Dear Ms Allen,

Re: Child Maintenance Service (CMS)

I am writing this open letter to you as we are being contacted by many service users who are anxious about your draft Child Maintenance (Assessment of Parent’s Income) Bill which is due to have its second reading on 27th April 2018. We were pleased to have had the opportunity to provide evidence relating to Child Maintenance to the Select Committee for Work and Pensions inquiry that reported last year1. The report did not address key points we raised and we suspect that, had it not had to be prepared in a hurry prior to the dissolution of Parliament on 3 May 2017, it may have resulted in a more balanced and authoritative report and perhaps a more even-handed draft bill.

We are pleased to report, however, that the evidence on affordability that we and Dr Christine Davies of Royal Holloway University of London submitted to the Committee has been accepted by DWP to be accurate and they have begun assessing the scale of the problem and potential remedies. Frank Field MP suggested on 26 February 2018 that we write to you directly about these. We were disappointed to learn that you felt unable to make the time to discuss our concerns and suggestions for amendments to your bill prior to its second reading. We respectfully ask you to reconsider so that we can discuss the proposed draft so it may be amended uncontentious during its passage through Parliament.

I would like to thank the Committee for inviting us to give oral evidence to its inquiry on 16 November 2016 and for recommending in its report that the Department for Work and Pensions consult us as a stakeholder group. I am pleased to report that those meetings are going ahead and have been productive. However, the consultation was a year and a half ago and the issues being raised in your draft bill were not discussed, nor were we consulted on the bill itself. Also, the key matters not being taken into account in the draft bill are:

• affordability of assessments made by CMS and
• shared parenting – which the current formula does not apportion fairly

Affordability

We want children to be properly supported whether they are jointly or singly parented, however, there are fundamental flaws in the formula for Child Maintenance that make it unaffordable for many paying parents. The problem applies both under the old benefits system and under Universal Credit, resulting in paying parents on low income being pushed into poverty or out of work. It means that, for many, work does not pay. The fact that Universal Credit and other benefits do not take into account Child Maintenance for either receiving or paying parents is, in our view, an omission that makes the system not only unfair to parents, but an unnecessary burden on the taxpayer.

Affordability and Self-Employment

With a good deal of the focus of your proposed bill being on self-employed paying parents we think it helpful to consider that the average income of those in self-employment is £12,500 per annum or £240 a week2; £228 after deductions3.

Someone on such an income with two children would need to pay £45.60 a week4 Child Maintenance. If they lived in outer London, a single ‘box’ room in a house share would cost them around £100 a week, if they had to travel to work daily on London Underground their transport costs might be over £40 a week, leaving around £40 a week or £6 a day to live on, buy clothes, pay for visits to children, etc.

Add to this that many of these parents will be part of the ‘gig economy’, on zero hours contracts or receiving irregular income, is it surprising that many struggle to meet Child Maintenance demands derived from assessments that don’t take into account their essential costs of living? Currently CMS will not take into account variations in income unless they exceed 25%. We propose that this variation threshold should be no more than 7% to 10%.

You may recall one of the case studies in the VT on the Victoria Derbyshire Show last year 5 showed a father who was a children’s entertainer. We have no information on that case, but can’t help but wonder what kind of income he may have and how regular that is. From the tone of the piece, we also wonder whether he is seeing his child(ren). Involved dads are far more likely to be supportive financially if they are not prevented from contributing their love and care.

‘Deadbeats’

Given the above, it is upsetting to many of our service users to see certain sections of the media refer to them offensively using the general term ‘deadbeats’ even if they are experiencing genuine difficulties with payments of Child Maintenance based on an unworkable formula. A number of fathers reported to us feeling upset and hurt by the use of this word on the Work and Pensions Select Committee’s website6. We agree with them that it plays to a stereotype and does not assist in creating a culture of constructive engagement. We ask the Committee to review this and remove the word ‘deadbeats’ from its website.

Shared Parenting

We draw your attention to the fact that the Government supports shared parenting after separation, but the current CMS formula does not and on the contrary penalises parents who do. When parents share care 50/50, unless they agree amongst themselves not to claim Child Maintenance via CMS, only one parent will receive 4/7 of assessed Child Maintenance (and all
the other benefits!) whilst the other receives nothing and still has to make payments, irrespective of relative income. The single parent charity Gingerbread agreed that there is a problem when they gave oral evidence to your committee, stating that “there should be a look at those shared care rules where at the moment it is just a source of dispute between parents”7. We urge you to consider adding a section to your proposed bill to address this anomaly. It would be very unfair to continue to ignore it.

Cost to the Taxpayer

We note that at the first reading of your bill it was stated8 that the issue of non-payment was “forcing the parents with care on to benefits” and is a “double hit to the taxpayer”. We agree that tax evasion is bad and needs to be dealt with by HMRC, however, it should be clarified that welfare support is provided to the ‘Parent With Care’ irrespective of whether they receive no child maintenance at all or £1,000 a week, so unless this too is addressed there will not be a saving to the taxpayer.

12 Month Rule

FNF agree with you that this rule does not work. It needs to be replaced with something more sophisticated. In its current form, it is open to abuse by both receiving and paying parents. When financial matters are resolved in court, judges have an opportunity to review in detail both parties’ finances, responsibilities and agreements. It does not make sense that a mere 12 months later such agreements can be discarded and a far more crude CMS formula applied. Paying parents may, as you suggest, seek to hide or diminish their income and end up with much lower payments. Similarly, receiving parents who agreed in court not to claim Child Maintenance, for example, in return for the paying parent clearing shared debt, may then renege on such agreements by applying to CMS after 12 months to claim a share that is far in excess of what was already agreed in court.

Lifestyle Test

We have pragmatic and fairness concerns about this as currently proposed. This test was scrapped a few years ago because it did not work. DWP have stated in their recent consultation9 that many of their investigations into lifestyle beyond stated earnings revealed that the lifestyle was financed by debt rather than income. In any event, any such test, to be fair, should take into account both parents’ financial positions. We often see paying parents who live in poverty, unable to provide a few treats for their children when they visit, whilst their ex-partners enjoy a lavish lifestyle and receive Child Maintenance from them. Most paying parents, however, are on low incomes and many are carrying debts resultant from legal fees whilst seeking to maintain relationships with their children after separation, so this proposal, even if effective, addresses a small minority problem.

We have stated in the recent DWP consultation10 that

“Until work is complete on assessing the affordability of the current Child Maintenance Formula and its failure to reflect shared parenting arrangements it would be wrong for draconian enforcement measures to be introduced that will push some paying parents out of work, into deeper poverty, despair, ill health and suicide. Until this work is done, current proposals place the cart before the horse”.

We further, respectfully ask, you to review in detail the response we prepared to the DWP consultation on Child Maintenance last month which is enclosed/attached for your convenience. We also hope you might take-up our invitation to meet, not just with us, but with our service users at one of our support meetings. The proposed draft of the bill will mostly affect a small number of high net-worth individuals. Can it be right, when there are so many fundamental flaws with current arrangements, that such a piece-meal, selective approach is taken? We feel sure that a more even-handed approach will result in more workable and fairer legislation with better outcomes for tens of thousands of children in whose interest it is, we trust, proposed.

We look forward to hearing from you.

Yours sincerely,

Michael Lewkowicz
Director of Communications

cc: Select Committee
Work and Pensions Committee
Frank Field MP (Chair)
Kit Malthouse MP
Parliamentary Under-Secretary DWP