Examination of Witnesses (Questions 20-39)
PROFESSOR STEPHEN
MCKAY,
MS ANNE
KAZIMIRSKI AND
MS MAVIS
MACLEAN
17 JANUARY 2007
Q20 Miss Begg: That was the question
I was going to come on to, what is the impact of the different
charging structure going to be on compliance, especially as the
White Paper states that "the clear burden of charging should
fall on the non-resident parent and not on the parent with care"
yet in the example I have just given it was the parent with care
who was the one who went to the CSA in the hope of not getting
what might be regarded in the courts as being a fair settlement,
but the father was not saying "I am not paying for my children"
it was just that he wanted payment in kind such as the holidays
and the fact that he did have accommodation for them taken into
account, and that could not be taken into account.
Ms Kazimirski: The idea of charging
assumes that the CSA or C-MEC is involved just because the NRP
does not want to pay and for no other reason. In order to take
that into account one possibility is to charge only if there is
proof of a long period of non-compliance or irregular payments
or something that shows that the private arrangement is breaking
down because of the non-resident parent. It would make more sense
for those situations to lead to a charge against the non-resident
parent and could act as an encouragement as well to work successfully
at a private arrangement.
Professor McKay: Fees are, in
the work we have done, hugely unpopular; people expect this kind
of service to be provided so they find it a hugely unpopular concept.
In the case you mention, they are going in a sense to be worse
off under the new system because under the new system they could
go to the CSA and enforce it that way, but under the new system
they will go to C-MEC and he will never pay anything on top, so
in a sense it is a disadvantage. If the argument for not making
it affect PWCs is because you do not want to harm children then
you ought to see whether the NRP has any children. I do not really
understand why people are not looking at things like ability to
pay as being kind of relevant here. If someone is able to pay,
whether that be the NRP or the PWC, that should not come into
it. As I said, when people go through a separation they are often
not at their most rational and I think some people would rather
make their ex pay a fee than to get the same amount of maintenance
and not make them pay a fee. I do not really see what would be
the disincentive for a PWC just to get in touch with C-MEC and
go through the process. There is a case for fees and you can use
fees in a much more creative way. I do not think it is the NRP
who pays or it is the PWC who pays, you can use fees so that they
are waived if people supply information quickly and fees are based
upon ability to pay. I just think as a kind of knee-jerk it must
be the NRP is not helpful.
Q21 Miss Begg: Have you any suggestions
to the Government of other ways or other incentives that would
actually allow parents to come to a private arrangement, because
obviously what is proposed in the White Paper is that they want
the maximum number of people to come private arrangements so that
the state is not involved. How does the Government do that; how
do they make it easier for people to come to private arrangements
that are not going to break down or are not going to tempt the
parent with care to go off to C-MEC and say "I think I can
get more"?
Ms Maclean: Paradoxically, the
biggest incentive to come to a private arrangement would be to
know that there is a fallback position if it does not work because,
as I keep saying, coming to the arrangement is easy, you can agree
a figure, it is how you cope with change in circumstance, how
you cope with non-compliance. That is where private arrangements
are frightening, particularly for the parent with care. A strong,
accessible collection agency will make people more confident about
private arrangements. A complex fee system is a bit of a slippery
slope; in order to be equitable and fair, a fee system would have
to be quite finely tuned and respect people's circumstances, and
the more complex it is the more uncertain it will be and the more
it will be a disincentive to use. If we are not quite sure what
kind of bill we are going to end up with, we are going to be nervous
about getting involved.
Ms Kazimirski: The registering
arrangement has been mentioned—
Q22 Miss Begg: That was my next question,
so please carry on.
Ms Kazimirski: This is where I
find it difficult to distinguish the difference between private
arrangements that are registered—and I am not certain but
I understand there is a suggestion that there might be some sort
of monitoring attached to a register—and maintenance direct,
which I have talked about already. I am not sure that there is
a point in having those two systems, because the only difference
might be that the CSA has been involved in setting the amount
in the case of maintenance direct and perhaps not for the register
of private arrangements, but if people are moving from the collection
service straight into a private registered arrangement, the CSA
was involved in the original assessment, it is the same as maintenance
direct, so we need to think carefully about setting up too many
systems. What might be worthwhile is prioritising some sort of
maintenance direct system, or registered private arrangements,
whatever we call it, but just have one system like that that perhaps
helps parents who are not quite ready to just go out there and
set up a private arrangement without any help from the Government
agency at all. There is a kind of in-between stage where there
is some sort of registering, some sort of monitoring that could
be a regular letter that reminds them both what should be being
paid, the frequency and the level of payment, perhaps a regular
phone call to one or both parents, that sort of in between stage
that might help people start looking at—
Q23 Miss Begg: Who should do that?
