Some Background

  1.  The existing Child Support Scheme finds its genesis in the White Paper "Children Come First" (October 1990 Cm1264). The essential formula there suggested was not complex. It was centered on the idea of a "maintenance bill" which would represent the day to day expenses of maintaining children and which would be the sum which all parents should pay if they could afford to do so. The "bill" would consist of those income support allowances which would be paid for the children and the caring parent if that family had no other income. In calculating whether a parent could afford to make a payment towards this bill his assessable income would be calculated by taking from his net income the cost of his essential expenses including cost of caring for children in his care. These expenses would be calculated by reference to income support allowances and premiums and actual housing costs. Once the assessable income had been determined a rate of deduction would be applied to it of 50 per cent until the bill was met: "the assessable income should be shared equally between the children-term and the absent parent until the bill is paid". Once the Bill was met a further liability would arise in respect of surplus assessable income: "this is, after all, what would happen in ordinary family life".

  2.  The Bill was published in February 1991 and sped through Parliament receiving Royal Assent in July 1991. Its provisions were supported by both major parties. The structure of the Act followed the terms of the White Paper faithfully. However, the regulation making power contained within it was very wide. The consultation document containing the terms of the proposed regulations was published in November 1991. There were a number of differences from the proposals contained in the White Paper of which the most striking was the failure to include any allowance in exempt income in respect of earlier capital settlements. The regulations were duly made in the latter part of 1992 and the early part of 1993. Again, they passed through Parliament with the support of both major parties.

  3.  Although the new scheme had been conceived, gestated and delivered with the support of both major parties, in itself a remarkable illustration of consensus politics, its customers in large numbers rebelled against it. One reason, no doubt, was the lamentable failure of the authorities to enforce reasonable levels of child maintenance under the earlier liable relative provisions, resulting in a substantial body of non-residential parents escaping any liability for support of their children with the consequential devolution of that responsibility to the long suffering taxpayer. The principal focus of disquiet was on the high levels of maintenance thrown up by the formula. But, in addition, there was not unreasonable anger at the complete failure of the scheme to recognise that capital settlements had been made in the past, and approved by the courts, which had been intended to meet wholly, or partly, obligations of child maintenance. As a result, the Social Security Select Committee of the House of Commons began an inquiry into the workings of the Act and reported in December 1993. The committee praised the scheme as bringing about "the most far reaching social reforms to be made for 40 years". But it identified the main concerns as regards the workings of the Act as relating to the treatment of clean break settlements; the costs of travel to work; expenses connected with access to children; debts resulting from the marriage or separation; and the inescapable cost of caring for step-children. Moreover, amendments to the existing phasing arrangements were suggested. From this report can be traced the progressive complexification of the Child Support Scheme which has now led to the present Government suggesting in the current proposals a complete abandonment of the existing arrangements.

  4.  The then Government accepted the recommendations of the committee and in February 1994 amending regulations were passed which largely incorporated the suggestions. Again, these regulations were passed with the support of the Labour opposition. But disquiet continued. By this stage concern was being focused on the absence of any "maintenance disregard" in income support cases, and of the non-availability of an Australian-style "departures" system permitting discretionary variations of assessments in specified circumstances. It was also clear, by that stage, that the performance of the agency was hopeless in its administration. Again, in October 1994 the committee reported recommending yet further tweaking to the formula. The Government's reaction in January 1995 was radical. It produced a White Paper "Improving Child Support" (Cm 2745) in which far-reaching reforms were proposed, including the introduction of a departures system (now implemented), a child maintenance bonus scheme as a half way house towards a maintenance disregard; and the inclusion of travelling costs and a allowance in respect of capital settlements in the formula. Thus a substantial set of amending regulations was passed in April 1995 (again supported by the Labour Party) and the Child Support Act 1995 made rapid unopposed passage through parliament receiving Royal Assent on 19 July 1995. This, too, was uncritically supported by the Labour Party.

