Looking beyond the reformed scheme
Whoops! Working Families Tax Credit is implemented by the Inland Revenue and does all these things!
Whoops! Child Benefit administration is being transferred to the Inland Revenue!
(The proposals in this article were submitted in a formal response to the CSA Reform Green Paper in 1998).
This article first discusses how using the "social security" administrative approach rather than alternatives such as the PAYE administrative approach leads to problems for everyone concerned, including the government. Then it discusses whether most or even all of the system should be provided by the private sector anyway.
Problems with using the "social security" administrative model
This discussion is not about amounts. It is about administration - how the system should work, whatever the amounts are to be.
The social security administrative model
The social security approach is about trying to identify a precise amount and then deliver it as soon as possible.
When someone loses all income, they need money fast. They need to be able to use an administrative machine which will get it to them before they starve.
In many cases, the payment may be for a relatively short amount of time, for example months. There isn't the luxury of being able to keep tuning the amounts as more information comes in with long periods of time to adjust the balance. The aim is to try to get it right from the start then pay it without expectation that it can be corrected later. There are problems with checking enough information to prevent fraud in the short period of time available before the money has to flow.
The income tax administrative model
The PAYE income tax approach is to do the sums "about right" in advance, to pay "sort-of" the right amounts in installments, then sort out the issues and corrections and adjustments at the end of the tax year.
There is little urgency - the Inland Revenue knows it has you for many years, and it can take a relaxed approach! There is about the right amount of cash flowing with minimum initial administrative cost, then reconciliation at a predictable timetable.
Small errors in the PAYE code often don't matter, and are not a cause of urgency and anger - as long as you are confident that reconciliation will sort it all out. Big errors may need intermediate action, either because they are reducing the disposable income too much or they are building up arrears to much, but typically a few £ can be tolerated. Tweaking pay on a month by month basis doesn't have advantages - income tax is then looked at over a full year, and temporary fudges get smoothed out.
Implications for child support
Here are some problems that arise because the child support system is based on the "identify a precise amount and then deliver it" approach:
No one needs to receive the exact amount of child support fast. No one will starve if they don't get it. Child support needs to cater for some things that are not bought per week, such as clothes, and there is flexibility about when these are bought. If there is an urgent need for just the right amounts of money for food, then it is social security, not child support, which has to sort this out. What matters is the overall balance over a significant period of time. (Actually, it is more likely that temporary overpayment will screw up the NRP than that temporary underpayment will screw up the PWC).
Typically, the child support system has you for years (up to 18!) There is normally plenty of time to reconcile minor errors and correct them and then make adjustments to future payments to get it closer in future. So you paid £100 too little this year? Big deal - you'll have to pay £100 extra next year! Here are some potential advantages of such an approach:
There would be considerable advantages in using this sort of approach, both for the parents and the CSA. Note - this is not saying that child support should be thought of a tax - it is not "a compulsory contribution to state revenue" (New Oxford Dictionary of English). This is simply talking about the style of administration.
Problems with using a "civil service" model
The need for a government agency at all
Some would argue that child support is a personal matter between some private citizens, and so a government administrative agency shouldn't be involved. (Courts could still be used to resolve disputes as in other civil matters).
The main need for having such a government agency is to protect the interest of taxpayers, if it is decided, as in the UK, that child support payments will interact with the benefits system. Without an agency, separated parents will tend to arrange their finances in such a way that they maximise the total amount of money they claim in benefits, then share the proceeds. The agency attempts to ensure that they arrange their finances so that they minimise the total amount of money they claim in benefits. The only reason that the child support system has to be operated as a government agency is to benefit the Treasury and taxpayers at the expense of the parents and children involved with benefits cases. Private cases could be handled other ways.
(Much of the discussion among anti-CSA groups is about how to ensure that it is the children's household which gets better off rather than the Treasury. For example, all talk about NRPs colluding with PWCs to keep the CSA away, by claiming fear of violence, or claiming not to know the NRP, is about trying to get money to the children's household which won't then reduce the PWC's Income Support by a corresponding amount. But government spin will try to make even these cases appear to be about not wanting to support the children!)
Let's suppose that the UK continues to reduce benefits in this way, and needs an agency to facilitate this. (As a childfree taxpayer, I can see the point of this!) Could there be a better approach than an agency such as the current CSA? Yes!
Civil service priorities
Despite the best will in the world, civil servants will continue to be driven by internal efficiency even where this impacts quality of service. The government's response to the problem that not enough effort was available to enforce assessments adequately was to free up resources by simplifying the scheme, not simply to increase resources for enforcement. Again, this makes sense for taxpayers, who don't want to pay lots of civil service salaries.
This has constrained government thinking about the reformed scheme. For example, the stated reason that a fairer shared-care formula isn't being adopted is that this would mean looking at the PWC's income as well, at extra administrative cost. (The fact that it might serve to reduce the number of CSA cases was ignored). Extra administrative cost is bad for a civil service agency. But the cases concerned are private cases, not benefits cases, and the CSA could have charged the parents for the service to cover the administration cost. This isn't natural thinking for much of the civil service.
Another problem is that civil service agencies tend to operate as monopolies, and therefore suffer all the problems for their "clients" that private sector monopolies suffer - little direct motivation to improve being one of them. The CSA would have long gone out of business if it had been a private sector organisation in a competitive market and continued at its current service levels.
A different model
Even if it is necessary to keep a government agency in order to protect taxpayers' interests - to ensure that the Income Support paid to the children's household is reduced by precisely the right amount - it doesn't need an agency which tries to do everything itself.
Using the administrative style of PAYE, see above, helps the process. Once less on-going precision is needed, it is much easier to outsource the financial services.
A suggestion is for "maintenance accounts" - a sort of joint account, specifically for child support purposes, in which the NRP can pay in and the PWC can take out. Being designated for child support means that exactly the right statements of account can be provided to each parent and to the CSA - and preferably to the children too - so that all are satisfied. All parties have a record of what is paid in, and the CSA can then use this in its reconciliation each year. Even where benefits are concerned, the parents would still have some flexibility in the short term - they could make private arrangements to temporarily adjust the amounts, secure in the knowledge that there would be an accurate record visible to all.
A lot of the calculation and reconciliation could be outsourced too. There could be spot-checks for benefits cases (to avoid benefits fraud) and appeals if one or other party feels cheated, but otherwise the parents may simply not interact with the CSA for years at a time, for any sort of case.
The CSA would be a policy making body, an oversight body, and a long-stop enforcement agency, but not be "in the loop". Government agencies should stay out of the loop of people's lives!
More radical approaches
What the above says is that the CSA could be vastly simpler with lower costs and have less adverse impact on people's lives even without dramatically changing the way the amounts are calculated using a formula written into legislation. The above describes a different way of administering even the current or reformed formulae.
Many people advocate not having an agency at all, and extending the role of family courts to consider child support at the same time as other matters such as residence / contact. Not all people adversely impacted by the CSA feel that - some see the advantages of a system which doesn't need lawyers! They don't want to see child support turn into a fight to see who can pay for the best lawyer, or get the best lawyer on legal aid.
This topic will be discussed elsewhere.
Claimed reply to a CSA form:
|Page last updated: 17 December, 2003||© Copyright Barry Pearson 2003|