Is that C-MEC?
Ms Kazimirski: I would see that
as C-MEC's role, yes.
Q24 Miss Begg: Not a separate agency
that is there to advise, that is not coming in with a big stick.
My understanding was that C-MEC was envisaged as the big stick
agency, that it was coming in to do compliance. If it is the big
stick agency is there not a role for a different agency that would
give guidance on parenting, how to manage now that parents have
separated, that kind of soft skill approach—here is a reasonable
settlement that, given your income, you might accept; that is
the kind of ballpark figure you should be settling on. Is there
not a role for that kind of soft seats approach that can get parents
around the table to settle the child support arrangements so that
it is all amicable, but there is a professional sitting in who
can advise them in all of these things?
Ms Kazimirski: That might work
better but if you do distinguish C-MEC as only hardcore cases
where the father has never paid at all you might get situations
where the parent with care is almost too scared to involve C-MEC
because of the way that the non-resident parent would react, so
even though she may really need the money she may be so scared
that it would affect the relationship between them and the way
that the non-resident parent would behave with the children, there
would be that sort of side effect.
Q25 Miss Begg: But I can also see
a role for registering and monitoring the registration of the
private arrangement to protect the parent with care who may be
bullied by the non-resident parent into saying you had better
accept that because that is all I am going to be giving you, and
she—I am saying she because it is usually she—is frightened
of the non-resident parent and is frightened to challenge him,
but at the moment that is taken out of her hands because the CSA
gets involved. That might be much more difficult under the proposed
arrangements so how do you look at that particular problem or
that scenario?
Professor McKay: One of the problems
is that in the White Paper this idea of a private register is
mentioned but there is no detail at all, it is just perhaps someone
should be able to consult a register and it is not mentioned that
it is going to be something that people could voluntarily sign
up to, is it something everybody is going to be involved with—in
Australia it is compulsory to register to get other kind of benefits—or
is it just some kind of sample of people? There is very little
detail of what is envisaged and I find it quite difficult to know
how the private arrangement is supposed to work since one person
can always say the formula is there and we can use that, that
is the number I want to receive and negotiating around that is
quite difficult. There is a problem in that at the moment people
are compelled to use the agency and they often take some convincing
that they should do, and they are reassured by the case worker
that there is not going to be any kind of comeback, whereas under
the new system you separate and you are going to never want to
see this person again so when would you be encouraged to go for
this kind of thing. I do not actually see that you would be; you
would probably go your separate ways and might well be too scared
to actually do anything different. Again, that takes away a lot
of difficult cases from the state dealing with them, but I do
not really see how they would have actually become involved in
the system.
Q26 Miss Begg: You said the parent
walks away but one of the proposals is for the joint birth registration;
do you think it is right to address birth registration as part
of the child support policy and so on?
Professor McKay: My personal view
is that if this was an idea that came out of DCA with the idea
that more children should know their parentage and it now gives
you parental responsibility if you are married, it is probably
an idea that is interesting to discuss and you could also go down
the voluntary route, but because it is bound up with this process
it seems to me that it is much more about paternity establishment
at an early stage to make later enforcement more straightforward.
Maybe that is a good thing, but it is a rather different thing
from other objectives you can have. Again, there is not much detail
in the White Paper to go on but would the father need to be present
for his name to be added or not and what are the different consequences
of that? There is some research in the US that seems to show that
more births are registered with father's names if it is done quickly
and in hospital, and that may well be true, but over here the
system is rather different and you do not actually register for
some considerable time, two months, after the birth has occurred.
I really do not understand how you could compel the father to
be there if he does not want to be or what would happen if he
does not have to be there and whether he would actually find out
that he has been registered.
Q27 Miss Begg: Or the mother does
not know who the father is.
Professor McKay: Yes.
Ms Maclean: May I come in on this?
