Memorandum submitted by Professor Stephen
McKay
SUMMARY OF
SOME KEY
POINTS
— Whilst there is public consensus
that NRPs should pay for their children, even quite basic details
of the appropriate calculation are controversial (PWC income,
overnight stays, second families).
— The White Paper does not mention
how the level of proposed maintenance was calculated, and if it
is intended to reflect the costs of raising children. This contrasts
markedly with the recent reform process in Australia, where it
was central.
— If there is no maximum award, then
the formula may reflect children sharing in NRP living standards
and not poverty alleviation. Using gross income and fixed percentages
implies that higher earners will pay an increasing percentage
of their disposable income in child support.
— Where the formula is used, it seems
that NRPs with one child will pay less (or, from the PWC perspective,
receive less), NRPs with three or more children will pay more
and, those with two children will pay roughly the same.
— The White Paper appears to have no
recognition for different patterns of care, including shared care
and the effect of overnight stays—long a difficult area.
— It remains to be seen how far parents
will "negotiate" a private agreement in the shadow of
a fixed formula that is widely known about and easily calculated.
— Joint birth registration may have
important general merits but may become confused with a tactical
approach to tackle paternity issues for a minority of child support
cases (many currently compelled to use the CSA).
BACKGROUND
1. In 2006 the Government finally lost patience
with trying to make child support—and especially the Child
Support Agency (CSA)—work as it was intended. Following
the failure of its earlier reforms to make progress, and continued
poor performance statistics, a new approach was thought to be
needed. An independent review (under Sir David Henshaw) was started
in February 2006 and reported in July (with an accompanying DWP
response). In December 2006 a DWP White Paper set out a new direction
for child support, with a greater emphasis on people making their
own arrangements and the proposal for a new body with strengthened
enforcement powers. The policy emphasis strongly shifted towards
reducing child poverty as the primary objective. Proposals for
child support reform have thus taken less than a year from announcing
an external review until the publication of the White Paper.
2. This initial analysis of the 2006 White
Paper inevitably focuses on areas of concern and uncertainty.
It is, however, good to see the difficult issues of child maintenance
being given a high priority.
PUBLIC ATTITUDES
TO CHILD
SUPPORT
3. Government wants the non-payment of child
support to be socially unacceptable; Hutton (December 2006) "I
hope that the reforms that I am bringing forward today will succeed
in bearing down on the unacceptable culture that has grown up
that says that it is okay for people not to pay for their kids.
It is not". However, it has proved difficult to design
a child maintenance system that commands widespread consensus
and on many points of detail there many people (not a small "hard
core") who disagree with key aspects of the system.
There is consensus that people should pay, but the calculation
has very controversial elements, as we now see.
4. The gaps between beliefs and the system
are quite wide. In Table 1, using a survey from March 2004, we
show the answers to some key questions apparently in conflict
with the direction of the White Paper reforms:
— Most people (72%) believe that the
PWC's financial circumstances should be included in any calculation
(24% disagree, 3% unsure).
— Few believe (25%) in taking account
of second families (8% unsure).
— A slim majority (54%) believe in
discounts for overnight stays (11% unsure).
Table 1
ATTITUDES TOWARDS CHILD SUPPORT [N=1751]
| Per cent who agree with each statement
| Men | Women |
All |
| Do you think that a father who does not live with his child or children should always be made to make maintenance payments to support them? [YES]
| 78 | 84 | 81 |
| Do you think that the amount of maintenance a father pays for his child or children should depend on how much he earns? [YES]
| 81 | 87 | 84 |
| Do you think that the amount of maintenance the father pays for his child or children should depend on the mother's financial circumstances? [YES]
| 76 | 69
| 72 |
| Do you think that if the father has another child or children with someone else, he should be allowed to pay less maintenance for the child or children he does not live with? [YES]
| 32 | 20
| 25 |
| Do you think that maintenance payments should be a fixed proportion of the father's income regardless of how much he earns, or should there be a maximum amount of maintenance payable?
