Simplifying the maintenance formula

Changes to the child support system take effect in April. John Fotheringham outlines the essentials of the new provisions

The Child Support Act has, according to taste, been the saviour of the abandoned wife and mother or the greatest injustice imposed on Scots Family Law: the most over-complex nonsense or the birth of objective assessment.

Whatever our attitude to the Act and its many sets of regulations, family lawyers have grown to accept the Child Support System as an environmental factor like the weather which cannot be wished away. Many of us have finally become used to the algebraic structure of the Child Support System. It seems that we will now have to become used to an entirely new system of calculating Child Support Maintenance which will affect all Child Support applications after April of this year.

First it will be beneficial to look at some of the main shortcomings of the old (i.e. present) system:

1. It is extremely complex
2. It is expensive to administer and ...
3. ... very slow
4. Many assessments are wrong and at the same time difficult to check
5. There is no incentive for Income Support clients to co-operate with the systems.
6. The general public has no chance of calculating the likely level of Child Support Maintenance.
7. The Departures System is poorly structured and poorly understood.

The new system attempts in various ways to address these shortcomings. Most significantly the maintenance formula will be rendered very simple but it will remain to be seen whether or not its effects will create more or less injustice.

Maintenance Formula

The old algebraic system with its complicated formulae will be replaced in respect of all new applications from a nominated date in April. The new system 1 will be simple – perhaps brutally simple.

If the Non-Resident Parent (NRP), who for the purposes of this article I will assume to be the father, is earning in excess of £200 per week net and has one qualifying child he will pay 15% of his net income in Child Support Maintenance. If there are two such children he will pay 20% and if there are three or more he will pay 25%.

What is Net Income?

For the purposes of Child Support net income of the NRP will be defined as all income from all sources including bonuses and regular overtime less income tax, national insurance contributions and all pension contributions whether occupational or otherwise, up to the Inland Revenue limit. The maximum net income is deemed to be £2000 per week and accordingly the maximum amount of Child Support payable will be £300, £400 or £500 depending on the number of qualifying children.

More dramatically, the new calculation of net income leaves out of account the income of the Person With Care (PWC). The original Child Support System accepted the principle that a child’s two parents each had a responsibility to provide maintenance. The new system renders the PWC’S income irrelevant. She may obtain an increase in salary from £30,000 per annum to £60,000 per annum but this will not affect the level of Child Support Maintenance at all.

The NRP’s housing costs – often a major factor in maintenance disputes to date – will likewise be left out of account as will his travel to work cost, the child’s own income and the income of the NRP’s new partner. The terms of a capital settlement between the parties can be included only under the Variations Scheme of which more later.

Shared Care and the Second Family’s Needs

The existing Child Support System has been widely criticised for its failure properly to take into account the needs of the new family of the NRP. Furthermore the NRP has had to exercise contact of 104 nights per annum before being granted any diminution in the level of Child Support Maintenance. This high level of contact has been seen as an unreasonably large hurdle.

Under the new scheme, if the NRP has one child in his new family (whether natural or step) then the calculation of his net income will be reduced by 15% before the normal maintenance formula is applied. If he has two such children the net income is reduced by 20% before maintenance is calculated.

Shared care under the revised system will become relevant at a lower level. The NRP need exercise only 52 nights residential contact per annum to obtain some relief from the level of maintenance. It is important to remember that the amount of time spent by the NRP with his child or children will not be a relevant factor. The Agency will count nights of residential contact only. The father who exercises non-residential contact on four days per week but has residential contact on only one night per fortnight cannot seek a diminution in his maintenance payments however large his expenditure on his child during his non-residential contact.

If the NRP exercises 52-103 nights’ residential contact per annum he will be allowed a reduction of one-seventh of his Child Support Maintenance payments. 103-156 nights will give him a two-sevenths reduction and 156-174 nights will be give him a three-sevenths reduction. Residential contact in excess of 174 nights leads to a halving of the Maintenance Assessment.

The important thing to remember is that the “new family” dispensation affects the net income of the NRP. The “shared care” dispensation affects the Maintenance Calculation directly.

Example:

The NRP’s income after deduction of tax, national insurance and pension contributions is £350 per week. He has two qualifying children living with his former wife, the PWC. The Maintenance Assessment for his two qualifying children will be £75 per week.