Clearly it is desirable for children to know who both their parents
are and at the moment the trend is very clearly towards joint
registration of birth by co-habiting couples; it is happening
by itself. This is an area to be very careful about, the role
of law and compulsion and requirement. If it is a very small minority
who are not registering directly of course there may be inertia,
it may just not have occurred to people, but it is quite possible
that there is a powerful reason for not seeking joint registration.
There may have been issues of domestic violence, there may have
been issues about abuse of earlier children of the couple and
one would have to be very careful about any form of pressure in
that situation. The other related issue is what goes with joint
registration: joint registration would, as I understand it, automatically
lead to parental responsibility, and that is quite a murky legal
concept. It is quite unclear still what powers and duties parental
responsibility in that form confers and there are issues about
whether it would require a parent with care to consult with the
non-resident parent about various aspects of medical treatment
or schooling or whatever. It is setting up a very confused legal
position, and if there was compulsion to register jointly you
would leave the parent with care in the position of having to
go to court to object to a parental responsibility order. It is
not an issue where legal aid would be very likely to be available,
so I think it is a heavy burden on the mothers and on the court
system, whereas at the moment if a non-resident parent wants a
parental responsibility order he can go to the court and ask for
one and, unless there is a very compelling reason not to have
it, he will get it. At the moment the balance is much more sensible;
it is a very unnecessary and potentially dangerous route to follow
to press for joint registration.
Q28 Miss Begg: Do you have anything
to add?
Ms Kazimirski: Just that we are
still talking about a minority of cases that do not fall into
the area where it is not suitable to force the woman to name the
father, and the situation is that you would be left with just
a few extra joint registrations that would not have a great impact
nationally.
Q29 Miss Begg: Is there a danger,
if there is forced registration, that the mother registers somebody
but it transpires that actually it is not the father at all—and
in some cases they will not know the father—would that not
have legal consequences later on if the father on the birth certificate
is discovered not to be the father but has been paying child maintenance
all these years?
Ms Maclean: It would be very messy
and unhelpful for everybody.
Professor McKay: It is a criminal
offence, I believe, to give false information on a birth certificate.
Q30 Miss Begg: Yes, but she might
not know.
Professor McKay: I have no idea
what the penalties are for giving such false information.
Q31 Mrs Humble: I would like to move
on to ask some questions about the new assessment process and
start off with examining whether or not using gross income is
the right way forward, because of course the old system used net
income and the current new system uses net income. Should we be
using gross income as recommended in the White Paper?
Professor McKay: It is partly
bound up with what you then do with the gross income figure. Gross
income is a better concept to the extent that it is easier to
find out someone's gross income and it is less subject to some
of the manipulations you can do to get from gross to net, so there
is an advantage that you can get it from HMRC, basically, so it
is a good place to start. My concern is that if you then apply
a simple percentage formula to gross income, then under a progressive
tax system it has the implication that as someone's income rises
they can be paying a higher proportion of their income in child
maintenance. At the moment, for instance, if your disposable income
doubles your child support assessment will double. If you use
a fixed proportion of gross income then when your net income doubled
your child support assessment would more than double, so I do
not actually see that as a particularly desirable consequence,
particularly since most evidence is that as people's incomes rise
the proportion they spend on their children actually falls. The
combination with a fixed percentage, particularly higher up the
income distribution, does have this kind of quality that it takes
an increasing proportion of income from an income scale.
Q32 Mrs Humble: Do you think then
it might lead to greater incidence of non-compliance for the reasons
that you have outlined?
Professor McKay: In a sense gross
income is helpful because it can be taken from HMRC and it is
helpful in the compliance and enforcement process because you
have much greater access to a given income in the first place,
because it is more difficult to thwart the process of actually
getting the details to start with, because obviously one of the
things that slows the thing down is not getting access to income
information. That is a positive benefit, that gross income is
more readily available and it is less subject to other deductions,
although it does remain to be seen exactly how pension contributions
get taken into account. On balance it is probably the right context,
but allied to fixed proportions it does have, perhaps, unexpected
properties for some income groups.
