22nd Aug 2017

The Child Maintenance Service – A third generation scheme?

By James Pirrie

In this blog director James Pirrie, a specialist in the operation of the Child Maintenance Service, examines the development of the current system of payments for the children of separating parents.

Our current child support scheme is a third epoch in a history that stretches back to April 1993, when our administrative system went live.

  • From April 93, CS1, there was a complex formula with poor delivery that would see £3.8 billion of arrears build up.
  • In March 2003, it was replaced for new cases with the simpler formula (with its familiar 15, 20, 25% bands for 1, 2, 3 or more children); but then
  • From December 2012 a new “gross income” system began its roll-out with its plethora of percentages applied – usually – to the gross income last reported to HMRC. (The CMS was relieved of the responsibility of determining the income of the Non Resident Parent (NRP).

A golden era…that has already passed

Between April 1993 and March 2003, the administrative child support system was a misery of non-performance for most. It would see enforcement powers extended time and time again by a Government desperate to create a working system. Eventually it was recognised that the real problem was simply that the head-count and skills resources of the Agency’s staff were insufficient for the scale of investigation required by the task, where one calculation alone might require over 100 pieces of information to be assembled (Select Committee on Work and Pensions 2nd report Jan 2005, para 8).

From December 2012, the new system (“the Child Maintenance Service”) went live, to become – for some – a misery of unfairness. The old failures were a system overburdened by the demands of a complex formula targeting fair outcomes (that in consequence delivered none where the obligors were sufficiently committed to evading responsibilities). The latest iteration seemed to sacrifice the goal of fair outcomes in favour of a system that is cheap and easy to operate. Particular challenges exist where the obligor’s finances pass a threshold of complexity that permits significant capacity to pay to be hidden behind headline low taxable income.

It seems strange that we must now look back on what lay between these two periods 2003 to 2012 as the golden years of child support.

Changes in policy – continued exclusion of the Courts

Along this continuum we have changed from a scheme that required parents to authorise the administration to pursue a claim on their behalf to a system that would exclude all save those persistent or insistent enough to battle their way past the “information” service” CM Options and (generally) pay a fee for the privilege. Where on top the current CMS administration is used to manage collection then substantial further fees are charged. It is a system that might have been designed to minimise take up. It is easy for the DWP to present the diy “family based arrangement” as a victory for family self-determination (as it does in its report “Effective Family based Child Maintenance Arrangements” pub 16/5/2017) but the underlying reality may be that these are lower-level, informal commitments with patchy compliance that short-change children their financial provision.

As with all changes there are winners and losers. Those sufficiently well informed or supported to get into the current system, pursuing claims from Non Resident Parents (“NRPs”) with neat constant PAYE income may well find an effective system for fixing and managing child support obligations. Those with financial complexity may find themselves battling to have their circumstances understood. However, numerically it is the applicant parent (“parent with care” or “PWC”) pursuing a claim against the NRP with complex finances who seems to have lost out most.

Under CS2, DWP officers or the tribunal judge could treat assets as having a notional income value so as to generate a liability. They also had powers to impute the income that was needed to justify a good lifestyle. These powers permitted applicants to secure reasonable income from most parents with capacity to pay, even where the presenting income figure was a low one. The abolition of these powers under CS3 sees the emergence of a class of multi-millionaires with £7 pw liabilities.

And despite a poor formula and discouragement from using the administrative system we are still left with a prohibition on the court assessing child support where the CMS has jurisdiction.  The Government-appointed Sir David Henshaw provided 13 key elements that should underpin a reformed system in his comprehensive review “Recovering Child Support: Routes to responsibility” in 2006. This is the only recommendation that has been left out of his scheme.

A cheap system but marvellous delivery?

One might have hoped that this downside was at least matched by operational nirvana – sadly we are seeing the steady climb of maintenance arrears (in CS3 alone) from £65m in November 2015 to £93m in November 2016. It may be that this results from a failure to progress cases to the more effective (and costly) enforcement measures but these statistics are no longer available.

Making use of the statistics

The 2008 Act recorded the objectives of the CMEC administration (no longer with us) to include the relatively modest goal: “The commission’s main objective is to maximise the number of those children who live apart from one or both of their parents for whom effective maintenance arrangements are in place.”  When we would look at the agency stats in the 90s, the picture that they gave was a depressing one and showed how far we had to go before that sort of objective might be attained. The new stats need to be looked at differently. This is because some information is not recorded but beyond this, even if recovery of the assessed sums were at 100% we could not pretend to have a perfect system simply because the formula is not perfect. In short it is difficult to feel confident that the efficacy of our support for children of separated parents is proved simply because the published data says so. More worrying, it clearly isn’t saying so.

A qualitative assessment:

So it may be appropriate to move from quantitative to qualitative assessment. In that regard we have the recently published “Children Deserve More” https://gingerbread.org.uk/uploads/media/17/10131.pdf , which follows the experiences of five Parents With Care. It is (another) brilliant piece of work from major-players Gingerbread. As the title might suggest it is a resolutely depressing picture and an important read for policy-makers and anyone with ongoing involvement with the regime. One comes away with a strong sense that this third generation scheme fails children as:

  1. it discourages the claimant from entering the scheme:
  • the designers of the system are open in their preference that the system is not used:
  • the CM Options “gateway” was put in place to encourage self-managed arrangements;
  • a fee of £20 is usually levied to use the system;
  • where the administration manages the payments 4% is deducted from the sums that would otherwise pass to the recipient and 20% is added to the payer’s bill.

As a result, behind the statistics, there is a vast hinterland of private arrangement or no arrangement at all.

  1. its formula fails to “out” capacity to pay (in favour of a formula that is cheap to operate);
  2. it fails to permit the Court’s outing of true capacity to pay to trump the rough and ready assessment from the bargain-basement Agency; and
  3. obligations are not all enforced anyway.

More depressing still, the Gingerbread report represents, I understand, author Janet Allbeson’s swansong (at least for now). She has been one of the leading thinkers in this arena throughout its 26 year story. (For example the CMEC objective referred to above was, if memory serves, born of one of her initiatives). There are many of us who still believe that Government should invest until we have a scheme that is fit for its intended purpose. She was the person who held the policy makers to account perhaps more effectively than anyone else, her insight wisdom and approach will be very sorely missed.

James Pirrie is a director at Family Law in Partnership. He specialises in complex financial issues and non-adversarial and cost effective approaches to divorce and separation including mediation, arbitration and collaborative law. He helps clients take control of the issues that affect them, clarifying priorities, exploring all the options and identifying the best way forward. James is very well known for his expertise in the law relating to child support with a commentator noting that James is “undoubtedly this country’s expert on child support“. As a specialist in child maintenance, James appeared before the House of Commons Public Accounts Committee to talk about the practical impact of the introduction of the new Child Maintenance Scheme. For help and advice, contact James at E: jp@flip.co.uk or T: 020 7420 5000 or read more about child support payments here.