  5.  The existing scheme has been modestly fine tuned since then, but essentially reflects the effects of the 1995 reforms. It is a good example of Government's reaction to pressure groups and adverse media comment. What began life as a relatively straightforward scheme has been converted, as a result of the Government's willingness to accommodate almost every suggestion for reform, into a Byzantine labyrinth. Its development is instructive: a simple initial formula is shown to have arbitrary affect and to be incapable of addressing specific circumstances of life. So those circumstances are addressed in the formula. But they do not go far enough: other citizens with other different circumstances demand to be accommodated. So the formula is progressively tweaked and tuned and in its final development becomes almost incapable of sensible management.

  6.  The proposed reforms in the current Green Paper contain a formula of almost infantile simplicity. It provides that the non-residential parent should pay a proportion of his net income as follows:

  If the non-residential parent has children living with him the amount will be reduced, the Government advancing alternative methods as to how this might be achieved. Shared care will be recognised by a pro-rata reduction in liability where the child in question spends at least 52 nights a year (as opposed to the current 104) staying with the non-residential parent2[53]. There will be reductions in liability for low-earners and a minimum payment of around £5 per week.

  7.  As will be explained below there are at least three aspects of gross unfairness in the new proposals. But those aside, how can the government expect, given the insistent pressure from aggrieved citizens who consider the simplicity of the existing formula to be unfair not to experience a repetition of history?

  8.  On the 9 February 1998 the House of Commons debated a Liberal Democrat motion calling for the abolition of the Child Support Agency. Mr Archy Kirkwood said this

"I doubt that we shall persuade the Government to go as far as we want, so I shall run with what they say rather than with our more radical suggestions. I believe that given that the Government are set on creating a new system that uses a flat-rate formula, it must have two characteristics. First, the flat-rate system must be almost moronically simple—it must be transparent, so that everyone can understand it. Secondly, the rate must be set relatively low. If we introduce both those elements, we can then say that there should be no exemptions whatever. I suggest that the liability should be set at three per cent of earnings—it makes no difference whether it is net or gross—for the first child and seven per cent of earnings top-sliced for the second child, with no exemptions. That would indeed be rough justice, but it could be implemented"

So far so good. But what of his fellow party member Mr David Rendell? He said this:

"The Act's basic failing is that it rests on a rigid formula. It is supposed to treat people living in equal circumstances equally, but any formula will treat equally only those people for whom the circumstances that the formula takes into account are equal. It cannot take into account all the possible circumstances that may arise. As a result, the formula may produce identical settlements for people whose circumstances are very different."

One might ask if the Liberal Democrats cannot even agree amongst themselves whether the formula should be simple, or complex, or altogether abolished what possible hope has the government of persuading the people of Britain that their reforms are fair, just and workable?

  8.  During the debate Mr Frank Field, the (now discarded) Minister for Welfare Reform announced a Green Paper for the summer in which the following possible areas of reform might be canvassed:

"As I said, I want to conclude by examining the objectives for reform. It is quite clear from the comments of the hon Member for Newbury—as I hope that it will be from the comments of every speaker in this debate—that hon Members are as committed to the principle enshrined in the CSA as we have ever been: a child's right to be supported—which is our first aim—is crucial.

Conversely, the second objective of our reform programme is to achieve a reverse and decline in the number of families on benefit who lack regular maintenance payments.

Thirdly—by achieving our second objective—we will be laying the basis, mostly for mothers but occasionally for fathers, to make greater choices in how they live their lives and in the mix that they will have from benefit and from benefit and work. That choice can be available only if adequate and regular maintenance payments are made.

Fourthly—although I listed it as first when I was in opposition, because I had always thought that it was overlooked—we have a responsibility to taxpayers. Although we want our reforms to be successful, for all the reasons I have just given, the cost of supporting separated families on benefit was approaching 5p on the standard rate of tax. Taxpayers also have to be taken into account in considering our reforms. The pleas on effectiveness of the system that we heard in interventions in this debate will help in achieving that objective.

