An open letter to Frank Field


(Address removed)

The Rt. Hon. Frank Field MP
House of Commons
London,
SW1A 0AA

13th September 2005

Dear Mr Field

You have published descriptions of the serious condition of the CSA. So have I.

You believe that even the "new scheme" cannot be made to work satisfactorily by tweaking it, but that radical reform is needed. So do I.

You have published proposals intended to provide the basis for that radical reform. So have I.

We differ in the details of what that reform should be. The following pages identify some of those differences. They are comments on two of the documents published on your web site. Throughout these pages, I refer to them as follows:

- Blaiklock 2004: the body of "A Broken Backed Agency: The Impending Collapse of the Child Support Agency", Oliver Blaiklock, November 2004

- Field 2004: the foreword to Blaiklock 2004

- Field 2005: an open letter to Tony Blair, 6th September 2005

I hope you find these comments constructive. Surely the CSA is one of Blake's "dark Satanic Mills"!

Yours sincerely

Barry Pearson


The formula

"To my alarm I learnt that the review committee thought it was clever enough to make the CSA formula even more complicated. … Ministers from both major parties have looked at the CSA formula as though it were a benefit and should be fine tuned to individual needs". Field 2004

"The truth of the matter is that a computer was always going to struggle with the complexities of a formulaic approach to child support". Blaiklock 2004

"Any sort of formulaic approach to child maintenance calculation, which attempts to mirror the myriad of family life, is destined to deliver nothing but disappointment and confusion, as the CSA has so aptly demonstrated". Blaiklock 2004

"For this, and the above reasons this report proposes the replacement of a complex formula that fails to deliver, with a surcharge, which will ensure that children get the maintenance to which they are entitled. Parents with care would not be forced to chase their case around the country, nor would they be forced to become private investigators in a bid to acquire all the information necessary for a calculation to be made, when they should be receiving maintenance". Blaiklock 2004

There is no doubt that the "old formula" is complicated, and the above comments would be justified if confined to that formula. It has been quoted as needing about 100 pieces of information before a calculation can be made. I developed and published an "old scheme" spreadsheet that has proved popular among parents who want to be able to have informed discussions with the CSA. Although a complicated spreadsheet, it still works on the 80:20 principle, trying to get 80% of calculations about right while only using about 20% of the details of the legislation. The CSA has never attempted to supply an equivalent.

But the "new formula" is very simple. My published "new scheme" spreadsheet is small, yet handles the entire formula. The CSA has published its own online version, which is easy and accurate to use. There are only 4 parameters to the formula. Furthermore, only 2 of them are needed to start a case, because the other 2 can be defaulted, to the disadvantage of the non-resident parent, and he will be motivated to supply the information!

The parameters are:
1. The net income of the non-resident parent
2. The number of children for whom child support is to be paid
3. The number of other children in the non-resident parent's household
4. The number of nights per week of shared care

Parameters "1" and "2" should be easy to obtain from other sources. Parameters "3" and "4" could sensibly be defaulted to "0" if the non-resident parent refuses to supply them.

The failings of the new computer system are not because of the formula. They are, inter alia, because of the difficulty of developing its administration functions, the ambitions to use it also to manage workflow and provide management systems throughout the CSA, and because of the 1000s changes requested by managers and government. There is probably also the issue of the lack of experience with the system as a result of the high staff turnover.


Child support via the tax system

"I registered my disappointment that you were not being presented with a clear, bold and radical reform, moving the collection of maintenance to the Revenue and having a simple tax rate to determine the level of those payments". Field 2005

"The CSA is attempting to tax absent parents in order that they meet their financial duties to their children and thereby reduce the huge costs that they had hitherto transferred to taxpayers. I argued unsuccessfully that the CSA should be scrapped in its current form and its duties to tax absent parents transferred to the Inland Revenue". Field 2004

"In the infighting that characterised the creation of the CSA, the Department of Social Security beat the Treasury in the bid to collect child maintenance, even though absent parents would in effect be paying a tax". Blaiklock 2004

"The culture of the DWP is geared towards paying out money. In British government it's the revenue which collects slices of income and their raison d'etre is to achieve this objective as cheaply and as efficiently as possible". Blaiklock 2004

"It therefore seems sensible to work with the grain of the bureaucracy and put what is in effect a Revenue raising function with the appropriate body, i.e. the Revenue. Those deemed liable for child maintenance would have a surcharge for each child added to the tax-take on each pound of taxable income". Blaiklock 2004

tax (n): "a compulsory contribution to state revenue". (New Oxford Dictionary of English).

