Commentary on the Letter from Baroness Hollis

Letter from Baroness Hollis

Letter from Baroness Hollis Commentary by Barry Pearson

Dear Mr Pearson

Thank you for your letter of 20 September about the evidence you gave to the Social Security Select Committee on 15 September relating to your "Fair Shares" approach to the issue of shared care. You also wrote on 26 September. Please accept this as a reply to both letters.

I am pleased (and impressed) to receive such a long and considered response (rather than a pro-forma response) from the government minister concerned.

I agree that the issue of how most appropriately to adjust child support liability on account of shared care of a child is not straightforward. I can, however, assure you that, prior to your appearance before the Select Committee, I had already familarised myself with the details of your proposals, albeit via the unattributed comments of the [organisation deleted] response to the Green Paper. And, of course, the proposals - although again not attributed to you - were spelled out at greater length in the article by Karen Randall on pages 8 and 9 of the July/August edition of McKenzie, FNF's national newsletter which I of course had and - they send it to me. This being so, I am sorry if you feel my comments before the Committee were based on a misunderstanding or were otherwise unjust.

Turning, therefore, to the detail of your proposals, there are two key elements with which I have insurmountable difficulty: first, you assumptions as to the "savings" which the parent with care nominally makes during periods when a child is staying overnight in the care of the non-resident parent; and secondly, your assertion that your "Fair Shares" approach will not unduly increase the administrative burden on the Child Support Agency compared with the proposals in the Government's White Paper.

 

On the first point, you suggest that, under your proposals, the maintenance liability should be reduced by an amount equivalent to the sum which the parent with care saved during the child's absence. I cannot accept that the fixed and recurring costs incurred by the parent who has primary responsibility for bringing up a child are reduced in direct proportion to the number of nights spent by the child with the other parent; equally, I do not accept that the costs incurred by the nonresident parent in caring for a child overnight are increased in direct proportion to the number of nights involved.

The most important question is - what happens when care is shared equally? Surely, at that point the costs are shared too?

Now - what happens if this arrangement is changed by one night per week? So one cares for 4 nights, the other for 3 nghts per week. Is this then a massive adjustment, or a relatively minor adjustment? Most experience says that it is a relatively minor adjustment.

With the proposed symmetrical formula, this change of 1 night either way is minor. With the reformed scheme, it is truly massive - the difference, in fact, between being a PWC & NRP.

Having said, that, I recognise that adjusting child support liability on the basis of a simple comparison of the number of nights sent with either parent is unlikely to reflect the actual costs that have been incurred by either of them. It would, however, be extremely time-consuming and complex for the Child Support Agency either to attempt to establish on an individual basis the actual costs of caring for a child, or to assess or apportion out all the periods of care (i.e. both day-time and night-time) by each parent. The time spent with each child by each parent would have to be closely examined - which might involve calculating the number of hours each of them has physical care of the child each week - as would each parent's expenditure.

The proposal here is NOT to look at the detailed costs. That is simply a diversion from the proposed symmetrical system.

The proposal is to treat the number of nights of shared care as a useful indication of the actual cost - both ways.

The Agency already has to deal with innumerable disputes between parents over the extent to which each party provides overnight care. If all periods of care and the actual costs were to be taken into account, the scope for such inter-parental disputes would be magnified man times over. The Agency's ability to deliver an effective and efficient service would be severely hampered.

See above - the aim here is simply to use the number of nights of shared care, properly. This does not change the costs to the Agency.

This information is already used in the formula, and the proposal is to use it properly, rather than improperly.

My second concern is about the number of parents with care potentially affected by your proposal. At the moment, some 58,000 nonresident parents benefit from the existing shared care provisions. Whilst we hold no precise information on the number of nonresident parents who share the care of their child for between one and two nights per week on average, the available research suggests that anywhere up to 30% of parents will be able to benefit under the planned relaxation in the threshold from 104 to 52. Although our working assumption is set somewhat lower than this - at 17 percent - this still means that, with an anticipated live load of 1 million by the time the reformed scheme is introduced,we expect to be dealing with some 170,000 non-resident parents with shared care. This estimate does not take into account any behavioural changes as a result of the reduction in the threshold.

OK.

This has no influence on the proposal for a symmetrical formula, of course.

For each of the 170,000 nonresident parents, there will be a matching number of parents with care, all of whom would - under your proposals - effectively be treated as non-resident parents themselves for the period when the child was with the other parent. You acknowledge that each of these parents with care would need to provide details of their income plus details of any children they had living with them in their current family (to allow the appropriate adjustments to be made). Additionally, they would each be able to apply, where appropriate, for an allowance in respect of any of the exceptional expenses we plan to recognise.