The fifth objective that I hope our reforms will achieve is to move up the political agenda—quietly and without dispute—the entire matter of access. For far too long, the agreement has been that no problems will be made about maintenance, and that the benefit cheque will continue to arrive, but the quid pro quo is that fathers should not see their children. Of course, one does not make access dependent on maintenance—indeed, there will be some cases in which the court will have to decide, given the record of some of those fathers, and very occasionally, some of those mothers—but, when we talk about the needs of children, we are not talking only about their financial needs, but about the full responsibility that parents have for their children. Parents sometimes tell me that it is all very well to say that, but that the children get deeply distressed when they see their father. That is the price that children have to pay for the break-up of a marriage or a relationship. At the end of the day, one has to consider whether it is right to spare children some of the grief, as one parent comes and goes in their lives, or whether the children should never see the absent parent, and never have that parent ask how they are doing at school or bring them a Christmas or birthday present. Surely we need to widen the debate so that it deals not only with finances, although they are important, but with the full responsibility that parents should have for their children.

Finally, I hope that one of the objectives of the reform is that we have a system that the staff can understand."

  9.  Against this background I turn to examine the contents of the Green Paper and ask whether it achieves Mr Field's hopes, or whether it throws the baby out with the bath water.

  10.  Before doing so I believe it is vital that we recognise that if we are to have an Agency based system at all the current system has certain meritful features which should not be uncritically abandoned. First and foremost is the facility of those parents who are not within the benefit system, and where the state has no direct financial interest in the collection of Child Support, to contract out of the system by the mechanism of entering a consent order in the court. The present effect of sections 8(3A), 8(5) and 4(10) of the 1991 Act (as amended) is to deprive the agency of power to make an assessment in such circumstances and to leave all future variations in the hands of the court. This is an exact reflection of the situation in Australia. There, parents may make a Child Support agreement in prescribed terms. Once accepted by the Agency (which means only that the Agency is satisfied that the agreement conforms with the legal requirements) it is binding in the same way as a court consent order. The Agency will not make a judgement about what the agreement contains and will accept whatever the parents have decided. Where a parent is, however, claiming benefit the rules do not allow for such agreement to provide for less Child Support than would be payable under an assessment. Once an agreement is reached it can only be varied by subsequent agreement or by a court order. Although our scheme is perhaps less transparent it is to identical affect. In non-benefit cases parents can make their agreement and leave subsequent variations to the court without the interference of the Agency. This properly reflects the important principle of autonomy for parents in whom the state has no direct financial interest (other than the raising of taxes). It is a vital freedom which should not be removed. The Green Paper is silent as to whether it will be retained.

  11.  Another feature that must not be overlooked is that the current scheme formula is responsive to many individual circumstances of the particular case. These include

a.  A minimum target figure for the support of the number of children in question ("the maintenance requirement")
b.  The income of both parents
c.  The minimum cost of support of the parents in question
d.  Their housing costs
e.  The effect. effect of any earlier capital settlement
f.  Their disability
g.  Their responsibilities for other children
h.  Shared care arrangements
i.  Their travel to work costs

  The departures system takes account of
j.  Travel to work costs
k.  Contact costs
l.  Illness or disability costs
m.  Pre-separation debts
n.  Pre April 1993 commitments
o.  Costs of suporting other children
p.  Capital settlements
q.  Non-income producing assets
r.  Diverted income
s.  Lifestyle inconsistent with income
t.  Unreasonably high housing costs
u.  Unreasonably high travel costs
v.  Failure of a partner to contribute to housing costs
w.  Unreasonably high travel costs

  12.  The new scheme is far more arbitrary. It takes account only of the income of the non-residential parent, the number of children in question, responsibilities for other children, and the question of shared care. One has to ask whether the asserted objective of the new scheme, namely fairness (the word "fair" appears 35 times in the Green Paper), will be achieved with a formula of such crude effect.

  13.  The answer to this criticism may be that the new departures system will provide the safety-net for those hard cases which would have previously been reckoned under the formula but whose circumstances are now to be ignored. But Chapter 5 Paragraphs 27-29 merely says

"27  We expect that the new formula will result in a fair calculation of maintenance for most parents. The amount left over after maintenance is paid should cover all normal expenses. However, some parents have special expenses—for example, for a sick or disabled child living with them, for the cost of maintaining contact with their first family. For these people, paying a set percentage of their income in maintenance might not be reasonable. We therefore propose to allow a tribunal to set a different level of maintenance in certain, exceptional circumstances.

28.  Parents will also be able to apply for a different level of maintenance where they already provide some support for their children, for example, meeting the housing costs of the first family. We believe that the ability of the tribunal to set the formula in certain cases is an essential part of reaching a fair assessment, although this should not be used as a means of delaying payment.