| | | |
| Per cent of income | 44 |
46 | 45 |
| Maximum | 46 | 46
| 46 |
| Don't know | 11 | 8
| 9 |
| Do you think that mothers who claim benefits should be made to claim maintenance from the father of their children through the Child Support Agency (CSA)?
| 54 | 52
| 53 |
| If mothers who claim benefits receive maintenance payments for their children, do you think that they should be able to keep some or all of these maintenance payments or should they go to the government?
| | | |
| Mother should keep all maintenance | 51
| 51 | 51 |
| Mother should keep some maintenance | 30
| 28 | 29 |
| All maintenance should go to the Government
| 11 | 9 | 10 |
| Don't know | 8 | 12
| 10 |
| When children live with their mother but often stay overnight with their father, should this be taken into account when calculating his maintenance payments [YES]
| 55 | 53
| 54 |
Source: National Statistics Omnibus Survey—March
2004, own tabulations
Questions in bold italics seem at odds with the
direction of policy in the White Paper
THE CHILD
SUPPORT WHITE
PAPER: FROM
CSA TO C-MEC
Aims
5. The 2006 White Paper set out four principles for the
reform of child maintenance. To: Help tackle child poverty; Promote
parental responsibility; Provide a cost-effective and professional
service; Be simple and transparent. (DWP 2006: paragraph 1.28).
Crucially it identifies "tackling child poverty the first
and most critical test for reform".
6. Many of these objectives reflect those of Henshaw
(2006), but a potentially missing element he identified is that
the structure needs to be "fair, credible and accepted
as legitimate" (p16). The White Paper does not mention
how the level of proposed maintenance was calculated, and if it
is intended to reflect the costs of raising children or some other
criterion.
7. This contrasts markedly with the recent reform process
in Australia, where issues of fairness in meeting the costs of
children were paramount. This led to key changes—such as
taking account of the higher costs of teenage children, and including
both NRP and PWC income (see Appendix 1 for details and sources).
Timing
8. The proposals will take until 2013 to be fully implemented,
it seems. If so, it seems likely that for a while there will be
"old rules", "new rules" and "newer rules"
cases all running alongside each other. This is likely put pressure
on who is allowed to "convert" (and who is not) between
systems.
C-MEC's status
9. Making C-MEC a "non-departmental public body"
(NDPB) is quite a significant reform, and it remains to be seen
how much it operates (or should operate) at arms length from ministers.
In particular, it will have considerable powers and the ability
(it seems) to easily access HMRC data. Most other NPPBs seem to
be quite small, and advisory in tone, often concerned with appeals
or regulation (like the Food Standards Agency, Office for Fair
Access, the Research Councils, the Pension Protection Fund). A
body with such extensive powers, and designed to raise a lot of
money, looks like a new departure. Henshaw wanted no mass conversion
of cases from CSA to C-MEC, [64]but
this seems the current direction.
Features of the proposed (White Paper) formula
10. The White Paper proposes a simplified assessment
formula for child support. Child support is expected to be set
at 10%, 15% or 20% of gross income for one, two and three or more
children. There are reductions for so-called "second families".
11. Two key aspects used in past CSA algorithms appear
to have been dropped: a maximum level, and deductions for overnight
stays, which we discuss below.
12. The use of tax information follows practice elsewhere
(eg Australia) and has long been suggested. Fixed-term awards
should dispense with too many reassessments thwarting accurate
assessments and enforcement.
No maximum
13. The new formula lacks an overall maximum—at
least this is not mentioned in the White Paper. If there is no
maximum, then in some cases the formula becomes about children/PWCs
sharing in NRP living standards (across families) and not poverty
alleviation, even though the latter seems the key objective of
the reform. There may be good arguments for not limiting child
support, but the effect of not having a maximum takes the calculation
to potentially very high levels (in a few cases) and risks alienating
a relatively influential group—it might also affect the
discussion in cases where top-up maintenance (such as for school
fees) is sought in the courts. It might be thought that the lesson
of CSA mark i was that alienating the highest income NRPs generated
more adverse heat and publicity than was really worth it. CSA
mark ii included a high maximum.
