 30 minutes at a cost of £10 per hour then the additional cost of providing advice would be 29,000*75,000*£5*1.3 (to reflect non-wage labour costs) = around £1.4 million to advice agencies.
Total additional costs are therefore £1.4 million per year.
Numbers likely to be affected: In order to assess the impact of extending the use of AEOs and DBs it is necessary to estimate the numbers of offenders likely to be affected.
We estimate that approximately 29,000 additional DBs and 63,000 additional AEOs will be made as a result of extending the use of AEOs and DBs. These figures are derived as a percentage of the total number of the 126,000 offenders who are classed as previous defaulters (ie they have previously defaulted on fines) and who may qualify for AEOs/DBs, assuming that approximately half of those previous defaulters will pay immediately, under the threat of attachments being imposed.
There will also be offenders who will be subject to either AEOs or DBs after defaulting on payment or failing to make credible arrangements to pay in instalments. Since current offenders can only receive an AEO or DB after they have defaulted on payment of a fine, it has been assumed that those offenders who currently receive AEOs or DBs fall into this category. Currently, 18,500 offenders receive DBs and it is estimated that 9,300 offenders receive AEOs (estimated as 1% of offenders fined). Therefore, the total numbers of offenders likely to receive AEOs or DBs are calculated as the sum of those who already receive these and those who are categorised as being current defaulters. It should be noted that the estimates are based on information from one MCC only and may not constitute an accurate representation of enforcement across all 42 MCC areas. At present, however, this is the most accurate estimate available, there being no centralised collection of this information.
Proposals to extend the use of AEOs and DBs will impose costs on the following:
Employers: will bear the costs of administering AEOs for their offender employees
DWP: the department responsible for administering DBs, which will face additional costs from any increase in the use of DBs.
MCCs- will incur costs associated with setting up and monitoring AEOs and DBs.
Deductions from Benefits: It is estimated that approximately 29,000 automatic DBs will be made as a result of this proposal. It has been assumed that those offenders who currently receive DBs fall into the category of receiving an AEO/ DB after default, and therefore the total number of DBs likely to be made is 29,000 + 18,500= 47,500. Using the figure of £6.34 per deduction and the assumption of 13 deductions per offender, the total cost will be £3.9million/year. This represents an increase of £2.4million/year in the cost of administering DBs.
Attachment of Earnings
If AEOs are used more widely we estimate that the total number of AEOs
will increase to 70,000. This will imply additional costs to employers,
the breakdown of which is shown below.
Small businesses
It is estimated that small businesses will deal with 26,000 AEOs as
a result of extending the use of AEOs (37% of 70,000 AEOs). This implies
the following costs:
It is estimated that the total set up costs of AEOs for small firms will be approximately £6.50 * 26,000 = £170,000 per year.
Automated Payroll firms
By extending the use of AEOs, we estimate APFs will administer 7,800
AEOs (30% of 26,000 AEOs). It is estimated that 30% of these orders
will be dealt with on a weekly basis and 70% on a monthly (4-weekly)
basis. This implies:
Weekly deduction costs: £2 per deduction * 2,300* 52= £239,200 per year
Monthly deduction costs: £2 per deduction * 5,500 * 13= £143,000 per year
Total deduction costs: £243,400 + £142,000 = £382,200 per year
Employers are able to make a £1 deduction per pay period to cover their administration costs, so they recover £120,000 per year if they deduct weekly and £71,500 per year if they deduct monthly. Employers therefore recover £191,500 per year
Net costs are £382,200 - £191,500 = £190,700 per year
Automatic, manually checked, payroll firms
We estimate that 7,800 AEOs (30% of 26,000 AEOs) will be administered
by automatic, manually checked payroll firms. It is estimated that 30%
of these orders will be dealt with on a weekly basis and 70% on a monthly
(4-weekly) basis. This implies:
Weekly deduction costs: £5.40 per deduction * 2,300 AEOs * 52 deductions = £646,000 per year
Monthly deduction costs: £5.40 per deduction * 5,500 AEOs * 13 deductions = £386,100 per year
Total deduction costs are therefore approximately £1.03 million per year
Employers are able to make a £1 deduction per pay period to cover their administration costs, so they recover £120,000 per year if they deduct weekly amd £71,500 per year if they deduct monthly. Employers therefore recover £191,500 per year.