29.  We will make it clear to parents what level of exceptional expenses might lead a tirbunal to change the assessement. We anticipate that these extra expenses incurred in supporting children would only be taken into account in setting the amount payable in a small number of cases to ensure that the simplicity of a percentage-based scheme is not lost. There is an argument for a more wide-ranging approach. However, there is a balance to be struck here between making reasonable allowance and reintroducing complexities into the assessment process by another route. We will welcome views on the items for which allowance should be made."

  14.  Citizens are entitled to be told how wide, or how narrow, the new departures systems is going to be. The phraseology of the Green Paper suggests that it will be no wider than the existing departure system. If this is so then one can reasonably assert that the results of the new Child Support adjudication process proposed in the Green Paper will be more arbitrary, more crude and less fair than exists under the present maligned system.

Three fundamentally unfair features of the new scheme

  15.  These are, first, the substantial and arbitrary reductions in the amounts of child support that will be payable under the new scheme. The second is the complete failure of the new scheme to bring into account the income of the parent with care. The third is that there is no maximum income on which child support can be assessed.

16.  Reductions

  Although the Green Paper repeatedly states that the new scheme will be more beneficial to parents with care than under the old it is silent when it comes to comparing the figures paid under the existing scheme with the new scheme. The Green Paper does not acknowledge that there will be very substantial reductions in payments in almost all cases. Figures illustrating the reductions are set out in Annex 1. In non-benefit cases this will be to the detriment of the parent with care and the children. In benefit cases the tax payer will be the sufferer. The tax payer will in fact be a double sufferer for not only will there be less Child Support collected, but the introduction of the £10 maintenance disregard will remove that benefit from those citizens paying tax who are already supporting their own children. So one has to ask: is the new scheme truly "fair to the taxpayer" as the Prime Minister asserts in the foreword to the Green Paper.

  17.  It can be seen from Annex 1 that in almost every case there will be a substantial reduction in child support receipt in the hands of the parent with care, or the tax payer as the case may be. Only in those cases where the parent with care earns very significant sums will the new scheme in fact provide the same or increased payments than hitherto.

  18.  What is the justification for these reductions? The Green Paper offers none apart from the hope that the payments may result in a higher compliance rate. This, it may be argued, is cynical and unprincipled. For why should the fact of non-compliance be a reason for reducing payments made by complying parents?

  19.  The response of the Minister (Baroness Hollis of Heigham) is that the average case posited in Annex 1 is not realistic, for the father in question is likely to assert all manner of other factors which are presently permitted for inclusion in the reckoning. The particular example given by her was travel to work costs. Moreover, she stated, the father may go on to claim a departure; and so, for these reasons, the figure given for the present levy may well be higher than that actually computed. Of course, that may be true in some cases. But travel costs can only be claimed for travel in excess of 150 miles each week, and are not claimable at all by the self-employed. The great majority of payers would not be able to claim that allowance in exempt income. And the facility to claim a departure will be a feature of the new regime. So with all due respect the arguments given by the Minister simply do not stand up. The undeniable fact is that the new regime will levy much lower sums that the present; and bearing in mind that 90 per cent of the Agency's workload is benefit cases it will be the tax-payer in the great majority of cases who will have to meet the deficit.

20.  Income of parent with care ignored

  The second aspect of gross unfairness is the failure of the new scheme to bringing into account the income of the parent with care. Paragraph 8 of Chapter Six makes no bones about it. It says

"the new scheme will not take account of the parent with care's income. Every child who lives with a parent shares automatically in her living standards and income. And non-resident parents still have a responsibility to their children, however much support and financial provision the resident parent provides."

  This logic is incomprehensible. Why should a non-resident parent pay the same for his children whether his former partner earns nothing or £200,000? A fundamental ingredient of the old scheme was to bring into account the income of the residential parent. It reflects elementary fairness.