Shared care and overnight stays
14. The new formula does not appear to have any provision
for the sharing of care by parents, a radical departure from the
past formulas used in the UK (and elsewhere). At present, each
night that children spend with the NRP each week (minimum 52 per
year) reduces child support by 1/7. So, calculations may be reduced
by 14%, 29% and 43% if care is shared for 1, 2 or 3 nights a week.
Clearly, those with care of this kind would face substantial increases
in the levels of child support expected, if their ex-partners
opted to use the new C-MEC formula (as they are legally entitled
to do). A parent with 51% care could go to C-MEC and would receive
the same level of maintenance as a parent with 100% care. These
are rare, but not wholly exceptional, cases, and easily seized
upon as examples of unfairness by those seeking to challenge the
system.
15. This is a tricky area. There are good reasons not
to mix up cash and care. However, having no recognition at all
for the sharing of parenting brings a focus on the money that
NRPs can provide, to the exclusion of other roles they may play
in their children's lives. The existing formula is already used
as a guide by those going through the courts or sorting out their
own arrangements where such considerations may be more common
than for current CSA cases.
16. The extreme case of overnight stays is where care
is shared 50:50. Henshaw wanted to exempt such cases from the
child support formula, [65]but
the White Paper is silent on this matter. This implies treatment
as now, where even exactly shared care gives rise to a liability.
Nor should there be any presumption that those with shared care
are always those able to resolve things amicably—indeed
shared care residence orders have been used to help settle acrimonious
cases between parents. [66]
Benefit recipients to pay £7
17. Taking £7 from benefit recipients means taking
money from one of the poorest groups in society in order to marginally
offset the poverty of another poor group. This is particularly
punitive given that single people receive just about the lowest
amounts of anyone receiving benefits (especially those under 25:
£45.50 a week). In Table 2 we show benefit rates (JSA, IS
and child tax credits) for a single NRP and a lone parent PWC
with one child. PWCs are clearly badly off, but (even with just
one child) have double the income of single NRPs before any child
support is paid.
18. A single male aged 18-24 would be expected to survive
on £38.50 pw, compared with the PWC's income exceeding £126.
It is difficult to see how a NRP in such circumstances would be
able to spend much (if anything) on their children from such an
income (such as costs of visiting them, presents, etc).
Table 2
INCOMES WHERE BOTH NRPs AND PWC ARE OUT OF WORK
| Age | NRP income
| PWC income | Ratio of incomes
| Money difference |
| -Before child support |
| | | |
| 18-24 years | £45.50 |
£119.28 | 2.6 | £73.78
|
| 25-59 years | £57.45 |
£119.28 | 2.1 | £61.83
|
| After £7 child support is paid |
| | |
|
| 18-24 years | £38.50 |
£126.28 | 3.3 | £87.78
|
| 25-59 years | £50.45 |
£126.28 | 2.5 | £75.83
|
Non-working NRP and non-working PWC, one relevant child with PWC.
In practice costs of housing and Council Tax are also likely to
be met
Comparison of amounts—NRP not receiving-benefits
19. A fixed percentage of gross income equates to a rising
proportion of disposable income in a progressive tax system, so
those on higher incomes (particularly higher rate taxpayers) are
likely to face the greatest changes in levels of assessments—leaving
aside issues of shared care.
20. Economic theory would tend to suggest that spending
on children increases as income rises, but falls as a percentage.
In the existing formula, a constant share of net income is payable
as child support. The proposed formula would mean some NRPs spending
an increasing proportion of their disposable income, as
their incomes rose.
21. However, most of those affected by child support
reform are likely to be on more modest incomes—the kinds
illustrated in Figure 1.
22. Generally speaking for those in this denser part
of the income distribution:
— those with one relevant child will pay less (or,
from the PWC perspective, receive less);
— those with three or more children will pay more
(or, from the PWC perspective, receive more); and
— those with two children will pay roughly the same.