Net costs per deduction are £1.03million - £191,500 = £838,500 per year.
Manual Payroll firms
We estimate that manual payroll firms will deal with 10,400 AEOs (40%
of 26,000 AEOs). This implies:
Weekly deduction costs: £6.50 per deduction * 3,100 AEOs * 52 deductions = £1.05 million per year
Monthly deduction costs: £6.50 per deduction * 7,300 AEOs * 13 deductions = £616,900 per year
Total cost of deductions = £1.05million + £616,900 = £1.7 million per year
Employers are able to make a £1 deduction per pay period to cover their administration costs, so they recover £161,200 per year if they deduct weekly and £95,000 if they deduct monthly. Total amount reclaimed by employers will therefore be £256,200 per year.
Net costs are therefore £1.7 million - £256,200 = £1.4 million per year
Total costs of £170,000 + £190,700 + £838,500 + £1.4 million = £2.6 million per year. This represents an increase in costs to small businesses of £2.3 million per year as a result of extending the use of AEOs.
Other businesses
The remaining 44,000 AEOs are dealt with by medium and large enterprises
and by public sector employers. It is assumed that these firms will
deal with these orders in a broadly similar manner and therefore they
have been put together in one group and costs have been estimated for
these firms as a whole. Research carried out by IPPM Consultancy (Institute
of Payroll and Pensions Management) indicates the following breakdown:
Automatic deductions- 82% of businesses
Manual deductions- 9% of businesses
Automatic deductions with manual intervention- 9% of businesses
It is estimated that the total set up costs of AEOs for these firms is approximately £6.50 * 44,000 AEOs = £286,000 per year.
Automatic Payroll firms
We estimate that approximately 36,000 AEOs (82% of the 44,000 AEOs)
are administered by automatic payroll firms at a unit cost of £2
per deduction. 30% of these deductions will be made on a weekly basis
and 70% on a monthly basis. This implies:
Weekly deduction costs: £2 per deduction * 10,800 AEOs* 52 deductions = £1.1 million per year
Monthly deduction costs: £2 per deduction * 25,200 AEOs * 13 deductions = £655,200 per year
Total deduction costs are approximately £1.8 million per year
Employers are able to make a £1 deduction per pay period to cover their administration costs, so they recover £562,000 per year if they deduct weekly and £327,600 per year if the deduct monthly. Total amount recovered by employers is therefore approximately £890,000 per year
Net costs are therefore approximately £910,000 per year
Automatic, manually checked payroll firms
We estimate that 4000 AEOs (9% of 44,000 AEOs) are administered by automatic,
manually checked payroll firms at a unit cost of £5.40 per deduction.
This implies:
Weekly deduction costs: £5.40 per deduction * 1200 AEOs * 52 deductions = £337,000 per year
Monthly deduction costs: £5.40 per deduction * 2800 AEOs * 13 deductions = £196,600 per year
Total cost = £337,000 + £196,600 = £533,600 per year
Employers are able to make a £1 deduction per pay period to cover their administration costs, so they recover £62,400 per year if they deduct weekly and £36,400 if they deduct monthly. Total amount recovered by employers is therefore approximately £99,000 per year
Net cost = £533,600 - £99,000= £434,600 per year.
Manual Payroll firms
We estimate that 4000 AEOs (9% of 44,000 AEOs) are administered by manual
payroll firms at a unit cost of £6.50 per deduction. This implies:
Weekly deduction costs: £6.50 per deduction * 1200 AEOs * 52 deductions = £405,600 per year.
Monthly deduction costs: £6.50 * 2800 AEOs * 13 deductions = £236,600
Total cost = £642,200 per year
Employers are able to make a £1 deduction per pay period to cover their administration costs, so they recover £62,400 per year if they make weekly deductions and £36,400 per year for monthly deductions. Total amount recovered by employers is therefore £99,000 per year.