  21.  Before illustrating the absurdity of this proposal I would wish to digress to a short discussion of the Australian system. One question that can fairly be asked is why the government, if it is so anxious for reform does not look at the Australian system, which can now be fairly described as mature having been in place for a decade? The green paper does not mention the existence of the Australian system. The Australian system is essentially a simple percentage system but coupled with a sophisticated departures system. It works as follows. First the non-custodial parent's taxable income (gross) is established. From that gross income is subtracted a self-support component plus an allowance for each dependant child in his care. This is his exempt income. The allowances are the unpartnered social security rate, if he has no dependent children (presently just in excess of A$ 9,000). If he has dependent children he is allowed double the partnered social security rate (just over A$ 15,000), and for each dependent child he is allowed the Social Security rate (for children under 13 it is A$ 1,895; for children aged 13 to 15 it is A$ 2,649). A further deduction is made in respect of what is known as the custodial parent's excess income. This is calculated by first taking what is known as the custodial parent's disregarded income. This comprises the state average weekly earnings figure (just under A$ 39,000) plus the social security allowances for children in her care. This disregarded income is then subtracted from the actual gross income of the parent with care, giving her excess income. This is subtracted from the non-custodial parent's income. The resultant product is then subjected to a percentage. If there is one child it is 18 per cent, two children 27 per cent, three children 32 per cent, four children 34 per cent, five or more children 36 per cent. There is a minimum payment where the income of the custodial parent is high, namely one quarter of what would be payable if the custodial parent had no income. There is an upper limit on the part of the non-custodial parent's obligation namely that he will not be assessed in respect of any income in excess of 2.5 times the state average weekly earnings. A paper from Justice Kay of the Family Court of Australia is attached as Annex A.2.

  22.  It can thus be seen that in Australia the income of the non-custodial parent is a crucial element of the formula: and this reflects elementary fairness. The effect of the Government's proposal can be illustrated by the tables and graphs in Annex A.3 which include, it is hoped not impertinently, a suggestion for reform in this crucial area.

  23.  The response of the Minister to these twin criticisms was as follows. First, she stated that the Australian experience had not been overlooked. She asserted that their collection rate was in fact less than ours and so perhaps they had more to learn from us than vice versa. Whether this is in fact the case, or not, the fact remains that the Green Paper does not mention the Australian system if only to dismiss it as inappropriate for this country. Moreover, her comment betrays a cause for considerable concern. If a simpler and more arbitrary formula than ours leads in Australia to a higher degree of non co-operation then surely it must follow that the yet simpler scheme outlined in the Green Paper will give rise to even higher levels of resistance.

  24.  As to the failure to bring into the reckoning the income of parent with care the Minister's response was simply that if the parent with care had an income of significance then the child would by necessity be sharing in it. It is therefore fair for the father to pay the same proportion of his income whatever the income of the mother. The response to this is that it will be very difficult to persuade the fathers to see it like this. As Families Need Fathers have said in their response to the Green Paper (paragraph 44)

"It will, for example, always be in the interests of the working PWC to involve the CSA in setting child support—because her own income will in future be wholly ignored. We therefore foresee the volume of new cases coming onto the CSA's books, articulate `middle England' who have never before had to engage with benefits-driven legislation or agencies, as the new explosion of discontent with the CSA."

Or as Mr Justice Kay says in his paper on the Australian system.

"The success of the scheme may well depend on the extent to which the public perceive it to be fair. Assessments which throw up $500 per week for a baby or ignore the fact that the carer is earning $100,000 pa whilst the payer is struggling to make ends meet do little to bolster public enthusiasm for the scheme."

It is worth remembering the foundations on which the present scheme stands. In the original White Paper it was stated

"The Government proposes to establish a system of child maintenance which will be equally available to any person seeking maintenance for the benefit of a child and which will . . . Recognise that both parents have a legal responsibility to maintain their children . . . "

And so s1(1) of the Child Support Act 1991 stated

For the purposes of this act, each parent of a qualifying child is responsible for maintaining him

And thus the income of the parent with care has from the very start been a central feature of the formula. For all the criticism made of the present system, whether by politicians, judges, lawyers, commentators, journalists or pressure groups there has never been the slightest murmur of criticism of this fundamental axiom. Why? Because it is so obviously fair.