23. In any event, there are likely to be a large number
of potential "winners" and "losers", comparing
the old, new and even newer assessment formulas. For those on
higher incomes, the extra amounts paid by those with three or
more children, can be substantial—see Chart in Appendix
2. Those few fortunate to be earning £80,000 would be paying
an extra £55 per week for three children (taking 20% of gross
income compared with 25% of net income). Conversely, with one
qualifying child and an NRP earning £15,000, the PWC might
lose about £6 per week.
24. It is worth stressing that these calculations do
not include pension contributions, whose role in the new system
is unclear. [67]
Note: "old" means the 2003 formula and "new"
means the formula proposed in the 2006 White Paper. The 2003 formula
is generally thought to have lowered average child support for
those with a positive assessment, compared to the prior very complex
formula, whilst increasing the number needing to pay some level
of child support (ie fewer zero assessments).
Historic income information
25. Where people are unable to reach their own agreement,
a new even simpler formula will be applied. It will be based on
gross income, and use income data from the tax authorities. In
a sentence that appears to belie several years of problems with
tax credits and income volatility, the DWP is happy to: "believe
that historic tax income information is close enough to the current
financial position of most non-resident parents at the time to
be an acceptable and sufficiently robust basis for assessment"
(DWP: p 61).
26. This historic approach may make it difficult to claim
that one is paying/receiving the equivalent of the "C-MEC
rate", without keeping accurate records of past income and
tax paid.
Exclusion of PWC income
27. Most US States uses a shared-incomes approach where
the income of both NRP and PWC is included (see http://www.ncsl.org/programs/cyf/models.htm).
Australia is introducing such a system (see Appendix 1), and it
was used in CSA mark i. However, both CSA mark ii, and the proposed
changes, as well as many jurisdictions, ignore PWC income.
28. Including PWC incomes would mean collecting an additional
piece of data, but one already generally available for tax credit
purposes and where there are few incentives not to co-operate.
Its inclusion could, however, marginally reduce incentives to
work.
Fees
29. Henshaw wanted fees charged to PWCs. Without such
a fee, there is no reason for PWCs not to use the CSA as a "tactic",
he argued. The DWP's response has been to assert that NRPs would
always be the ones paying fees. Both approaches seem to neglect
a variety of charging mechanisms and potential incentive approaches.
If the logic relates to the position of children, then by extension
NRPs with dependent children might also be candidates for an exemption
from fees.
30. The fact that C-MEC fees seem likely to be payable
only by NRPs and not PWCs makes that a "power" that
PWCs might elect to use. Separation is often a difficult time,
and decisions at such a time not always entirely rational. Why
accept less than C-MEC would obtain, especially when you can hit
your ex-partner with an extra fee at the same time!
31. We might want to consider how a NRP would react,
having offered a reasonable sum of maintenance, to an assessment
that they should pay a similar (or lower) figure, and being charged
for the privilege.
32. In services exemption from fees is at least partly
based on ability to pay and not simply on (parental) status. Other
ways of using fees would be to incentivise a quick supply of information,
or to base fees on the total amount collected rather than being
flat-rate, or to consider different kinds of fees for NRPs and
PWCs. The experience with CSA mark i was that within a few years
fees were abandoned in the light of poor delivery, and their addition
to arrears makes for a higher level of debt owed to the state.
Negotiation and private arrangements
33. A key aim of the proposed reform (for both Henshaw
and DWP) was that parents should be expected to agree a relevant
figure between themselves. However, such discussions might occur
at a stressful time, when an independent ("objective")
figure might be preferable. It remains to be seen how far parents
will "negotiate" a private agreement in the shadow of
a fixed formula that is widely known about and easily calculated.
During any discussions one parent can always turn round and say
that they can get more (or pay less) if they go to C-MEC.
A register of child support agreements
34. The White Paper mentions, as a possible information
source, "a register of private maintenance agreements
made available via the helpline and a website." (paragraph
2.28) but nowhere discusses how this is to happen. The only other
mention is in a consultation question.
Joint registration of births
35. It is a laudable idea that children should be aware
of their parentage, and have this recorded on the birth certificate.
