Memorandum submitted by Resolution
EXECUTIVE SUMMARY
Resolution are particularly concerned about
the following aspects of the White Paper:
— Shared Care—the lack of
clarity in respect of the future provisions.
— Enforcement—the implicit
assumption that more draconian powers and administrative enforcement
will improve the situation.
— The approach to the "historic"
debt, how it will be managed and the issue of write offs.
— The impact of gross income on
the future C-MEC caseload.
— Lack of Examination of the role
of the court.
INTRODUCTION
— Resolution is an organisation
of 5,000 family lawyers who are committed to promoting a constructive
approach to the resolution of family disputes. With each separating
couple, comes the responsibility of discussing and negotiating
future child maintenance payments, or assisting clients to do
so directly (sometimes through alternative dispute resolution
processes). As such, Resolution are in the unique position of
having substantial practical knowledge about how the child support
system works, as they have to deal with the CSA on a daily basis,
both in respect of the parent with care (PWC) and non resident
parent (NRP).
— Kim Fellowes is the Chair of
Resolutions CSA Committee and a National Committee member, with
considerable expertise in all aspects of child support law, since
July 1993, acting for both the PWC and NRP.
— Dealing with the individual
consultation questions raised in the White Paper:
Are the key principles and areas for detailed
work we have identified, the right ones?
1. The key principles of promoting greater
personal responsibility, choice for parents and the removal of
disincentives is supported. The latter is achieved in part by
removing the compulsion element[1]
and significantly increasing the benefit disregard. However, failing
to remove what is known as the "12 month rule", as proposed
by Sir David Henshaw, means there is little incentive for non
benefit cases to make private agreements. The 12 month rule generally
applies in what could be termed as "package orders",
for example, in divorcing cases, where other financial orders
are made and an agreement relating to child maintenance is also
reached. Continuing with the concept that once a Court Order has
been made, a party can apply to C-MEC for a calculation after
a 12 month period, provides a considerable disincentive to the
parties. Why reach an agreement, if after such a short period,
it can be overturned? Instability and uncertainty for the family
is created which does not facilitate consensual arrangements at
all. The problems concerning this and associated issues are detailed
in Appendix 1; Resolutions response to Sir David Henshaws Report.
2. Transparency must be integral to the
future scheme. Failure to provide details of financial disclosure
given by the parties until appeal, [2]means
that verification of information used, can only be achieved if
an appeal is issued.
3. In Australia, there is considerable investment
in engagement and signposting to relevant services at the outset.
Without such a philosophy, the Agency will continue to host the
"working out" of other disputes (eg contact or other
financial issues) between the parties, making it more likely that
enforcement procedures have to be relied upon to secure payment.
Paragraph 3.14 sets out what we hope to achieve
through a framework of objectives and principles for the new body;
are these three aims appropriate?
4. Resolution supports the stated aims.
If the aim is to empower parents to reach their own agreements,
then parents must be able to reach their own agreements and record
those obligations at court. The proposed reforms would prevent
this.
Do the principles for moving forward set out in
paragraph 3.21 provide the right approach?
5. The proposals concerning transition state
there should be focus on the poorest families first. Resolution
supports the focus on child poverty. However, the effect on the
workload that this will create for C-MEC has not been properly
considered. Incorporating a significant maintenance disregard
will provide a considerable financial incentive for a PWC to transfer
to the new scheme. Definition of "poorest families"
is likely to be problematic and create additional unnecessary
work for the new agency in prioritising which cases should be
transferred first. The simpler and arguably fairer way forward,
would be to deal with the transition of cases on a date order
basis.
Is our approach of combining a simpler assessment
formula with an exceptions regime the right one?
6. A simple assessment formula is required,
together with an exceptions regime in particular circumstances.
However, the proposals to change the current fixed percentage
formula and net income to gross income is problematic.