  The argument advanced by the Government is hopelessly flawed. Of course, it is a fact of life that the parent with care will spend a part of her own income on the child. But that obvious truism cannot lead to the conclusion that the paying parent should therefore pay the same whatever the income of his former partner might be. Every child requires a finite amount of support. That obligation should be shared rateably between the parents in the ratios of their respective incomes. Only thus will the system reflect the legal obligation on each parent to support the child in question. The extent to which the parents should then endow largesse on the child from their residual incomes should be a matter for them. A percentage system does not fit easily with these precepts, while for all its faults the present system clearly does. The Australians have addressed the problem by reducing the paying parent's assessable income by the caring parent's excess income (as explained above). This seems a fair way of dealing with the problem. The amendments I have suggested above are to the same effect. If they, or something like them, are not adopted there will be massive discontent with the new system before it has even got off the ground.

No maximum

  26.  Under the existing scheme there is a maximum assessment dependant upon the age and number of children in question. (This maximum can be topped-up by the Court). Thus for the case where there is one child aged under 11 the maximum assessment is £109 per week. This maximum assessment would be reached where the income of the paying party was approximately £47,000. The range of maximum assessments and the corresponding income thresholds are illustrated in Table 10 of At a Glance. As explained above, in Australia there is a ceiling of assessable income of 2.5 times average national earnings. The Green Paper does not propose any maximum income on which child support may be assessed. This would lead to absurd and unfair results. If a father earning, say, the income of an average Lord Chancellor (£151,002 gross £92,500 net), had to pay 15 per cent in respect of one child aged, say, two years, he would have to pay £13,875 in child support, against a current maximum liability of £5,668. It is hard to visualise any circumstances in which a child aged two needs nearly £14,000 for his support and the complaint that the Child Support is presently indirectly providing spousal support, currently made in respect of the care allowance within the computation of the maintenance requirement, would be able to be made much more strongly and much more convincingly. Interestingly, the tables contained in Annex One to the Green Paper do not admit that it is possible for a paying parent to earn more than £505 per week, or £26,260 net per annum, or £37,500 gross per annum. Bearing in mind that the income of a Parliamentary Under-Secretary is £69,339 and of a Prime Minister is £147,816, one can only express surprise!

  27.  The Minister has stated that the Government had an open mind on this issue. She however did articulate the argument in favour of no maximum which was simply that a child had a right to share in the income of the paying parent. With all due respect a child has no such right. He has instead a right to be maintained by each of his parents. He may have an expectation to share in each of his parents' income, but that is a very different matter to a legal right to a fixed proportion. Failure to impose a maximum will lead to blatant wealth distribution without regard to need, to the concept of maintenance or to the precept of each parent discharging a legal obligation to maintain in fair proportions. It would amount to disguised spousal maintenance without any judicial determination, and as such would be likely to amount to a breach of the European Convention on Human Rights (shortly to be incorporated into domestic law by the Human Rights Act).

28.  Conclusion

  The Green Paper has much to commend it in its content. The insistence that the administration of the agency must be improved is not only commendable but an imperative necessity. There is merit in making the system more transparent in its workings. It should be possible for a citizen dealing with the agency to have explained to him the basis on which the assessment is made. This is impossible under the current arrangements. If the sophistication of the existing formula, seeking to address a wide variety of individual circumstances, is to be jettisoned, and a cruder and more arbitrary formula put in its place, then it is essential that a wide departures system is also introduced to enable the special circumstances of the individual case to be addressed. This is what happens in Australia. In advancing the Holy Grail of simplicity in the formula the Government must not overlook simple fairness. Simple fairness demands that there should not be substantial reductions from the levels of child support currently paid whether here or in Australia. The figures that would be thrown up by the new formula do not represent a reasonable contribution to maintenance. It is defeatist to set unreasonably low levels of support simply to induce non-complying parents to pay. The failure to take into account the income of the non-custodial parent and the failure to impose a maximum are hideously unfair. There is no justification for them.

Nicholas Mostyn QC

5 November 1998

53   Families need Fathers have made a compelling objection to this. They point out that if the non-residential parent has the child staying with him for 3 nights a week, his liability should not be reduced by 3/7ths but by 6/7ths to reflect not only the reduction in expense on the part of the parent with care but also the assumption of liability by the non-residential parent. Back