Since December 2003 their inclusion on the birth certificate has
conveyed parental responsibility on unmarried fathers. However,
whilst this is not spelled out, the key relevance to child support
legislation is likely to be the way that parentage may be deemed
(rather than having to be proved). At present, married couples
and those couples both identified on birth certificates are assumed
to be liable for child support, and the onus to disprove this
is on the putative father (and this may be onerous in practice).
Where the father is not named, there is more of an onus on the
CSA to prove paternity (e.g. through DNA testing).
36. So this reform—which has merits on other grounds—may
become confused with a tactical approach to tackle paternity issues
for a proportion of child support cases. The use of paternity
establishment in-hospital is credited with increasing child
support for unmarried parents. In the UK, births need not be registered
for 42 days, and this may be at a register office (though can
be in hospital).
37. An immediate question is the role that fathers would
play in having to confirm their paternity. If attendance is needed
(currently it isn't needed for married couples, but is needed
for unmarried couples) how could this be enforced? If attendance
isn't needed, would those so named be informed about their inclusion?
Well-handled, this could be a valuable change to treat married
and cohabiting couples in comparable ways—badly handled
this could create problems of proof and actions against incorrect
assignments of paternity.
Enforcement
38. The CPAG Debt Handbook 2006-07 (p75) notes that even
within the existing framework, "The enforcement powers
of the CSA are potentially draconian". This contrasts
rather markedly with the Government's perception of having "only
limited incentives and tools to ensure compliance" (p22).
The CSA White Paper proposes to do away with the need to obtain
a Liability Order (LO) from a magistrates court, which is currently
the key gateway to further enforcement action (apart from DEOs
which CSA may issue). It argues that obtaining LOs is "a
slow process that takes on average more than 100 days to complete".
However, the reasons for this slow speed are not described, and
this is in principle a significant change to the enforcement procedure.
39. CSA has managed to double the number of LOs it obtains
in the last year (to 12,000), which was below 4,000 on a few years
ago. However, by comparison Local Authorities may obtain over
2.2 million such orders in the space of a year (Hansard,
14 May 2003 col 304W data for 2000-01 for England). Whilst Magistrates
are heavily restricted in what they may challenge, the poor accuracy
record of the CSA's assessments makes this a potentially quite
concerning development, particularly for those who tend to ignore
repeated reminders relating to legal action. In 2005 the Child
Support Agency Standards Committee reported to the Work and Pensions
Select Committee that 65% of the cases where a liability order
was sought were inaccurate or procedurally incorrect in some way.
[Work and Pensions Select Committee minutes of oral evidence given
on 15 February 2006, HC920-i]. This was based on a small sample
of 54 cases from 2003-04. I'm not aware of more recent figures,
and "The Standards Committee has not met since September
2005 due to the departure of its Chairperson. The Standards Committee
will be reformed during 2006-07." (Child Support Agency
Annual Report and Accounts 2005-06, p28)
40. The use of credit reference agencies seems overdue,
and (in common with student loans) it will be interesting to see
how the agencies and their clients make use of such data drawn
from Governmental policies. This approach might be particularly
effective for dealing with the self-employed who rely on various
forms of credit.
41. Other parts of the public sector face difficulties
in enforcing monies owed, but there are examples of success. In
2002-03 collection rates for magistrates fines were only 55%,
but stronger enforcement increased this to 80% by 2005-06 (Lords
Hansard 19 June 2006).
Website—naming and shaming
42. Many US states make use of "ten most wanted"
webpages for those with the highest arrears—typically to
help trace them. There is no real evidence on their effectiveness.
Often those with relatively low-paying jobs are said to owe tens
of thousands of dollars. This eye-catching initiative seems less
familiar to the UK, where we do not have lists collated relating
to very serious criminal offenders, lists of sex offenders, or
ASBOs and the like. It would also, presumably, run risks of identifying
the children affected and their reactions to seeing in their fathers
on such a public site would be of interest (to say the least)
and perhaps not in their best interests.