Net costs are therefore £642,200 - £99,000 = £543,200 per year
These calculations indicate that the current net cost to all other businesses of dealing with AEOs is approximately £286,000 + £910,000 + £434,600 + £543,200 = £2.2 million. This represents an additional cost to all other businesses of £1.9 million per year. There is however a great deal of uncertainty about what the likely impact will be of extending the use of AEOs, since it is extremely difficult to estimate in advance the numbers of offender likely to have an AEO imposed. These figures should therefore be treated with some caution.
Costs to magistrates courts
Magistrates courts will incur the costs of having to set up and monitor
a total of 70,000 AEOs and 47,500 DBs. This will imply the following
costs:
Setting up costs of £2.80 per case * 117,500 AEOs and DBs = £329,000 per year
Monitoring costs: It is estimated that 19,600 AEOs (28% of AEOs) will require reminder letters and phone call at an estimated cost of £475,000 per year (note this assumes that every time magistrates courts check their current AEOs and DBs in operation 28% of cases will require follow up letters and phone calls)
Further monitoring costs: It is estimated that 5,250 AEOs (7.5% of AEOs) will require further warning notices sent and some form of additional action, at an estimated cost of £127,000 per year.
Total cost is therefore estimated to be approximately £930,000 per year. This represents an increase in costs of approximately £800,000 on the basecase.
Again it should be emphasised that these calculations are based on the costs incurred by one magistrates court committee (MCC), and on estimates of the numbers of AEOs and DBs likely to be made and therefore should be treated with some caution.
Total additional costs of extended use of AEOs and DBs are therefore £7.4 million per year. This is derived from £2.4 million (additional costs of DBs) + £2.3 million (AEOs- small businesses) + £1.9 million (AEOs other businesses) + £800,000 (magistrates' courts) = £7.4 million per year.
It seems unlikely that the introduction of fines officers recruited from existing court personnel or staff budget allocations would generate additional costs. Any additional manpower costs (such as training on the new fines collection scheme) would be offset by a reduction in enforcement court hearings and a corresponding decrease in warrant tracking by court staff. The savings arising from fewer enforcement hearings are explained in more detail in the benefits section.
Depending on pricing structure of contracts the costs of recruiting fines officers may be increased if the role is contracted out, but this would be expected to be offset by benefits from more effective application of private sector enforcement practice. The arrangements for such contracting out will be subject to the safeguards (paralleling existing arrangements in the Court Service) that the work to be eligible for contracting out must be specified in an Order, and the senior judiciary must be consulted on the terms of this order. An evaluation would be made and a full business case showing definite benefits would have to be proven before any contracting out was implemented.
The impact of an increase or a discount on a fine in response to prompt or late payment is impossible to predict in advance. It is intended that the level of the increase or discount will be set in secondary legislation so that it can be informed by the results of the pilots.
It is not anticipated that increasing a fine would generate significant extra revenue, as it is hoped that in many cases the mere threat of an increase will produce compliance. Whilst the provision of a discount might generate a loss of revenue this may be offset by a resulting increase in compliance. We are currently unable to forecast whether there would be a net gain resulting from the offering of a discount or threat of an increase and therefore would be unlikely to introduce such measures without further research by means of the pilot schemes.
An increase would not be effective if a defaulter lacked the means to pay. However, with clearer information about offenders' means this would be less likely to arise. The intention is that in cases where the offender contacts the court and provides evidence of a genuine inability to pay, the case will be referred back to the court, and the imposition of an alternative sanction, such as community penalty or fine payment work may be possible.
The threat to register default is potentially a powerful sanction because of the impact it would have on a defaulter's ability to obtain credit. The existing scheme for registration of county court judgments provides a model for the registration of fines. DCA pays nominal charges for the scheme, which is presently run by Registry Trust Limited, (for whom it is self-financing) but which contract is currently up for re-tender. The cost of registration is covered by the fees charged to credit-rating companies and the public to search the register. There might be a small initial cost in training court staff to use the new system. The volume of fines registered can be offset against the additional search revenue generated. It would also be possible to increase the search fees. We do not have data on the cost of adding fine defaulters to the register. The numbers of fine defaulters who may be added to the register is currently uncertain, as registration would be a further step to be taken against persistent defaulters. Until the measure has been piloted, it will be impossible to judge how effective the knowledge that such a sanction could be used will be in deterring default.
