Discussions of some basic principles
Stakeholders in Child Support
Examples of Rights & Responsibilities
Do both parents pay under the reformed scheme?
NRP incomes and the new formula
The domino effect - chains of child support
Lost opportunity costs & child support
The most administratively incompetent government agency in living memory
The formula for 2nd family children
Home & weblog
Blog archive & site history
Site map & search

NRP incomes and the new formula

Everyone knows that the new CSA formula is very simple: it says "the non-resident parent will pay 15% of net income for 1 child, 20% for 2 children, and 25% for 3 or more children".

As usual with what "everyone knows", that is wrong. The new formula is very complicated, with 4 variables that differ from one case to another, and over 20 fixed numbers defined by primary and secondary legislation.

In the diagram below, the red line is the formula for what the nonresident parent pays if there is one qualifying child, no other relevant children in the nonresident parent's household, and no significant amount of over-night sharing of care. For net incomes from £200 per week to £2000 per week it is indeed 15% of net income.

The new formula isn't designed to be simple. It is designed to be easy to administer. Computers can handle all those fixed numbers with ease. People and processes have to gather the evidence for those 4 variables. That is why there are only 4 variables, even though this causes certain incredible unfairnesses. It is the immense number of variables in the original (1991 & 1995) legislation that make the current CSA system nearly impossible to administer, and the government hopes that having only 4 variables in the reformed system will overcome these problems. (It may well do so. Without a workable formula, the CSA would be doomed).

However, certainly some non-resident parents will pay 15% or 20% or 25% of their net incomes. But how many? Only a minority! Probably less than one quarter.

The diagram below maps the percentages of non-resident parents with various incomes onto the graph shown above. The top end of the graph is omitted for simplicity because very few non-resident parents earn that much.

What this shows is that the mean net income of nonresident parents is little different from the point where the 15% / 20% / 25% formula kicks-in, and nearly three quarters of nonresident parents (see the numbers in the 2-headed arrows near the bottom) earn less than that amount. In fact, more than half of nonresident parents only earn enough for the new formula to calculate £5 per week.

These figures are taken from the CSA Quarterly Summary of Statistics for November 2000 [1]. The new formula hasn't started yet. Are those figures representative for the new formula? In fact, in those statistics a key definition is:

Net income for assessable purposes: Nonresident Parent’s net income to be used in the calculation of the maintenance assessment. It includes net income from employment (i.e. after tax, National Insurance and 50 per cent of pension contributions), certain benefits and income from capital sources.

In other words, you take the gross income and subtract tax and NI and half of the pension contributions (etc). The reformed formula differs - you subtract all the pension contributions! It appears that net incomes under the new formula will often be lower than under the current system. Perhaps the mean net income would be about £200 per week. Perhaps the percentage of nonresident parents earning at least £200 net per week will be one quarter or less. This tends to support the view of Professor Jonathan Bradshaw that most of the nonresident parents that the CSA takes money from are relatively poor [2].

Rule of thumb: about a quarter of NRPs earn enough for the familiar formula; about half of NRPs only earn enough to pay £5 or less; the rest will pay somewhere in between.

This doesn't invalidate the idea of having a Child Support Agency. After all, there are still the remaining quarter! But it does put its maximum effectiveness into context. Is the Child Support Agency the best way of doing what it is intended to achieve? Most CSA cases are private cases which could be settled without the involvement of the CSA if the parents concerned chose to. Very many of the rest can only pay £5 per week at the most. Have these facts been sufficiently discussed? (Note: the above statistics will change over time, so the rule of thumb may change too).

References

[1] CSA Quarterly Summary of Statistics for November 2000
The latest CSA Quarterly Summary of Statistics are available from the DSS ASD page.

[2] Absent Fathers?
Jonathan Bradshaw, Carol Stimson, Christine Skinner, Julie Williams
Routledge, 1999 - ISBN 0-415-21593-5

Remember, half the people in the world are below average.

Page last updated: 5 July, 2004 © Copyright Barry Pearson 2003