Memorandum submitted by Child Support
Action
EXECUTIVE SUMMARY
1. The Government says that a new system
of child support should be transparent. We agree. If this objective
is to mean anything more than mere words then Regulation 8 of
the Child Support (Information, Evidence and Disclosure) Regulations
1992 must be amended to authorise disclosure of information held
by the Secretary of State—or C-MEC to a parent with care.
If consenting adults have been close enough to share semen then
they can expect to be close enough to share financial information.
2. It should be recognised that having taken
away the right to go to Court to resolve the issue of child maintenance,
the State owes a legal duty of care to parents—and that
if the State negligently causes financial loss to parents then
it should be under an obligation to compensate those parents.
3. There is a real risk that the Government
objective in establishing C-MEC to assess and collect a smaller
caseload will fail.
INTRODUCTION
4. Child Support Action is a limited company,
which provides Internet advice and assistance to parents with
care and non-resident parents. Alison Davies is a director of
the company as a result of her own dealings with the CSA.
5. Alison Davies was badly let down by the
CSA in her own assessment. The lack of information disclosed to
her about the circumstances of the NRP made it impossible to understand
whether or not the calculation undertaken by the CSA was correct.
In her case the NRP had income from two sources. The CSA was specifically
made aware of this fact and confirmed that income from both sources
was included in the assessment. Some four years after information
was received it was discovered that the CSA had never in fact
taken into account both sources of income in the assessment—causing
her substantial financial loss. Alison Davies sued the CSA and,
much to her surprise, they stated in their defence that they owed
no legal "duty of care"' to her. Her case was proceeding
to the Court of Appeal in 2005—but the CSA paid her arrears
prior to the case coming to Court so her case was never heard.
The two essential issues deriving from this case have still not
been resolved, namely:
— transparency in the assessment
process, and
— the extent of any "duty
of care" owed by the CSA.
Question 1—Key Principles
6. Child Support Action supports the key
principles about encouraging action to support services by parents
with care and non-resident parents. It is essential that C-MEC
is perceived as an organisation that is prepared to listen. Our
experience to date is that the CSA is arrogant and prepared to
listen neither to a PWC or an NRP. It will be essential to engage
an NRP in discussions from the outset—but that if engagement
is not reciprocated then early action from C-MEC should be taken.
7. Our concern is that C-MEC seems to be
set up on the premise that it will have a smaller caseload dealing
with fewer—but more complex—cases. Our immediate comment
is that there is a high risk that this objective will fail from
the outset because:
— If Courts have been given jurisdiction
then difficult cases would have been taken away from C-MEC. The
Government has rejected this proposal.
— Unless private agreements can
be registered (and then enforced) by C-MEC it seems that no PWC
would have a real interest in negotiating an agreement, which
would be unenforceable.
— The laudable objective of giving
PWCs the right to keep more maintenance paid is likely to result
in more applications being made to C-MEC than before—and
the client base who have an assessment are more likely (quite
properly) to contact C-MEC on a more regular basis to ensure maintenance
is actually paid.
— C-MEC has said that it intends
to renew applications on an annual basis based on the last tax
return of an NRP. We do not understand why a PWC would be expected
to enter into a private agreement which would be expected to run
indefinitely and which would not be automatically updated to take
into account any increased salary by the NRP. The Committee must
understand that it is emotionally draining on an annual basis
for a PWC to have to review their financial circumstances with
an NRP—whom by definition they no longer want to have a
close association with. An application to C-MEC would (as it now
stands) allow parents to "set and forget" an assessment
without having to go through the emotionally draining requirement
of renewing contact with a former partner on an annual basis.
8. We entirely endorse the Government's
wish to have a simple and transparent system (paragraph 1.28)
but we believe that these are weasel words. To be transparent
it is essential that source documentation used by the CSA to make
a calculation are disclosed to a PWC so that the PWC can form
an assessment about whether or not the assessment is correct.
We see that in paragraph 2.19 the Government recognises that some
parents will not be in a position to facilitate their own arrangements
without help and that effective information will need to be available.
We would say that if C-MEC intends to rely on an income tax return
for the purposes of an assessment then at the very least C-MEC
should procure the last income tax return from the NRP and produce
it to the PWC who would then be in a position to judge whether
or not any private agreement was realistic.
9. Whilst we share the objectives of the
Government, we do not share their optimism.
Question 2
10. The Governance of C-MEC is largely irrelevant
to its users. We do however have concerns that at the moment a
Minister of State is nominally responsible for the delivery of
child maintenance. We have serious reservations about the fact
that this is simply an opportunity to allow Government to get
"off the hook" and be able to say "its not our
fault". We are very sceptical of Government motives. It is
well known that MPs face huge post bags in relation to constituents
problems with the CSA. At present at least the Minister is theoretically
responsible.