Whatever else it is, child support is not "a compulsory contribution to state revenue"! Its primary role, of course, is to transfer funds from a parent who has financial responsibility for a child but no ability to spend money directly on the child, to someone, typically either the child or the other parent of the child, who does have the ability to spend money directly on the child. There are two vital components: collection and payment, in fact of identical amounts. Having two such components makes the task of child support very difficult.

The primary role of child support is not to reduce the demands on state revenue, let alone increase state revenue. That is a diversion with a particularly narrow 1980/90s focus in the UK. Obviously, a state may choose to use child support for that secondary role. But child support remains a key issue even where the state would not otherwise spend money supporting the child, and indeed where the parent requesting child support has no intention of requesting support from the state. A working lone mother is entitled to child support too.

About 2/3rds of parents with care are not on Income Support, hence are entitled to the whole of child support. The child support in perhaps half or more of the 1/3rd of cases involving Income Support doesn't exceed the £10 disregard. Possibly only 15% to 20% of cases would a direct impact on state revenues under the new scheme, and even in those cases it is not for the full amount, but is decreased by the £10 disregard. (Other cases have an indirect impact on revenue, because a predictable flow of money might help more lone parents get to work).

So, child support isn't just about collection. It is also about payment, and "the culture of the DWP is geared towards paying out money". [Blaiklock 2004]. What this really means is that the matter can't easily be decided between the DWP and the Revenue. Neither is ideal!

I am more interested in what is achieved by child support than how it is achieved. If the best way of bringing up children with financial support from both separated parents is to use the Revenue rather than the DWP, so be it. That is what has to be demonstrated. So consider three aspects of tax collection: PAYE, the self-employed, and the unemployed.

PAYE is an effective way of improving the cash flow for the Revenue, by getting approximate partial payments throughout a year, instead of having to wait for a definitive payment later. But there is no pretence that PAYE monthly payments (say) are accurate 1/12ths of the proper annual payment. They are only ever approximations, and there is a later reconciliation as a result of the confirmed final income for that tax year. There may be an immediate bulk payment or refund, or an attempt to redress the balance over the following year.

If the surcharge were a percentage, paying child support via the Revenue would presumably be similar to PAYE. At best any payments would only be approximate (and somewhat unpredictable) amounts. They may need reconciliation later, and this may involve bulk extra payments, or bulk refunds. Obtaining a bulk refund from a lone mother, who has been over-paid via a surcharge on the tax system, may be harmful to the child, or more likely futile!

It is well known that one of the most problematic aspects of child support practice is the collection from the self-employed. The CSA has to have special processes, used by specialist staff, to deal with the self-employed. They often fail, but probably the Revenue doesn't often get the right tax from the self-employed either.

The self-employed use annual accounts to justify tax payment liabilities from earlier years. The UK is patient, with massive resources. It can afford to wait a year or two for payment. Lone mothers cannot. Children would suffer within the timescales that the Revenue can afford to wait.

Under the new scheme, it is intended that even non-resident parents on benefits should pay child support, by having £5 per week stopped from their benefits. In this case, using the DWP rather than the Revenue appears appropriate, because there is presumably no tax being collected.


Starting a child support case

"Yet the total backlog of applicants awaiting a determination continues to increase, up from 288,000 in November 2004 to 347,000 in July 2005, a rise of 20 per cent in a little over six months. Worse still 40 per cent of all applications for child support on the new scheme are still waiting for an assessment to be made". Field 2005

"After just over a year in operation the new CSA scheme has only successfully cleared 197,000 cases, to make matters worse, half of these applications were closed without a payment being made". Blaiklock 2004

Before a child support case can become legally viable, the following tasks are needed.
1. Ensure that the child actually exists
2. Ensure that the man identified is the father of the child
3. Ensure that the father is responsible in law for paying child support for the child

About one-sixth of child support claims do not satisfy these criteria. Any organisation that handles child support must complete those tasks before executing a case in earnest. (Other things may also be needed, for example identifying the parameters of a CSA formula, but they are secondary, and can often be defaulted then sorted out later).

- It is exceedingly rare that the child doesn't exist! The case of Stephen Barreras and Viola Trevino hit the headlines in the US because it was so unusual. (He had paid child support for about 5 years before expressing doubts about paternity and discovering that the child had never existed).

- It is a little more common that the man is actually not liable in law for paying child support for the child, even if he is the father. This typically occurs within a shared-parenting case, where the father is legally the parent with care because of the amount of time he has direct hands-on care of the child, yet the mother makes a child support claim, with the "institutional bias" of the child support system tending to side with the mother by default.

