Select Committee on Social Security Minutes of Evidence


Annex 2

LIST OF CHARACTERISTICS OF FAMILIES FOR WHOM THE FORMULA MIGHT

WORK UNJUSTLY

  26.  One of the lessons the Association learned from the introduction of the 1991 scheme was how profoundly (and inappropriately) the formula affected many families—often in ways that could not have been foreseen. The table below must therefore be regarded as illustrative rather than comprehensive. It is acknowledged that examples in each category could be found where the formula would work quite adequately. This merely emphasises the difficulty of forcing families into fixed formulae, where there is no discretion to impose a solution in line with the justice of the situation. Families risk solutions based on accident rather that any more balanced approach and in the heightened emotional tension of separation, there is a high risk of adverse reaction.


the assessment may be inappropriately low for the resident parent where: the assessment may be inappropriately high for the Non-resident parent where:
Educational expenses
Costs of disability
characteristics of this childhigh costs of contact
other responsibilities high costs of contact to other children (perhaps having special needs, eg disability or educational requirements)
Responsibilities to support other family members (disabled elder relatives—other children in tertiary education—other children living abroad
The RP has high child-care costs because of work characteristics of residential parent RP has significant resources (for example, capital, income or maintenance for other children)
RP has repartnered with person of such resources.
The NRP is relatively well off in capital terms but has a low income

The NRP has repartnered with someone able to make a substantial contribution to the overall household budget which would ordinarily release more income for the needs of the child

The NRP has complex financial arrangements (deliberate or otherwise) which are beyond the capabilities of the CS staff—or more likely beyond those of the CS scheme which does not have the forensic capacities of the court
characteristics of non-residential parent High housing costs
Contributions to discharge indebtedness (including the obligation of the income payments order on bankruptcy)


EXAMPLES OF CASES SHOWING THE INADEQUACY OF THE FORMULA TO PROVIDE APPROPRIATE RESOLUTIONS AS PART OF THE OVERALL PACKAGE OF PROVISION

  28.  The above table can be related to a sample of families for whom the writer has acted in the past year. (The writer could have taken a cross-section of clients of any member of the Association to give a similar range but is better able to address any issues that members may wish to raise about these families, because of his knowledge of their background).

CHARACTERISTICS OF THIS CHILD

  29.  Mr A and Ms X never married; they are both committed to their disabled daughter and she shares time with them. Mr A is well off in capital terms but less so in income terms. Ms X would not be in a position to seek a contribution towards the daughter's high costs; (and under the reformed scheme there would be increased conflict over contact because of the increased financial impact. Effectively mother would be likely to block the daughter seeing her father because of the loss of income to meet overall household bills—which do not end just because the child is staying away)

  30.  Mrs K earns considerably more than Mr K; theirs has been a divorce with high conflict; contact with the children has been blocked. Mr K is committed to continuing school fees payments because first this is the only contact that in effect he has with the children and secondly he believes that it is the route by which his relationship with them will be rehabilitated. However, Mr K will face paying 20 per cent of his income, a proportion of fees running at approximately £12,000 p/a, which cannot be afforded given that at separation he was earning very well and most of the matrimonial capital passed to the former wife. His net assets are now about £10,000 and hers are about £600,000.

  31.  Alternatively, one envisages Mrs S, who has remarried and is in a position to fund private schooling for her daughter who is a talented musician. The government makes no mention of any court power to enable her to seek a contribution towards these costs from the child's father.

OTHER RESPONSIBILITIES

  32.  Mr H has two children at university/ about to enter it and are receiving substantial support from him under a court order. He has separated from the mother of his third child who is aged 12. He must pay the CSA 15 per cent of his net income and continue to support the elder boys. He has few capital resources yet his work requires him to be in London where housing costs are high. The CSA figure would be £4,500; he is due to pay £6,000 to the boys at university and yet must find £10,000 to pay for his housing; this leaves him with £9,500 (or 31 per cent of his income) for his general living costs. The mother of the youngest child is very wealthy from a previous relationship and has three properties worth over three-quarters of a million pounds.