Yes. Any Parent With Care who isn't on Income Support and who doesn't care for a full 7 nights per week would have to provide 2 pieces of information:

  1. Net income
  2. Number of relevant children in that household

Remember - this is a private case probably deliberately brought by the Parent With Care, who should be motivated to provide this information. There should be no trouble obtaining this information - and if the PWC fails to provide it, the case can simply be closed.

I suspect that if we were to go down the path you have suggested, parents with care would also mount strong arguments for other factors - such as the income of the non-resident's new partner - to be fed into the equation. And would also demand the abolition of the abatement for any children in the second family.

There is no case for this. Why should putting the PWC into the equation require the NRP's partner to be put into tthe equation? There is no logic or reason for that.

This proposal is about symmetry - neither partner will be involved. Each parent will be treated the same.

It would not be true to say that the complications apply to only a small minority of cases. As at May this year, only 44 per cent of parents with care were in receipt of Income support or income-based Job Seeker's Allowance. (This percentage is down from 50 per cent in 1997, and we expect it to continue to fall). This therefore leaves 56 per cent of parents with care as private cases. The Agency would have to obtain all the necessary information relating to income and capital and relevant children since they could not reasonably anticipate the cases where shared care was not an issue. See above - this is a private case Ibecause the information is only needed if the PWC isn't on Income Support) probably deliberately brought by the Parent With Care, who should be motivated to provide this information. And if the PWC doesn't provide it, the case can simply be closed, at a saving to the CSA!
Finally, there is the end product of your proposals. As I mentioned in my evidence to the Select Committee, something like 96 per cent of all lone parents have income of less than £100, and only 200, on our base, have an income of £500 a week of more. So, in the vast majority of cases, it is reasonable to assume that the parent with care will have nothing to declare and nothing to hand over. You suggest that the cost of administration will, therefore, be the same as under the White Paper proposal. But this is not the case: we will still need to ask the parents with care for the information, and secure supporting evidence where appropriate. In my view, adopting your proposals universally would unnecessarily complicate the system for a very small minority of cases.

If their income is so small, then their contribution under a symmetrical scheme will be small or nil. They have nothing to fear from this scheme! This proposal does not impoverish poor parents, it simply equalises the situations for better off parents.

Where the PWC is on Income Support, the DWP's own computers will say so. There is little or no complication.

I accept that, where both parents have a good income and genuinely share the costs and responsibilities of bringing their child up equally, the parent who is classed as "nonresident" under our criteria may consider himself or herself at a disadvantage. However, these parents, will, as now, remain free to come to their own arrangements as regards maintenance, and we anticipate that they will carry on doing so, without involving the Agency.

But, of course, the Parent With Care is not motivated to come to such an arrangement! They have access to an unwarrented source of income, so why should they do so?

An aim of this scheme is to make the formula fair, instead of relying on the PWC agreeing to it.

On a couple of points of details, we have no plans to re-introduce assessment and collection fees until we are satisfied that the Agency is delivering an acceptable level of service to all its customers; and in cases where the care of a child is shared equally between the parents, I can confirm that an additional £7 per child per week will be allowed in favour of the non-resident parent, subject to his liability never being allowed to reduce below the minimum amount (£5).

The £7 adjustment is a "frig". It has no plausible contribution to a fair scheme. In fact, it can result in bizarre calculations, such as calcualtions that decrease as the number of children increase!

Here is just one symptom of its failings. Suppose the parents share care by an identical amount. The amount paid by the person who doesn't claim Child Benefit (aka "the father") to the person who claims Child Benefit (aka "the mother") varies according to the number of children. Suppose that he earns £210 per week net:

Number of children Child support
1 £9 pw
2 £7 pw
3 or more £5 pw

Everyone agrees that the child support system as it stands is not working. It is bureaucratic, over-complex and inefficient. We want to move to a system that is simple, efficient and comprehensible, containing minimum complexity and areas for dispute. We received over 1500 responses to out Green Paper proposals - from groups with interests across the spectrum - and it is our view that we have struck the right balance.

I don't dispute the reasoning. But it is not threatened by this proposal.

This does not increase the overall costs of administration, but it does make the system fairer for shared parenting, which will surely become more common in the 21st Century.

I am sending a copy of this letter to Archie Kirkwood, Chairman of the Social Security Select Committee.

Yours
Patricia Hollis
BARONESS HOLLIS OF HEIGHAM

Thank you.
Page last updated: 6 July, 2004 © Copyright Barry Pearson 2002