Commentary - BBC News 24 "Agenda" - 2nd March 2003

CSA Reforms

Transcript Comments
Here is the basic transcript plus further information about the programme and people. Comments below are by me (Barry Pearson) unless stated otherwise. Comments (polite!) are welcome from anyone on the programme.

Chris Lowe

Tomorrow sees a big change in the way the Child Support Agency works. It is almost 10 years since it was created and it’s been accompanied by controversy almost every step of the way. And tomorrow is no exception, because a brand new system of assessment is being brought in. Now, it may catch more absent parents in its net, but some believe that it will result in many fathers, and it is usually fathers, having to pay much more than they do at the moment. The basic change is that most parents will pay a straight percentage of their incomes depending on how many children they have and no longer will they be able to negotiate special deals.

Well, in a moment I’ll be joined from our Westminster studio by former Social Security minister Frank Field, from Manchester by Ray Mellor who set up the parents’ support group PALS and who thinks he is facing a whacking 100% increase in the charges he’ll have to pay to a former partner, and here with me is Barry Pearson, a business analyst with a special interest in the CSA.

Perhaps "negotiate special deals" is a reference to "departures" in the old scheme. They are replaced by "variations", which although they have stricter criteria, are still a type of "special deal".

Only perhaps one-quarter of NRPs will earn enough to reach the well-known 15% / 20% / 25% "straight percentage". And some of those will pay less because of shared care and/or more children in their household.

But first, to Dudley in the West Midlands, and Michelle Counley. Now, she chairs the National Association for Child Support Action, set up to help parents like her who feel they are victims of the CSA.

Michelle Counley

[7-minute film with Michelle Counley]

 

Chris Lowe

Michelle Counley of the National Association for Child Support Action. And her last point, I guess, is the crucial one: “what is in the best interest of the child?” Frank Field, down at Westminster there, do you think the children have been well served by the Child Support Agency thus far?

Frank Field

Well, I don’t think children have been well served, I don’t think most parents have been well served, I don’t think taxpayers have been well served, nor do I think the staff who are asked to run the service have been well served. So there is a huge need for radical change, but sadly I don’t believe what’s going to be introduced tomorrow will actually fit the bill.

Here is a preview of the nature of Frank Field's contribution to the programme from this point on:

His sole concern with the CSA was as a mechanism for minimising social security expenditure in benefits cases. Nothing he said appeared to have any relevance to private cases, for example getting money to PWCs instead of recouping money for the Treasury.

In fact, by concentrating on benefits cases, he proposed a scheme that would not work properly for private cases, even though the latter are nearly two-thirds of all CSA cases.

Chris Lowe

We’ll come onto the change tomorrow in a moment. Ray Mellor, would you agree with Frank Field that it hasn’t served the interests of … well, anybody, frankly?

Ray Mellor

[Response by Ray Mellor]

 

Chris Lowe

Well, we’ll come onto as I say to the immediate change in a moment. But just about the CSA generally, Barry Pearson you’ve followed it closely, you’ve examined it closely, have you? One of the criticisms made by Michelle in that film is that she claims it’s Treasury driven – it’s actually in the interest of the Treasury first, before parents or anybody else.

Barry Pearson

That’s right. And in fact that is also one of my criticisms of it. Until we can get the Treasury out of the loop we won’t be able to think of how child support should work for families and children. Increasingly the Treasury has slightly relaxed its grip on the Child Support Agency. First in the case of the Working Families Tax Credit system, in which it said "we are not try and get a linkage between the Tax Credits and the child support system", and that was welcomed, almost universally I think. And the system tomorrow relaxes it a bit more. But it needs to get completely out of the loop, I believe.

In spite of what Frank Field says later, I stick with my view here that we need to get the Treasury out of the loop. I have an alternative proposal for reducing the amount of Income Support paid to lone parents. My argument is expanded at:

"Child Support should be for Children" - A proposal for reform

There should be no Treasury saving or state compulsion

 

Chris Lowe

What about the suggestion that Michelle mentioned that we should follow the Canadian system, where as I understand it the government pays the money to the single parent with the child, and recoups the money itself from the absent parent, rather than the parents themselves being so heavily involved in it together.

