The Child Support Agency is to be “completely redesigned,” the work and pensions secretary John Hutton told MPs today.
He said the system “could never in its current state be made fit for purpose”.
“It is time for fundamental change,” he added, indicating he will back tough measures.
Outgoing chief executive of Liverpool Council Sir David Henshaw will lead a review of the agency and report back in the summer.
A report by CSA chief executive Stephen Geraghty last year confirmed how “deep-rooted” the agency’s problems are, Hutton added.
He announced a CSA improvement plan with new investment of £120 million, to be implemented immediately.
The figure includes £30 million to pay private debt collectors to recover outstanding maintenance arrears from absent parents, currently over £3.3 billion.
One third of parents assessed by the CSA do not pay, according to the agency.
The CSA improvement plan aims to help 40,000 more children out of poverty by 2010.