Vehicle clamping would be associated with significant costs, which would be borne by the defaulter (industry estimates of £125 per vehicle removed plus any storage costs). The prospect of having to bear these costs together with the inconvenience of losing the use of a vehicle could act as an incentive to pay. This would be an effective sanction when enforcement agents could establish ownership and locate a vehicle of sufficient value to induce payment. We do not anticipate that this sanction would be extensively used; it is the threat of the sanction which might persuade defaulters to pay their fines.
The latest figures available on the cost to the National Probation Service of a community punishment order are for 2001/02, and they indicate a cost of approximately £900 for a fine defaulter who serves an average sentence length of 60 hours, plus any enforcement costs. The proposed amendments to the Courts Bill will involve less intensive use of correctional resources, appropriate to the nature of the offence.
Under "fines payment work" provisions, upon satisfactory evidence that they are genuinely unable to pay a fine, the court may allow an offender to undertake to discharge the fine by carrying out a period of unpaid work in lieu of and to the value of a fine which would otherwise have been imposed. Alternatively where an offender cannot pay a fine they can contact the fines officer who would, on the strength of information confirming their financial information, refer the case back to court. The court could then decide either to leave the fine as it is, to vary it or to convert it into a work order. If the fine is converted to a work order the voluntary sector would be relied upon to provide the work opportunities, to supervise their completion and to report back to court (fines officer). If the offender satisfactorily completes the work the fine will be discharged and further enforcement will not be required. If the offender does not complete the work satisfactorily then a default hearing will be required where the court will decide what action to take.
Costs of fines payment work
The cost to the Home Office of funding voluntary bodies to administer
the scheme is expected to be £1.6 million. However,
the use of fines payment work instead of more expensive enforcement
action is expected to generate cost savings to the department.
Net cost savings of the fines payment work scheme is estimated to be £3 million (see benefits section).
The requirement to provide means information and the option to negotiate payment schedules with fines officers would generate additional work for advice agencies. Home Office research [Endnote 14] revealed that seven out of ten men and nine out of ten women appearing before the court at an enforcement hearing relied on state benefits as their sole source of income. The same research reported that 14% of those gave confusion over instalments as the reason they had fallen behind in payments. The intention is that these proposals would be implemented with the capability and funding of the advice sector in mind. Furthermore, piloting these measures would enable local advice capability to be taken into account.
Costs will be incurred by voluntary sector firms which are involved with supervising fines payment work schemes. On the basis of an estimated cost of £40 per offender (based on an assumption of 20 hours work) at a contingency rate of 75% compliance, the additional costs of fines payment work are estimated to be £1.6 million. The Home Office will need to provide the additional funding required by the voluntary bodies administrating the scheme in order for the scheme to be implemented.
The primary impact on small businesses of extending the use of AEOs will be the cost of having to administer additional AEOs for their offender employees. The proposals themselves will not alter the way in which AEOs are to be dealt with by small businesses, therefore those businesses currently dealing with them will not bear any additional costs. However, the proposals do extend the use of AEOs, and therefore it is likely that more businesses will have to deal with these orders. Since approximately 37% of public and private sector employees work for small businesses, the overall costs to small businesses are likely to increase.
The calculations made earlier suggested that an additional 22,600 AEOs would be dealt with by small businesses, at an additional cost of approximately £2.3 million being incurred. However as stated earlier these figures should be treated with caution as they are based on estimates of the likely increase in the numbers of AEOs made, which is very difficult to predict in advance of the pilots.
We estimate that magistrates' courts issue around 750,000 distress warrants and around 100,000 arrest warrants annually. This segment of the enforcement industry is highly concentrated with three firms responsible for around 51% of the business. We estimate that currently 20-25% of distress warrants are effectively enforced. If fines were set within the means of the offender and there was better management of debt, there might be a reduction in the volume of distress warrants issued and the market for bailiffs may shrink. Work carried out by bailiffs for Magistrates' Courts Committees (MCCs) represents approximately a quarter of all warrants issued. Given the concentrated nature of the enforcement industry there is a risk that any contraction will be borne disproportionately by smaller firms and that issues relating to competition within the market may arise. However it is not possible to quantify the effects such as the possible loss of revenue to bailiffs, prior to piloting the measures. The loss of enforcement business, if it did occur, would result from a higher level of compliance with financial penalties and so the costs to the enforcement industry would be outweighed by the benefits to the criminal justice system.
