Select Committee on Social Security Minutes of Evidence

Examination of witnesses (Questions 440 - 448)



Mrs Humble

  440. Can I explore with you a little your concern about the treatment of second families which you believe is too generous, especially the proposal to include step children, indeed any children, of the second family. Again, I was trying to follow the statistical information about the impact of any changes on second families. There is an assertion in the document, and you made it yourself, about the absent parent being better off under these changes and if there was an impact it would be marginal on them. I was interested in the way that you were talking about the absent parents in poverty being a smaller group than the parents with care. Many of the constituency cases that I get are not absent parents who are in poverty but absent parents who are in extreme financial difficulty. They may actually have a very reasonable income but their outgoings are such that it means when they are required to make their child maintenance payments they have hardly anything left to live on and that is obviously to do with the individual circumstances of the case, often to do with how they accepted debts at the break up of the relationship. I wonder if in your research you have been looking at people who may on the basis of their income appear to be well off but because you do not know, I do not know how you can know, all of their outgoings, in fact there are a lot of absent parents who are in financial difficulty in making their child maintenance payments?
  (Professor Walker) The figures that you have heard are based upon DSS equivalisation methods which adjust only for the family circumstances of the household. The concept of poverty that we use is the HBAI before housing costs concept. We do not allow for differences in housing costs to make a difference to people's welfare levels, which we could do. We could redefine these poverty levels to account for housing costs, but housing costs are not that well recorded in the data so we would be introducing some prospect of measurement error.

  441. I am simply pointing out that there are a lot of people out there who do not fit your statistical data and they are likely to be the ones who come knocking on my door.
  (Professor Walker) Sure.

  442. Linked into that is again your concern about dual earner households. Under the existing horrendously complex procedure, as I understand it, the new partner of the absent parent, her income is not taken into account in the assessment of the child maintenance but it is taken into account in the computation on the residual income that must remain to that second family. So many of those new partners bitterly resent that their income is taken into account, as they see it, in maintaining that first family. You appear to be saying that it ought to be taken into account. Am I right in saying that?
  (Professor Walker) I think we have tried to step back from normative judgments like that.


  443. Lucky you!
  (Professor Walker) We are telling you what the implications are in terms of people's net incomes. The source of those net incomes is a separate issue. One of the things that we aim to do in the next two years, funded by the Nuffield Foundation grant, is to look at the wider incentive effects of child support design. For example, asking questions, like "Is it the case that by imposing a tax on new partner's income by making it part of the child support formula that you change the incentives for re-partnering?" Re-partnering is a choice that people make. It seems a little odd to give a lot of weight to the implications of those choices.

Mrs Humble

  444. There is also the important issue of fraud and absent parents who do not declare that they either have a new partner or that their new partner is earning any income so that is not taken into account. The proposals in the White Paper are to change the rules and regulations about giving false information to the Child Support Agency. Can you take that into account when you are looking at your statistics?
  (Professor Walker) To a limited extent. Clearly the existing formula is complicated and not only is it complicated and requires lots of information, that information is often hard to verify and perhaps easy for the individuals concerned to manipulate. The additional enforcement resources that the CSA will have at its disposal, to wage withhold and so on, seem to me to be a move likely to promote compliance but we cannot precisely say how because we have never had the evidence that allows us to draw that implication from history.

Dr Naysmith

  445. How about in America? You have got studies in America saying that compliance does not necessarily increase with simplicity.
  (Professor Walker) That is right.

  446. What about bringing in the kinds of measures that Joan is talking about that are mentioned in the White Paper, are they tried anywhere in America?
  (Professor Walker) I do not recall any US evidence specifically on that point.

  447. It is variable, not just simplicity, there are other things as well that would have a much bigger effect.
  (Professor Walker) You are perfectly right. The incentive implications of these things are going to be very complicated because there is a large number of players who have an input into these calculations.
  (Dr Paull) One thing we did look at in our data was to see whether compliance changes for individuals who have more complicated assessments. For example, with absent parents who have partners, we see a very different compliance rate because in our survey data we do know what the new partner is earning, so we can get a measure on whether compliance is partly due to fraud or partly due to the fact that the absent father just is not paying his full assessed liability. We can see that in the survey data and we can look at that as well.


  448. It has been a very interesting session. I am still struggling to try and work out what it is you want us to do with all this important work. You used the phrase in the penultimate sentence on the back of the sheet you have given us, "Do not fudge the issues with transition arrangements". What does this actually mean briefly?
  (Professor Walker) There is a tendency when implementing changes to take a very short-term view of evaluating the impact of those changes and since people may be tempted to do that, politicians may be tempted to place a disproportionate amount of weight on people who are current losers under the reform, forgetting that there are future generations of separated couples out there that are also going to be affected by the reform. We are redesigning child support for the long term and I think we ought to take into account long-term issues, so it is important to get these things straight in our minds without confusing the issue with short-term considerations.

  Chairman: Thank you very much for your attendance this morning. It has been very interesting and we look forward to getting copies of the data when they are ready.

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