43. Approaching half those responding to the BBC-news
feedback service ("Have your say") adopted a view that
absent parents (fathers) should only be confronted by those powers
that also apply to parents (mothers) "blocking" contact
with children. These are important issues that are rightly kept
separate but the F4J "case" does seem to have caught
on in the public imagination. [68]It
seems there is some anxiety about tougher maintenance enforcement
powers (whilst clearly needed and overdue) without courts being—seen
to—enforce contact orders. [69]Reviews
of the working of family courts explicit rejected the idea of
electronic tagging (curfews), which the White Paper wishes to
apply to noncompliant NRPs. In both cases, however, the value
of such a punitive measure is hard to fathom and the causal process
for how it would have an effect rather opaque.
APPENDIX 1
SOME KEY ASPECTS OF RECENT REFORM IN AUSTRALIA
44. Details of the reforms in 2006-08 are available here:
http://www.facsia.gov.au/internet/facsinternet.nsf/family/childsupport_reforms.htm
45. Some key highlights from the summary report (available
at
http://www.facsia.gov.au/internet/facsinternet.nsf/via/childcare/$file/summary_report_15jun2005.pdf)
include:
46. "The child support formula should provide a
transparently fair basis for calculating child support. This requirement
cannot be met if the Scheme aims to fulfil objectives other than
sharing the costs of children equitably between the parents. For
that reason, it is proper that child support obligations be based
on the best available evidence of how much children cost to parents
with different levels of combined household income."
— "child support payments will be calculated
based on the actual costs of children;
— the combined income of both parents will be used
to calculate child support payments, treating the income of both
parents in the same way;
— both parents' contributions to the cost of their
children through care and contact will be recognised; and
— children of first and second families will be
treated more equally."
"The costs of children for the purposes of calculating
child support should reflect the following:
— Expenditure on children rises with age.
— As income rises, expenditure on children rises
in absolute terms, but declines in percentage terms."
Potential child support calculations
Note: "old" means the 2003 formula and "new"
means the formula proposed in the 2006 White Paper. Conversion
of net to gross income assumes contracted-in for S2P and no pension
contributions, and calculations are taken from www.entitledto.com
for 2006-07.
REFERENCES
Atkinson A and McKay S, 2005, Child Support Reform: The views
and experiences of CSA staff and new clients, Department for
Work and Pensions Research Report No 232.
Atkinson A and McKay S, 2005, Investigating the compliance
of Child Support Agency clients, Department for Work and Pensions
Research Report No 285.
Atkinson A, McKay S and Dominy N, 2006, Future policy options
for child support: The views of parents, Department for Work
and Pensions Research Report No 380.
Department for Work and Pensions, 2006, A fresh start: child
support redesign—the Government's response to Sir David
Henshaw, Cm 6895.
Department for Work and Pensions, 2006, A new system of child
maintenance (White Paper) Cm 6979.
Henshaw D, 2006, Recovering child support: routes to responsibility,
Cm 6894.
January 2007
64
Parents should be invited to re-apply to the new body if they
wish to continue their child support claim. This means there would
be no need for conversion of cases between the two existing child
support schemes. The redesigned system must not be contaminated
by previous failings. [Henshaw 2006: p6]. Back
65
"Given that cases of equal, or near equal, shared care involve
both parents taking financial responsibility for their children,
I believe that these cases should be exempt from third-party involvement,
with no provisions within the child support formula for transferring
funds between parents." [Henshaw 2006: 49]. Back
66
In particular see D v D (Shared Residence Order) [2001] 1 FLR
495 (D v D)
http://www.hmcourts-service.gov.uk/judgmentsfiles/j2253/father&mother.htm Back
67
The White Paper says, cryptically: "Further detailed work
will be undertaken on how the system of assessing liability will
treat pension contributions, because of the differences in the
handling of pension contributions within the tax system; the aim
will be to secure equal treatment of pension contributions in
the determination of a child maintenance liability." [p63] Back
68
John Hutton: "In relation to child maintenance, we are
talking about the obligation to comply with the law, but there
is an equal and equivalent obligation on the part of the parent
with care to ensure that any orders that the court makes in relation
to access and custody are complied with, too." Hansard,
13 Dec 2006: Column 885. Back
69
The privacy of family proceedings makes it difficult to assess
how matters of contact are handled, of course, though there are
now steps towards greater openness. Back
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