Q33 Mrs Humble: Can I briefly return
to questions that reflect Anne Begg's constituency examples? Should
we be reconsidering whether or not to take into account the parent
with care's income, because both in the debate on the original
legislation and the debate on the new legislation, the income
of the parent with care was not taken into account in the assessments,
partly because of the debate that we had at the beginning that
Mavis referred to that the Child Support Agency's assessments
were supposed to reflect the fact that the child should enjoy
the lifestyle that it would have had if the two parents had been
together, so by living with the parent with care, by definition
the child was enjoying whatever standard of income that parent
with care had, but added on to that was the income from the non-resident
parent. However, I understand that in Australia they are now looking
at reforming their CSA system to take into account the parent
with care's income, and also there are examples in America where
they are taken into account. Should we be doing it?
Ms Maclean: To be honest, the
example you have given, of the Australians moving in the direction
of making their formula more complicated while we are moving in
the direction of making ours more simple, just points out very
clearly that this is an extremely difficult area and, however
you do it, it is difficult and there are going to be problems.
In Australia they have been suffering a lot of criticism for the
lack of sensitivity in their formula, and that is why they are
becoming more sensitive; our criticism is about the over-complexity
of our formula, so we are becoming more simple. In 10 years' time
we will all be sitting here and we will be becoming more complicated
and they will be becoming more simple again. It is very, very
difficult and it is the nuts and bolts of being clear and visible
and the social expectations about compliance that I think matter
far more. For that reason I would put up with the disadvantages
of gross income for the benefits of clarity and being able to
move ahead. I would like it all to become like parking tickets:
once upon a time nobody paid parking tickets and then, suddenly,
if you did not pay them they doubled within a week, so now I pay
them. That is the sort of impetus that child maintenance needs
and the fine-tuning of formulae can often just impede that push
for action.
Q34 Mrs Humble: I definitely do not
want to get into any controversies about parking tickets, this
is bad enough. I am asking a question about the parent with care
now because in a way the issue is not relevant to the existing
system because the majority of parents with care are on income
support or have very, very low incomes, so they are not going
to be assessed to pay in any case, but as we move to a system
of the private arrangements, when you could have two individuals
both earning decent amounts of money it then could be an issue,
so is it something about which we might not want to do anything
now but as the new arrangements come into place it might be something
for us to consider?
Professor McKay: It is a bit more
than just fine-tuning of the formula, it does go to some quite
fundamental issues. You mentioned America and in fact about three-quarters
of American states do use both parents' incomes. The state of
Wisconsin is an exception to that and now uses the NRP, but three-quarters
of states do look at both parents' incomes, CS mark one was both
parents' incomes and 70% of the public think you should look at
both people's incomes. The Australian formula, for example, spoke
very clearly to the idea if this family was intact how much money
would they be spending on their children? They are no longer intact;
they would still expect to spend a certain amount on their children,
let us apportion that fairly to them on the basis of their incomes.
As I say, under the current system the formula is mostly designed
for parents on benefit who have no income so it is very clearly
just using the NRP income, but since most intact families have
two earners it speaks to fairness to be looking at both their
incomes. Certainly, the people I spoke to were very much of the
idea that both parents are financially responsible, therefore
they should both be included in this. The objections to doing
this would be it is another piece of income you have to find,
but most of this group will be in receipt of tax credits so the
information is more readily available now than it used to be,
so actually I feel quite strongly that the issue is something
that needs to be looked at.
Ms Maclean: If you are going to
move towards looking at the parent with care's income are you
going to look at her personal income, are you going to look at
her household income? It leads you to have a very complex and
slippery slope, back to Delaney, if you are not careful.
Professor McKay: The short answer
is you look at their personal income. Reading between the lines
of Government reforms there is this kind of idea that we tried
to be fair back in 1993, we tried to have a fair system but it
did not work, therefore we do not need to worry about fairness
but there are actually some systems which have greater elements
of fairness built into them than others, and one that takes account
of both people's income is a fairer system than one that looks
at one person's income. You can do that without going down routes
of complexity, though it is more complex than what is proposed,
absolutely. Having said that, if you look at the CSA they have
moved from a complex formula to a relatively simple formula and
the effect on compliance, accuracy, is pretty much the same as
ever it was.
Q35 Mrs Humble: Can I then move on
to another part of what could be a complexity in the new system
and that is how you treat informal payments. Should payments in
kind be classified as informal payments, should they be regulated,
should the parent with care have any say over payments in kind,
should she be able to say to the non-resident parent "I will
accept a new school uniform or new shoes for the child, but I
do not want you to be paying for a foreign holiday when my child
actually needs the school uniform or the new shoes." What
should we do about that?