CHARACTERISTICS OF RESIDENTIAL PARENT

  33.  Parents who have never married can face child support percentages that can be too low to enable them to fund the child-care they need to get back into the work-place, particularly for the demanding jobs where there may need to be flexibility over hours. Estate agent former client Ms X would have faced this problem. At present, the tax operates at the rate of 50 pence in the pound until a certain threshhold is reached. Afterwards where there is one child, the tax is at the rate of 15 per cent (it happens to coincide with the government proposal). The effect is that at present the bulk of the maintenance can be provided by the lower levels of income. Here the father's self-employed income is likely to show at about £12,000 after tax and national insurance (no pension contributions); he is capital rich and so has little by way of housing costs. Under the existing scheme, he would be paying about £1,820 from the first £3,640 of his income and £1,250 from the balance, a total of about £3,000. Under the new scheme, that would drop to about £1,800, an insufficient contribution for the mother to meet child-care costs thus preventing her from continuing in her pre-separation career. Were the father to have a second child in a casual relationship, this contribution would drop to £1,200

  34.  Mr A has an income of £11,000; his wife has an income of £8,500 and has inherited money. Child maintenance was agreed at £1,000 for the three children, an appropriate figure given Mr A's high re-housing costs. Under the new scheme, the children would command £2,500. If the figures were annual, this would be an insupportable burden for Mr A. In fact the sums are monthly; on top of her own earnings of about £100,000, Mrs A has £30,000 to maintain the children a year. The situation becomes stranger still if the mother then has a non-committed relationship with a colleague at work and a child is born. She may then be in a position to receive a further £15,000 (say) to give her £45,000 on which to support four children. Given that she already has her home mortgage free and still has earnings, the arrangement is likely to be regarded as inappropriate—certainly by Mr A and the work colleague.

  Under the new rules, Mr A would not be permitted to set off any school fee payments against the CSA levy. If (as is the case) Mr A is committed to private education, the Association envisages Mrs A "putting a gun to" Mr A's head, threatening to remove the children if he does not make an additional payment.

  This example is intended to show that the problems of the formula can run the gamut on families financial worth.

CHARACTERISTICS OF NON-RESIDENTIAL PARENT

  35.  It is now routine for NRPs to create companies to receive the income they formerly received directly when self-employed. The CSA generally accepts these arrangements at face value notwithstanding that income is shielded from assessment in the company. Dentist Z is able to affect his assessment by the purchase of business premises, off-setting the payments from the income that would otherwise be the subject of an assessment by the CSA. These are arrangements that would not stand up to even routine scrutiny by solicitors in the court process.

  36.  Police constable D offsets the future value of his pension against the value of the home avoiding disruption for the children but this means that he has high re-housing costs (in fact the position is exacerbated by high levels of borrowings, taken out to support lifestyle during the relationship. which he must continue to discharge. The situation is supportable whilst he can fix the level of contribution to the children at an appropriately lower level (effectively he is providing for their support by a higher level of capital provision for housing). The situation will collapse where CS contributions are imposed on him at a higher level disregarding the legitimate costs he has for housing and debt repayment.

  37.  (Surely it is a nonsense to say that Pc D contributes at the same level as someone on an equivalent level of income with no housing costs and no debts to pay? and that this remains the case when this equivalent earner then repartners with Ws X, a high-earning former colleague.

  38.  The white paper proposal offers little:

    —  it refers to a role for tribunals but there is no detailed consideration of the jurisdiction of such bodies, though there are hints that the jurisdiction will be narrow. This is likely to mean that cases of injustice will be left without redress;

    —  the current departure system merely gives licence to factor in an additional element into the formula, which often does not go to the heart of any injustice;

    —  in any event, members' experiences of tribunals is that they are unlikely to have the skills or the forensic process available to deal with the hard case.


 
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Prepared 19 October 1999