The amount of clamping business would depend on the effectiveness of other measures in the package, the impact of the threat of clamping on potential defaulters and the use actually made of this power. The impact on competition will be reviewed when the measures have been piloted.
Further information on competition impacts is provided in Annex 1.
By requiring that all offenders provide means information before sentence, these proposals seek to avoid the imposition of financial penalties on offenders who do not have the ability to pay. The new sanctions are aimed at those who can pay financial penalties but seek to avoid payment.
As a consequence, distress warrants will be more carefully targeted on those with the means to pay, by more active management of the enforcement process by fines officers.
The Government believes that in requiring those who have had a financial penalty imposed by a court to pay, it is promoting fairness and equity by sustaining public confidence in the criminal justice system.
The proposals will also promote fairness if they succeed in raising the payment rate of compensation due to victims of crime. When the payment rate of fines is low fewer victims of crime are receiving the compensation which has been awarded to them for the suffering they have incurred. Home Office statistics [Endnote 15] indicate that in 2001 97,100 offenders were ordered to pay compensation in the magistrates' courts. According to Home Office research [Endnote 16], the average amount of compensation awarded was £204, which suggests that a total of £19.8 million of compensation awards were made. If the payment rate of these mirrors that of fines in general, which may be the case since compensation awards may be made in addition to fines, this suggests that only 55% of compensation awards are successfully recovered per annum at a monetary value of £11.1 million. Therefore £8.7 million worth of compensation awards per annum are not collected. If the proposal to extend the use of AEOs and DBs results in the same improvement in the payment rate of compensation as it does for fines, this suggests a 2.3% improvement in the payment rate or £460,000 per annum. Improving the payment rate of fines thus goes someway to ensuring that victims receive the compensation which is awarded to them.
The then Lord Chancellor's Department conducted a Post Implementation Review of the Transfer of Warrant Execution project during October 2001 and a report was published in March 2002 [Endnote 17]. Comments made by MCCs as part of the review were taken into account in formulating these proposals. Development of the proposals also followed discussion with representatives from the criminal justice system at a series of conferences on enforcement held in April 2002.
Research by the Home Office, The Enforcement of Financial Penalties in Magistrates Courts [Research report to the Home Office] by Morgan Harris Burrows & Professor Raine at the University of Birmingham which was published in August 2002, was also used to inform the proposals.
Officials also took into account the National Audit Office report, Collection of fines and other financial penalties in the criminal justice system [Endnote 18] and the subsequent Public Accounts Committee report, published in November 2002.
Officials have consulted broadly across government departments likely to be affected by these proposals. Outline details of the proposals were sent to stakeholder groups and representatives were invited to meetings to discuss the proposals in more detail. Those consulted were:
Association of Civil Enforcement Agencies
Association of Justices' Chief Executives
Central Council of Magistrates' Courts Committees
Certified Bailiffs Association
Justices' Clerks Society
Law Centres Federation
Legal Services Commission
Magistrates' Association
Department of Work & Pensions
HM Treasury, Inland Revenue, Home Office and other government departments
The proposals were modified in light of issues raised:
fines officers will not be given power to set payment terms at the outset;
the proposals would be piloted prior to implementation;
more robust enforcement of better means information was required;
AEOs and DBs would be brought forward to point of sentence;
Converting fines to work would be incorporated into the fines collection scheme;
Access to debt advice network for those experiencing difficulties in paying their fine;
The various components of the package will be piloted (independently or in combination) before the introduction of the scheme nationwide. The pilots will be evaluated by the effect of the measures on the payment rate.