Ms Maclean: In an ideal world
people would sort those things out for themselves; they are not
matters for regulation or law or state control, they are personal,
individual and cannot be regulated in my view. How can the state
enquire into that level of detail, and not only detail but variability?
Informal arrangements are characterised by being very variable
and impossible to regulate.
Q36 Mrs Humble: In the existing system
though sometimes, prior to individuals going to the CSA, a non-resident
parent would say but I did actually contribute, I did buy the
school uniform and I did buy the shoes and I did buy the books,
but then the parent with care could say no, he did not. The CSA
would then get involved and often assess arrears to take it that
the non-resident parent had not actually paid up because they
had been making these payments that could not be traced and could
not be specified. Is there any danger that we could have exactly
those sorts of arguments under the new system proposed in the
White Paper?
Ms Maclean: I am sure they will
be there, but I do not think we should be trying to deal with
them. One pair of trainers often takes on immense proportions.
Professor McKay: Partly that happens
at the moment just because of the delays in the system; it is
a case of when the actual assessment is made from and when they
actually start enforcing, so there is an intervening period. If
we could eliminate that delay or make it as short as possible
then those kinds of issues would not even arise, but I agree with
Mavis, I do not think the state can be involved. If it means looking
at receipts for trainers and stuff, I do not think the state should
be going down that route. I agree with Mavis, looking at receipts
for trainers and stuff, I do not think the state should be going
down that route.
Ms Kazimirski: There could perhaps
be more information for non-resident parents to clarify that that
sort of payment in kind will not and cannot be taken into account
and that, if they want to prove that they have been supporting
their children, and so on, they should be going for payment made
by bank transfers rather than cash as well and to make that sort
of information clearer.
Q37 Michael Jabez Foster: Going back
to the question of the two-incomes being taken into account, is
not the problem that historically people used to get into the
argument about possible income, so that when people marry rich
new partners they do not work and then the paying partner gets
upset about that? Is that not impossible to overcome if you take
both parents' incomes into account?
Professor McKay: I understand
what you are saying. It is always the case that people are accused
of having a different earning capacity from what their actual
earnings are, and if you want to assess an earnings capacity you
can, but if you want to assess an actual income you can. I think,
the way the system has developed, we look at actual income, that
is true. Yes, you could say that person could work more, that
guy could do more overtime, she could take a job, but I think
you can only work on the basis of what their incomes actually
are. A lot of US states do assess people on their earnings capacity
and, basically, if people are unemployed for a while, their assessment
continues at the same level once you get a job. I think the approach
here followed by the CSA/C-MEC system is that you have to go on
what their incomes are, and the fact that they could earn more,
that they could have a better job, I am sorry, means nothing.
Q38 Michael Jabez Foster: It is totally
complex, is it not, and it is certainly going in the wrong direction?
Ms Maclean: I think so. Wisconsin
is a primary example, trying to look at income earning capacity.
There was a man who had a PhD in economics. When he finished as
a student he was offered a job on the West Coast as a highly paid
economics professor but stayed in Madison, Wisconsin, on a janitor's
salary to be near his child and see it every day. He was then
assessed on the salary that he could have been earning on the
West Coast. It is just not a route to go down.
Q39 John Penrose: I have got a couple
more follow-up issues about the new assessment process. Can I
quickly pick up on one of your earlier answers about the difference
between gross and net income. I was intrigued, because if HMRC
is providing details of gross income and the difference between
gross income and net income for this purpose, as has been defined
to us, is just the difference of tax, NI and potentially, depending
on which system, pension contributions as well, is there some
devious and disastrous systematic reason why they cannot just
provide details of net income instead, which would be simpler,
in one respect, in that you do not have to worry about people
below gross income thresholds who would not otherwise pay tax?
Professor McKay: There are a couple
of answers to that. You might know of a legal case that has been
going through, a certain Smith case, which is about assessing
self-employed and the difference between what is gross and what
is net and how you get capital allowances. For a lot of people
who are self-employed there are quite a few steps, particularly
from gross to net, to do with capital allowances, and even for
employees there used to be carry-back and carry-forward provisions
around pension contributions. It is not necessarily beyond the
wit of HMRC to do it, but it is not just tax and NI, they have
forward looking and backward looking aspects to them as well.
It is doable but more difficult, particularly with the self-employed,
as we have seen from the recent court case.
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