- The most common of these reasons for not validly starting a child support case is that the named man is not the father of the child, (either by biology or contract). Both the CSA of Great Britain and the CSA of Northern Ireland have told me that the rate of non-paternity for the paternity tests that they have administered over the last 7 years has been over 16%. (Other countries tend to show higher rates than this).

In spite of having one of the worst child support systems in the Western world, the UK has one of the most effective systems for avoiding these problems of "paternity fraud". It would be unacceptable to undermine this position, at a time when other states are enacting legislation to reduce paternity fraud. The above tasks must continue to be performed.

"Paternity fraud" tends to arise when the system is concerned to streamline the delivery of child support, without adequate legal and technological safeguards. (There are indications that it existed in England over 400 years ago!)

For example, in the US, the following policies have led to injustices against men who should never have been involved in child support:

"Substitute service": The papers that are supposed to indicate to a man that there is a child support claim against him are received and signed for by someone else, without evidence being required that the man concerned will ever see them. The man has no time to prepare, and will probably then have a "default judgment" made against him.

"Default judgment": In the absence of the man, a judgment that he is required to pay child support is confirmed, and the amount is decided. He may not even be aware that there has been a child support claim against him, for example in the case of "substitute service".

"Non reversible judgment": If the man provides evidence at a later time that he should not have been named as the father, and was never legally responsible for paying child support, the decision may be made that "in the interests of the child" he must continue to pay child support until the child is (at least) 18 years old. Even in states where this evidence is sufficient to terminate his child support responsibility, there is rarely a refund for the child support he has erroneously paid.

Whichever UK organisation administers child support cases must perform the earlier tasks before executing a child support case in earnest. Even eliminating the parameters to the formula wouldn't eliminate the paper-exchange.

What is needed is for this start-up process to be more efficient than it currently is. Perhaps professional "process servers" are needed to guarantee that the papers are delivered in a legally viable way. Perhaps robust penalties, including prison, are needed if a person attempts to delay the start-up process by as much as a day.


Other countries

"It therefore seems sensible to work with the grain of the bureaucracy and put what is in effect a Revenue raising function with the appropriate body, i.e. the Revenue. Those deemed liable for child maintenance would have a surcharge for each child added to the tax-take on each pound of taxable income. Such a reform … has the added benefit, if we compare the operations in the United States and Australia, of offering considerably increased support". Blaiklock 2004

As far as I know, no Western country actually collects child support via taxation in the way suggested above.

Australia and New Zealand position their CSAs within their tax departments, but still run them as distinct agencies, using formulae. They can then exploit the information held by their parent departments. (In theory the UK's CSA can do that, but there may be obstacles).

Other countries use a variety of organisations. Canada runs its equivalent within the Department of Justice. Across Europe there are several different organisational structures, some still involving courts. Different states in the US operate in different ways, because the responsibility for legislating child support details lies with individual states.

Many countries use tables or a formula with income as a parameter, sometimes gross, sometimes net. That is used to decide a predictable amount to be paid from then onwards. But the income is based on history, and not altered month by month. This doesn't say that the proposal in Field 2004, Blaiklock 2004, and Field 2005, shouldn't be examined. But it should be thought of as experimental, not proven.

A number of countries collect the child support directly from wages, by mechanisms with names such as "income-withholding", "garnishment", "attachment of earnings", and "deduction from earnings order". The UK itself has such a DEO mechanism available. Some countries always use such a mechanism. Such mechanisms are probably less effective than using taxation directly, because the UK's CSA can have problems finding the employer to serve the order on. That could be improved, since the Revenue presumably doesn't have this problem to the same degree. But that is a matter of how the employer is found and notified, and not a matter of how the amount to be deducted for child support is arrived at.

The UK's "new formula" is one of the simplest in the world. Australia's formula is more complicated. Yet Australia has been reviewing its child support system, and may take into account the cost of raising children, making it even more complicated!

There are many lessons to be learned from these other countries. For example, it is believed that one reason the Australian system works more effectively than some others is that it makes no attempt to use the CSA for welfare-savings, but passes the whole amount through. This also gives greater scope for parents to make their own arrangements, because compulsion of the lone parent is not needed. Given the small proportion of the total amount of child support that even in theory should now reduce benefits expenditure in the UK under the new scheme, I believe it is time to copy this successful Australian policy.

END

Page last updated: 14 September, 2005 © Copyright Barry Pearson 2005