Option 2 (a-h) is recommended. Without this enabling legislation, it would not be possible to pilot and assess the effects of the proposals, including the effect of financial incentives to pay promptly. The proposals would enable more enforcement action to be taken administratively, thereby freeing up court time to deal with more persistent default. A decision on national implementation of each of the measures or the package as a whole would only be taken once the pilots had been evaluated. We expect the package to be cost neutral to the unified administration. The impact on bailiffs is likely to be marginal. Although MCCs are making operational improvements to enforcement performance, significant progress is more likely to be made with the introduction of the measures in this package. It is vital that courts have the opportunity to use a wide range of tools for dealing with fine default. The benefits of improved enforcement cannot yet be measured precisely, but could be significant in raising confidence in the criminal justice system.
| Option | Costs | Benefits |
|---|---|---|
| 1. No change |
General
Current cost of AEOs and DBs
|
Magistrates' Courts Committees, the judiciary and enforcement agents are familiar with the current system There will be no additional costs to retrain staff in new procedures or bear additional costs associated with changing the system of enforcement |
| 2a Requirement for information about means & personal details | Cost of providing advice & assistance to offenders completing means forms = 0.29*0.75m*£5*1.3= £1.4m | The package will produce several benefits:
The package as a whole would increase enforcement of financial penalties and compensation orders, thereby promoting justice. |
| 2b Use of automatic and suspended AEOs and DBs |
|
|
| 2c Fines Officers | Additional cost of employing fines officers such as extra salary and training costs (however this will be more than offset from the reduction in enforcement hearings) | |
| 2d Increase of the fine | Cost will arise from any reduction in the payment rate due to increasing offenders' fines. | |
| 2e Discount | Possible loss of revenue as a result of decreasing the fine level. | |
| 2f Registration of fine with register of judgments | Additional cost of adding fine defaulters to the organisation maintaining the register of judgments | |
| 2g Clamping of vehicle | Industry estimates indicate that this costs £125 per vehicle removed plus any storage costs. These costs should be recovered from the fine defaulter. | |
| 2h Imposition of an alternative sentence |
The cost to the National Probation Service of a community punishment order in 2001/02 was £900 for a fine defaulter who serves an average sentence length of 60 hours, plus any enforcement costs. The proposals under development will involve less intensive use of correctional resources, appropriate to the nature of the offence. Fine payment work will cost Home Office approximately £1.6 million to fund voluntary bodies administering the scheme. However, the scheme is expected to generate cost savings (see benefits section) |
I have read the regulatory impact assessment and I am satisfied that the benefits justify the costs.
Signed
Date
Minister's name
Title
Department
Contact Points
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Dr Sue Rayner Jacobs Tel: 020 7210 2897 |
Jehangir Ullah Tel: 020 7210 1433 |
'Criminal Statistics England and Wales 2001'- Home Office. Note: these are the latest figures available.
Annual report on National Performance Indicators 2002-03 - DCA. The totals include figures for both criminal and civil impositions as the systems of many courts cannot differentiate between the two. It should be noted that that the penalties collected, cancelled and written off do not necessarily relate to those penalties imposed in 2002-03.
Magistrates' Courts Committees are responsible for enforcing fines imposed in both the Crown Court and magistrates' courts.
'Prison Statistics England and Wales 2001' - Home Office. Note: these are the latest figures available.
Published Research : The enforcement of financial penalties: Mackie, A., Raine, J., and Burrows, J. for the Home Office (August 2002)
Annual report on National Performance Indicators 2000-01 - LCD. The totals include figures for both criminal and civil impositions as the systems of many courts cannot differentiate between the two. It should be noted that that the penalties collected, cancelled and written off do not necessarily relate to those penalties imposed in 2000-01.
Magistrates' Courts Committees are responsible for enforcing fines imposed in both the Crown Court and magistrates' courts.
PKF Review of Magistrates' Courts Enforcement Strategies - Final Report (published June 2003).
R v Oldham Justices and another, ex parte Cawley and other applications. QBD, 30, 31 October, 28 November 1995
Enforcing Financial Penalties - Home Office RDS 1997
The payment rate is defined as the amount paid into court as a percentage of new amounts owed.
Research carried out by IPPM (Institute of Payroll and Pensions Management)
Cost estimated by ADP Chessington
Enforcing financial penalties Home Office RDS 1997
Criminal Statistics England & Wales 2001- Home Office
Research currently in draft