7. Using gross income from historic tax
year information, will cause difficulties. The self-employed,
who traditionally have been the most difficult for the Agency
to deal with, are likely to substantially increase the reviews
and appeals workload, as they will argue the information used
is wholly out of date, sometimes by one or two years. Substantial
additional resources will therefore be required to deal with the
increased workload. This potential problem must not be underestimated.
8. The appeals system has actually been
totally ignored in the White Paper. This needs to be addressed.
9. To state that last year's income will
be used, unless a person can show that their income has changed
by 25%, is extremely worrying. This percentage figure is far too
high and will create substantial financial hardship to a considerable
number of families. [3]See
attached Appendix 2 (not printed). A realistic percentage
figure has to be considered, if the aim is to restrict repeated
review applications where there is minimal change.
10. There is also concern at the proposal
to re-introduce annual periodic reviews. This has been tried in
the past and failed. The caseload of C-MEC will be considerable
in the future, particularly when the "significant benefit
disregard" cases are considered. Incorporating annual reviews
will only increase this caseload and create impossible targets
for C-MEC to achieve.
11. The White Paper states the assessment
will consider income, qualifying children, and children in the
household. There is no reference to the current shared care provisions.
Are they to be removed? Resolution is the stakeholder with practical
experience of what impact the current allowances have on a family
post separation. The provisions encourage parents to associate
the level of child maintenance with the amount of staying contact
a child should have with the other parent. Joint parenting is
discouraged, as contact costs money to the deemed parent with
care, who effectively is given a financial incentive to restrict
contact.
12. There cannot be a promotion of parties
making their own private arrangements if these shared care provisions
remain. They cause financial conflict between the parents, which
makes negotiation of private agreements difficult to reach. The
adjustment for overnight stays should be abolished. This is a
difficult issue for the Government, but has to be addressed. Resolution
would welcome a more detailed discussion orally or in writing
on this matter, as discussions here are restricted.
13. C-MEC will function more successfully
if it has removed from it, the most difficult cases. In Resolution's
experience, these are the cases in which the administrative agency
is ill-equipped to cope. Often, these matters are already being
dealt with by the Court system (ie applications for other financial
orders). Thus, we see the Agency being over-burdened unnecessarily
and a waste of resources through duplication of work. Appendix
1 again details the position in this regard.
14. Variations are key to the future scheme.
They must be considered carefully, as it is often the variations
that give rise to appeals. If the aim is to provide a streamlined
client base, the extent of the variations and their role must
be explored further. Resolution can discuss this in greater detail
when details of the proposed variations have been stated.
Which of the three approaches outlined in paragraphs
4.25 to 4.27, should be employed to determine child maintenance
liabilities?
15. Fairness cannot be achieved where the
non-qualifying children supported under alternative arrangements
are ignored. There should be excluded from the non resident person's
income, the sum of money paid pursuant to private arrangement
or Court Order. It is accepted there should be consideration of
safeguards, to ensure that an unscrupulous non-resident parent
could not seek to mislead C-MEC as to the true position, to reduce
maintenance liabilities for the "second" family.
Are there other approaches to enforcement we should
consider?
16. Curfews and the surrender of passports
are extreme measures, appropriate in only a few cases, having
limited applicability to the general caseload. The existing Agency
have the appropriate enforcement powers, but have failed to use
them. It is therefore disappointing that reformers assume that
more extensive powers will reduce the debt mountain. Resolution
believes a variety of responses are required:
16.1 There must be proper engagement with
clients at the outset to reduce the "bloody-minded"
factor which can generate non-compliance.
16.2 There must be earlier identification
of obligation to pay so that evaders are identified earlier and
before the debt grows.
16.3 The figures MUST be right. Resolution
members' experience has been that reluctance to pay results from
perceived error in many cases.
16.4 There must be better "mid-range"
enforcement options (such as fines for late payment).
16.5 And then finally, the "draconian"
enforcement powers may need to be reviewed for their effectiveness.
It is hard to do this now, when the existing agency has largely
failed to give sufficient attention to the above and is still
struggling from the historic debt generated by the earlier complex
formula.