Barry Pearson

It’s got some merits. The argument put against it, which also has some merit, was that this would start to look to the father that he was paying money to the government. Because although in fact he was really paying it to the mother in arrears, it would appear to him that he was paying it to the government, and this would be a bad taste, probably.

This principle is typically known as "advanced maintenance". The state pays the PWC a proportion of what the child support should be, then attempts to collect from the NRP. The state then retains from that the amount it paid to the PWC, and pays the PWC anything more than that. This gives the PWC the security of regularly getting at least a proportion of the child support due. This can be very useful for a PWC trying to get into work and struggling with childcare costs.

See: "Making child maintenance regimes work", Anne Corden
Family Policy Studies Centre & Joseph Rowntree Foundation
ISBN 1-901455-35-1

The following countries in Europe have some form of "advanced maintenance": Austria, Belgium, Denmark, Finland, France, Germany, Norway, Sweden.

Chris Lowe

So, Frank Field, the change that is coming tomorrow which is designed to simplify the system for everybody for everybody, what is wrong with it from your point of view?

Frank Field

Well, if I could just go back one moment, the Treasury has every right to be involved, in that we are talking about the massive huge bill that taxpayers foot because largely fathers don’t meet their responsibilities. So I disagree fundamentally with this soft line that we somehow should get the Treasury out of it. The Treasury is actually representing us, and for too long large numbers of fathers have not met any of the costs of raising their children …

I am a childfree taxpayer. In this matter, I don't accept that the Treasury is representing me.

Note that Fank Field's comment about meeting the cost of raising their children is clearly focused here on reducing the amount that the Treasury spends for raising children, and he doesn't show a concern for the private cases where the Treasury is already out of the loop.

While about 70% of CSA cases start as benefit cases, only about 10% end as benefit cases. About 37% of all CSA cases, a little over one-third, are benefits cases. The rest have no (current) Treasury interest.

In fact, because of the £10 disregard in the new scheme, probably well over half of the benefits cases won't yield any return to the Treasury, because most CSA benefits cases will be calculated at no more than £10.

Chris Lowe

But isn’t the argument about the CSA - its track record over 10 years - they been very good at getting more and more money out of those who are happy to pay but not very good at chasing those people that it should be chasing who are not happy to pay.

Frank Field

Well, it isn’t actually very good at getting more money out of even that static group, and what I argued for and failed to convince the government was that we should have a very simple tax system where for example, we debate the point, whether it is 3p on tax for 1 child, 6p for 2 and 9p for 3, and the Treasury would collect that automatically. So the example we heard earlier on with the barrister, who outrageously pays only £5 a week because he knows the rules, that wouldn’t rub. That when he put in his tax form, once his taxable income was computed the very simple tax formula would then apply in addition to any other taxation he paid.

Barristers are self-employed, so don't pay tax in the regular PAYE manner. So what use would it be to the PWC if she was not on benefits? The Inland Revenue would not collect the money until long after she needed it for the children, then it would come through as a lump sum much too late.

This reinforces my statement above that Frank Field was solely concerned on this programme with reducing Treasury spending in benefits cases, and he was not concerned the use of the CSA for private cases, even though they represent nearly two-thirds of the caseload.

And, the problem we have had from the word go is that people who design benefits have designed this reform yet again who are endlessly trying to nuance the formula to take account of almost every need, and what we ought to get back to is some might say a brutally rough formula that says that you have responsibilities to look after your children, the best way of doing that is through the tax system, you pay additional tax, just as people pay additional taxes who have taken grants out to go to university, and have to repay them.

Simple as that, and all the extra energy of the Agency can then go in trying to increase, year by year, the number of parents who at the moment refuse to pay, to get them to pay.

This is simply not true. The basic formula for the new scheme has 4 variables: NRP's net income; number of qualifying children; number of nights of shared care; number of relevant children.

It is arguable whether "relevant children" (extra children in the NRP's household) should be in the formula, but the other three variables have a sound justification, and two of them appear in his scheme.

"Variations" add more detail, but these are focused on child-related matters, and not "almost any need". For example, they cater for cases where the NRP's life-style exceeds his income, which Frank Field's scheme doesn't.

Chris Lowe

Ray Mellor, are you happy with that, because the change that is coming many would describe as brutally rough?

