SUMMARY

  1.  Recent relevant research is drawn to the attention of the Committee:

—  Boden, R and Corden, A (1998) Self-employed Parents and Child Maintenance, London: The Stationery Office.

—  Corden, A (1999) Making Child Maintenance Regimes Work, London: Family Policy Studies Centre (a comparative study of regimes in ten European countries).

  2.  Concern is expressed about proposals to allow use of financial data collected by the Inland Revenue, for purposes of assessment of child maintenance liabilities of self-employed parents.

  3.  Concern is expressed about proposals to withdraw exemptions from minimum payments.

1.   Recent research on child support

  1.1  Research conducted recently is of relevance to the Committee's considerations:

—  Boden, R and Corden, A (1998) Self-employed Parents and Child Maintenance, London: The Stationery Office.

This is a study of the assessment of self-employed parents' income for purposes of the Child Support Agency. The work was jointly funded by the Institute of Chartered Accountants in England and Wales and the Department of Social Security, and included comparison of the approach to measuring self-employed earnings in Australia and the United Kingdom.

—  Corden, A (1999) Making Child Maintenance Regimes Work. London: Family Policy Studies Centre.

This is a comparative study of child maintenance regimes in ten European countries: Austria, Belgium, Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden and the UK. The research was funded by the Joseph Rowntree Foundation.

  1.2  Copies of the reports from both studies have been sent to the Committee. Findings from both studies were discussed during the consultations held by Government following the publication of the Green Paper, Children First: a New Approach to Child Support. A copy of the author's submission to the Green paper consultation is enclosed, and the views and observations therein remain relevant. The White Paper refers to findings from the comparative European study (page 12 and page 54 paragraph 16).

  At this stage, I would like to re-emphasise two major concerns, as follows.

2.   Assessment of earnings from self-employment

  2.1  The discussion in the White Paper about problems that arise in assessing self-employed earnings continues to lay emphasis on non-cooperation by self-employed people and the refusal of some to provide information about earnings (Chapter 4, paragraphs 12-13). Research has shown that, in a number of regulatory systems including child support, problems in dealing with self-employed earnings often reflect the technical rules for income measurement and the ways in which these are implemented as much as non-cooperation by individual self-employed people. Many self-employed non-resident parents are strongly committed to supporting their children, and frustrated that it is so hard to deal with the Child Support Agency.

  2.2  The White Paper proposes to allow self-employed non-resident parents to provide the figures used for the self-assessment of tax for use in calculating child maintenance. This may be helpful for some parents, and may reduce some confusion and administrative delay.

  2.3  It is important to understand, however, that although using information from Inland Revenue tax records may help to reduce some of the current problems of implementation of child support assessments and recovery, new problems are also likely to be created. The research on self-employed parents and child maintenance, cited above, pointed to the differential which currently exists between child support regulations, tax rules and commercial accounting methods, in respect to measurement of earnings from self-employment. This provides some opportunities for manipulation of reported income for some parents, in dealing with the Child Support Agency; but at the same time, some of the technical rules are such that they threaten the viability of some kinds of businesses. Addressing such problems requires attention to the technical measure of income which is used.

  2.4  The policy objectives of the Inland Revenue, in seeking information and measuring income for purposes of taxation, are different from the policy objectives of a child support agency, in assessing the monies available to support children. In addition, the Inland Revenue's approach to self-assessment has developed in response to the need for overall customer compliance, and there is a relatively low level of audit of self-assessed returns from lower earners. This means that if some parents are to be assessed for child maintenance obligations on the basis of self-assessed returns to the Inland Revenue, important issues of equity of treatment will arise between self-employed parents and employees, and between different self-employed parents.

  2.5  There is a strong argument for greater harmonisation and consistency across all government agencies who must measure earnings from self-employment, to achieve efficient and effective regulation, and to encourage cooperation and compliance. Adopting a "piece-meal approach" by creating links between agencies in attempts to address specific problems within one agency, may contribute to eventual harmonisation in the long term. However, in the short term, this incremental approach may have unintentional effects of increasing problems for clients and administrators in other agencies or organisations. It is important that Government policy-makers understand this:

(The Committee may be interested to know that the Cabinet Office group which is addressing ways of "Modernising Public Services" by improving the provision of "joined up services" has organised a seminar on this topic on 27 September. Policy makers from across various government and non-governmental agencies and organisations will meet to discuss the basic issues which must be addressed, to achieve better integration in policy approaches to measurement of self-employed earnings.)

3.   Minimum contributions

  3.1  The White Paper continues to propose the removal of current exemptions for payment of the minimum contribution from non-resident parents, including those claiming Jobseeker's Allowance and Income Support (Chapter 2, paragraphs 16-17).

  3.2  The Green Paper argued that if the first family was intact, the child would be receiving support from the parent whatever the income level of that parent. Missing from that argument is acknowledgement that if the first family was intact, the parent claiming subsistence benefit income would be receiving a component for that child. Among the non-resident parents who will lose the exemption from minimum payments are parents who are unable to work because they are disabled or have long-term health problems. Many such parents will already face additional costs related to their sickness or impairment.

  3.3  There are likely to be dangerous outcomes for the health and welfare of children in second families if family incomes are reduced below what have been set as minimum requirements, by the demand for payments of £5.00 towards children of previous relationships.

  3.4  The comparative study of child maintenance schemes in Europe, cited above, shows that in schemes governed by rules or guidelines there is usually either a mechanism to ensure that a non-resident parent with low income retains a protected amount of income to meet basic living expenses, or this is decided by a discretionary decision (Austria, Finland, Germany, Netherlands, Norway and Sweden).

  3.5  The decision to reduce some non-resident parents' incomes below what have been set as minimum requirements, including non-resident parents with responsibilities for second families, and sick and disabled parents, appears contrary to a government commitment to reduce poverty and social exclusion.

6 September 1999