17. The White Paper is silent as to whether
parents should be entitled to enforce their own maintenance arrears.
This needs clarification.
18. "Naming and shaming", would
also only apply to the few and raises human rights issues, as
does the reference to providing information to other organisations
such as lenders.
19. The proposed deductions of earnings
order pilot is welcomed, although it must be seen as a processing
application, rather than a default mechanism for securing payment.
Is the shift from a predominantly court based
enforcement system to an administrative approach, the right way
to make enforcement more effective?
20. Looking at historic debt,[4]
statistics state that in 65% of cases, the figures were inaccurate
in the liability order application. C-MEC should not be given
administrative enforcement powers when these problems exist.
21. Charging orders put at risk people's
homes and Parliament should not sanction an enforcement regime
that offers no safety net to address errors.
Are we right to give more focus to chasing collectable
debt?
22. Clarification is sought as to how the
interim maintenance assessments are to be revalued. If the income
information has never been given, how does C-MEC intend to revalue
this debt without this being available? Negotiated settlements
should be central to recovering historic debt, but the power to
accept any settlement should not be the decision of C-MEC, but
the PWC, to whom the debt is owed (benefit cases excepted).
23. With regard to the proposal to factor
historic debt, how will this be applied? Will the decision be
made in those cases where the arrears are the highest, or where
enforcement is deemed to be most difficult? Resolution is particularly
concerned that debts may be factored where the underlying calculation
is incorrect.
24. There is no reference to the substantial
part of the debt which is legally unrecoverable (debt more than
six years old). What are the proposals? A considerable number
of maladministration claims are looming and whilst unpalatable
to some, is an issue which cannot continue to be ignored.
Is our approach in seeking write off powers the
right one?
25. The White Paper fails to state the "very
limited circumstances" where it believes it would be appropriate
to write off debt. Thus, full comment is premature until the position
has been made clear. If write offs are to apply where the debt
is more than six years old, due to the inaction of the CSA, numerous
compensation claims will arise. This needs to be addressed.
APPENDIX 1
CSA CALCULATIONS
Assumptions
1. Father on £20,000 gross employment
income with no other sources.
2. Personal allowance is the only deduction
in arriving at his tax liability.
3. Pays contracted in rates of National
Insurance.
4. Two children, so maintenance at 15% of
gross income.
5. Tax year to 5 April 2007 figures used.
Position on £20,000 gross is as follows:
| Gross employment income
| 20,000 | |
| less: personal allowance | -5,035-
| |
| Taxable income | 14,965- |
|
| Tax at 10% on first £2,150 | 215
| |
| Tax on balance at 22% | 2,819-
| |
| Total tax | 3,034 |
|
| National Insurance contributions | 1,646-
| (11% on everything over £5,035) |
| Total tax and NIC | 4,680- |
|
| Income net of tax and NIC | 10,285-
| |
| CSA payments at 15% of gross | 3,000-
| |
| CSA payments as % of net | 29.2%
| |
| Under current scheme, pays 20% = £2,057 (as opposed to £3,000)
| | |
If pay changes by 24%:
| Gross employment income | 15,200
| |
| less: personal allowance | -5,035-
| |
| Taxable income | 10,165- |
|
| Tax at 10% on first £2,150 | 215
| |
| Tax on balance at 22% | 1,763-
| |
| Total tax | 1,978 |
|
| National Insurance contributions | 1,118-
| (11% on everything over £5,035) |
| Total tax and NIC | 3,096- |
|
| Income net of tax and NIC | 7,069-
| |
| CSA payments at 15% of £20,000 | 3,000-
| |
| CSA payments as % of net | 42.4%
| |
1
Section 6 Child Support Act 1991. Back
2
Regulation 8 Child Support (Information, Evidence and Disclosure)
Regulations 1992. Back
3
Example of person on £20,000 gross, with a change to his
income by 24% (just less than 25% threshold). Back
4
National Audit Office Report 2006. Back
| 