Ray Mellor

[Response by Ray Mellor]

Frank Field

But Ray, can I come back to you, what’s happening at the moment because there is no money coming in the taxpayers are footing the bill. It’s not free money, it’s money that my constituents have to earn and willingly pay, to raise children who are in this vulnerable position. When parents start to pay, it is quite proper that the bill on the taxpayer should be reduced. It shouldn’t be on top of what taxpayers pay.

Chris Lowe

Ray?

Ray Mellor

[Response by Ray Mellor]

 

Frank Field

Well, there is actually a disregard. But the basic fact is that people get this money because their income is inadequate and it’s made up to a minimum level through the benefits system. And the rules are, for example if you are benefits and working, after a small sum of money the money is clawed back pound for pound. And we clearly cannot create and should not create a special category for single parents whose father of their children won’t pay their whack.

These are simply the current rules of the UK. They are not laws of the universe. We can change them if there is good reason. WFTC is also in some ways a form of benefit, and doesn't obey these rules.

The government does not consistently consider that the Income Support rate is a "minimum level" needed to live on. For example, it is prepared to take £5 per week off an NRP on benefits. And, apart from the new £10 disregard (confusingly called the "child maintenance premium"), there are other disregards, variously of £5, £10, or £15.

We can create a special category if we choose to. (His last sentence is misleading. I want a special category whether or not the father won't pay his whack - the latter is a red herring).

Chris Lowe

OK, Barry Pearson?

Barry Pearson

I have to disagree to some extent on this one, simply because probably more than half of the benefits cases will not actually result in a calculation that exceeds this £10 limit. There isn’t enough money around in many cases for the Treasury actually to get a significant amount of money back. It just isn’t there in the separated family. It is for a minority of cases, but for the majority of cases it simply isn’t there, yet they get sucked into the system.

Guide: the average earnings of NRPs in CSA cases are less than national average male earnings; and the average earnings of NRPs in benefits cases are less than the average earnings for all CSA cases. Higher earning NRPs are a minority.

At November 2002, 47% of NRPs were employed, plus 5% self-employed. The rest are typically out of work or in sporadic work. About 58% of NRPs are currently assessed to pay less than £10 per week.

CSA Quarterly Statistics up to November 2002

A recent Parliamentary Question shows that CSA payments where the PWC is on benefits are on average lower than where the PWC isn't. The average amount where the PWC is on Income Support is £5.79, while the average for a PWC on WFTC is £13.40:

Parliamentary question by Mr. Cameron; answer by Malcolm Wicks

Chris Lowe

Generally, I’m not just talking for your benefit but generally, will absent parents, largely fathers, as a result of this change that’s coming in, have to pay more than they did already?

Barry Pearson

About a third will have to pay more and about two-thirds less – that’s the sort of estimate.

Chris Lowe

And the third who have to pay more, why do they have to pay more?

Barry Pearson

There are various conditions. One is if they currently have high housing costs. That is taken into account in the current formula; it isn’t taken into account in the new formula. That’s one case. Another case is that the new system has higher caps, higher upper limits.

Further examples of NRPs who will pay more under the new scheme are indicated in:

Premature conversion to the new CSA scheme - A loophole that may thwart government policy

Another category of NRPs who are expected to pay more are those who are non-compliant at the moment, but will become compliant (or more compliant) under the new scheme. For example because there are fewer escape routes, and because there is expected to be more resource available to focus on compliance. In many cases, the liability will decrease, but the payment will increase

Chris Lowe

Do you think it’s fairer – the new system?

Barry Pearson

Phew - I don’t know how to define “fair” in this whole matter because you’ve got at least 3 points of view all pulling in different directions.

The only consensus I have seen about "what is fair?" is "anything that will make me financially better off"!

Chris Lowe

Ray, you don’t think it’s fair?

Ray Mellor

[Response by Ray Mellor]

 

Chris Lowe

Frank Field, that doesn’t sound, we mustn’t get into individual cases, but that doesn’t sound entirely fair.