Question 3—Principles for moving forward
11. We recognise that the Government has
a problem. The Government was plainly unable to resolve the history
of moving cases from the "old scheme" to the "new
scheme". Our fear is that once again parents with care will
suffer. If, for example, an application to C-MEC would result
in a higher assessment then why should parents with care be "stuck"
on the "new scheme" and prevented from making an application.
Why should parents with care have to wait until 2012-13 before
making an application under a scheme that the Government says
will be "improved".
Question 4—Simpler assessment formula
12. We all agree that we need a quicker
slicker system but we have grave problems with the objectives
set out by the Government since "the devil is in the detail"—and
we do not know exactly what is proposed.
13. We do know that the Government's previous
attempts to renew assessments on an annual basis failed—there
was simply too much work. There is a real risk that the Government
will be "swamped".
14. It seems to us that the Government is,
through the back door, massively seeking to change the principles
of assessment. The change from net to gross income is only a small
part of the change—at present only earned income is generally
included in an assessment. Are we correct in understanding that
the change to gross income will henceforth mean that income received
by an NRP from, for example, rent, dividends, bank interest, directors
emoluments, benefits from employment etc are now going to be included
as income available for assessment—we are surprised (to
say the least) that the Government has not made its position clear
since this would potentially result in a very significant increase
in maintenance available for children.
15. On the other hand we still have problems
with the reliance on latest available tax year information. What
if an NRP does not file a tax return on time or at all? What if
a tax return is false? The CSA has proved itself utterly incapable
of investigating fraud without the involvement of a PWC. Committee
MP's will know about the problems of their constituents in this
regard. There is a real and grave risk that the legitimate interests
of a PWC will be ignored.
16. We have further concerns. What if, for
example, an NRP has entered into a legitimate tax mitigation scheme
such as the purchase of an enterprise zone trust scheme endorsed
by the Government—which has the effect of reducing income
tax payments. Would income available to a PWC be correspondingly
reduced. Would the outcome of the case in Smith v Smith which
went to the House of Lords be different? The Government has purported
to make a very complex issue appear very simple. How would variations
be dealt with—eg lifestyle inconsistent with income.
17. The Governments stated objective of
ensuring transparency (which we endorse) will fail unless the
Government/C-MEC will produce to a PWC all of the core information
relied on by it in preparing an assessment.
18. We would call for information available
from HM Revenue and Customs to be used as part of the assessment
process—rather than requiring it to be the only piece of
information to enable an assessment to be carried out. The Government
may wish that family circumstances were simple—but our experience
is that they are not.
Question 5—Three approaches
19. We support paragraph 4.27—it is
essential to count all children supported by an NRP whether under
the child maintenance scheme or other arrangement. We agree that
it would be necessary to prepare a notional assessment.
Question 6—Approaches to enforcement
20. We agree that enforcement should be
a priority if an NRP defaults.
Question 7—Administrative enforcement
21. We are sceptical about administrative
enforcement, which seemed to take away valuable rights of a citizen.
To be blunt the mistakes of the past show that the CSA cannot
be trusted. Administrative enforcement in the future may cause
immense hardship for vulnerable (and poor) NRPs who often do not
have access to good quality, affordable, specialist legal advice.
The imposition of a charging order or administrative removal of
a driving licence could cause tremendous hardship—in entirely
inappropriate circumstances. Once again we can only repeat our
concerns about the lack of legal duty of care the CSA (and presumably
C-MEC) claims to owe. If mistakes were made which caused loss
would C-MEC pay? "Naming and shaming" is an irrelevance
which will have no impact on collection of child maintenance—seizing
goods of an NRP such as a few sports cars would be much more effective.
Question 8—Chasing collectable debt
22. It is important to attempt to recover
collectable debt. In circumstances where CSA maladministration
has caused the parent with care financial loss then the CSA/C-MEC
should pay. The Department for Work and Pensions does not seem
to make reference to its own guide called `Financial Redress for
Maladministration'. Our view is that very few users of the service
are aware of this publication. The CSA should notify parents with
care (and NRPs) about this document so that people should be encouraged
to make a claim for compensation against the CSA in circumstances
where their maladministration has caused financial loss. At present
only those who know about the policy and push the guide make claims.
Question 9—Write off powers
23. Our view is that much of the debt is
for all intents and purposes practically irrecoverable. The CSA
should write this off and pay compensation to the parent with
care. If the Government then wants to factor off the remaining
debts to recover part of its losses then this is a matter for
the Government.
9 January 2007
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