Frank Field

No. But of course it is the individual cases that in the end build up and make the rules. The argument I put forward again is for simple tax rates. There will be some people who for various reasons decide to spend more of their income on housing and less on holidays. Some will spend more on holidays and less on housing. I don’t think that’s relevant to devising a formula to actually try and foot part of the bill that currently taxpayers meet. I come back therefore to the simplest of all formulas which we know could work would be an additional tax rate with the Treasury running that because that is the Agency that collects money. The Department of Work and Pensions has great expertise, but it is actually in paying money out, not in collecting it.

The Inland Revenue indeed is experienced at collecting money. But could it pay it out to the PWCs of private cases regularly and reliably?

The new scheme ignores housing costs and holidays, just as Frank Field's scheme does. So while that comment may be relevant as a response to Ray Mellor, it is not an argument for Frank Field's simple tax system instead of the new scheme.

Chris Lowe

Barry Pearson?

Barry Pearson

I believe the main problem that Ray faces is not necessarily totally incompatible with what you’re saying. The problem is that because of the loophole it is all happening much too fast – too fast for people to adapt. The government’s intention was that where there was a big difference in the payment, it could be phased in over 5 years. Then the loophole that Ray is about to be subjected to is going to suddenly give him no time to adjust his housing costs, which takes a long time to do.

This is what I have been informed about how the NRP can block this loophole:

"If the parent with care cancels the case and the non-resident parent makes a counter claim using "CSA Form 1 (NRP)" within 13 weeks, as the status of all concerned has not changed the old case will be re-opened and will remain on the old system. There is also another way to close the loophole. That is by the right of appeal the non-resident would have when they receive notification of the closed case. The appeal would need to be brought under section 1 of the 1991 Child Support Act ("the duty to maintain"). In addition the appellant would need to prove that the parent with care's action was to use the loophole to enter the new scheme. This would be very easily done if there is no maintenance payments in place and they could not explain why (i.e. no private agreement)."

The CSA may claim they can't send out the form quoted above. But they should, and sometimes have done so.

For further advice on this matter, try: Durham Legal Services

Chris Lowe

Frank Field, is there a system … is this part of the role of the system to try to ensure that the relationship between the parents, the separated or divorced parents or partners, is not made worse but is actually made better in the interests of the children? Is there a role for the CSA in that, and does it do it?

Frank Field

I don’t think there is a role for the CSA in that, and they certainly don’t do it. Clearly, what we have to bring home to people is that, while it may be convenient for grown-ups to break up, it is a hugely devastating experience for most children. Particularly then if one partner denies access to a husband who the courts say is a perfectly proper person that should actually be seeing their children. Now that is not a role for the CSA to try to mediate or do anything about that ….

Chris Lowe

No, but the system shouldn’t make to worse, should it?

Frank Field

It shouldn’t … well … the sad fact is that when someone breaks up and moves off and starts another family, their primary loyalty will be to that new family and not to their first family. There will be honourable exceptions, but that’s the general rule. And therefore what we’ve got to have is I think is a simple tax system which says to people how you run your lives in this respect, your grown up that’s nothing to do with us, but you shouldn’t put the whole bill of your changing preferences onto taxpayers.

While it isn't the role of the CSA to mediate, there is a strong case for trying to ensure that the CSA does not make matters worse (as indicated by Chris Lowe).

Frank Field then switches back to Treasury-saving, which appears to have been his only concern during this programme.

Chris Lowe

Ray Mellor, briefly would you settle for that?

Ray Mellor

[Response by Ray Mellor]

 

Chris Lowe

Barry Pearson, last word?

Barry Pearson

I would like to comment on something that Frank said there. He talked about the court system and how contact is arranged and enforced and so on. I actually believe that some of the key problems of the child support system are in areas which are not directly to do with child support. The Working Families Tax Credit system changed the rules and actually improved the child support system without changing the child support legislation. Change the court system, improve the benefits or do the sort of things that Frank is talking about, and do some changes to the formula, and gradually move forward like that.

Chris Lowe

Fair old shopping list, Barry. Thank you very much indeed. Plenty to think about.

That I’m afraid is all from Agenda this week. Thank you to my guests Frank Field, MP, in Westminster, to Ray Mellor in Manchester, and Barry Pearson here.

That "shopping list" is further described at:

Child Support Agenda for the 21st Century

Page last updated: 6 July, 2004 © Copyright Barry Pearson 2003