If the same NRP has one child in his new family then his net income is reduced by 15% from £345 to £297.50 and accordingly the Maintenance Assessment becomes £59.50.

If the same NRP sees the qualifying children from his first marriage on 80 nights per annum then that Maintenance Assessment will be reduced by one-seventh to £51.

Variations

A new system of Variations replaces the Departures system

The NRP may apply for a variation from the normal Maintenance Calculation on the grounds of:

1. The high costs of exercising contact.
2. Acceptance of debts which were incurred while living with the PWC.
3. Payment of boarding element for school fees for qualifying children.
4. Property or capital settlements with the PWC.
5. Long term illness/disability of child living with the NRP.
6. Mortgage payments made for property in which the NRP has no Propriety interest, such as the former matrimonial home.

The Variations system will to some extent be subjective and the level of diminution in Child Support Maintenance will be subject to some discussion between the NRP and the Agency. The provision for payment of the mortgage of the former matrimonial home will be very useful for both parties in negotiating settlements since the parties may be able to avoid the sale of the matrimonial home (in the interests of the children’s stability for example) by entering into a registered Minute of Agreement that the NRP will make standard security payments for a set period of time. It is of course possible under the old system for the parties to enter into such an agreement but the NRP will now be able to do it more confidently in the expectation that these standard security payments will be taken into account in his monthly Child Support Maintenance Assessment.

The PWC may apply to increase the level of Child Support Maintenance if she can convince the Agency that the NRP has unreasonably reduced his income by refusing to work overtime which was normally worked in the past and which was still available. If the NRP has assets exceeding the prescribed limit (not yet defined) then she may also seek a variation. It is probable that the most keenly contested cases will involve the PWC claiming that the NRP has a lifestyle inconsistent with the apparently declared income. The Agency may then take a view on the level of income which they will assume in the calculation of Maintenance Assessment.

This is the one area in which the financial position of the NRP’s new partner is relevant. The NRP in our example can claim that his high lifestyle is entirely funded by his rich new girlfriend. If he can show that this is the case then that will be a complete defence to the PWC’s application for variation.

Incentive for Income Support Claimants
Under the present system a mother in receipt of Income Support will make no gain whatsoever by a calculation of Child Support Maintenance to be paid by her former partner. This has usually resulted in such PWCs being very unenthusiastic throughout the recovery of Child Support Maintenance and has made matters more difficult for the Agency. The Agency does of course have the sanction of a Reduced Benefit Direction if the PWC fails to co-operate but this stick is not nearly so useful as the proposed carrot.

After April a PWC on Income Support or Income Based Job Seeker’s Allowance will keep the first £10 of maintenance collected each week from the NRP without affecting her benefit.

Early Changes
Although the new system will not become operational for new cases until April, there has been a raft of changes since the beginning of 2001 all of which are already available to the Agency and its officers although little used. The most spectacular of these is that if any party persistently refuses to co-operate with the Agency in its calculation the Agency will be able to apply to the Sheriff for the removal of that party’s driving licence. I am not aware of this ever yet having been used. It does occur to me that the power will be most useful in a case when an NRP may be self-employed. However, very few self-employed people are able to earn significant sums without a driving licence and it may be that the removal of the driving licence would be a Pyrrhic victory for the Agency and the PWC.

The NRP on Low Earnings or Benefits
The normal maintenance calculation will apply to NRPs who earn in excess of £200 per week net. An NRP who receives Income Support or Income Based Job Seeker’s Allowance will pay £5 per week. If the PWC is also in receipt of Income Support or Income Based Job Seeker’s Allowance then the money will be paid to her without reduction of her benefit income.

If the NRP earns less than £100 per week net then, similarly, he will pay a flat £3 per week.

If his income is between £100 and £200 per week net he will pay Child Support Maintenance on a sliding scale.

Transitional Provisions
The transitional provisions have not yet been finalised. This may appear strange for a system which is to come in so soon. What is certain is that the new system will apply to all new cases after the date in April (referred to as the “A” date). For a period of some months after the A date the new system will be reviewed by the CSA to establish whether or not it is working well. This is because of the great confusion and hardship caused by the rushed introduction of the original CSA scheme which required many hurried amendments. It is very unlikely that the Government will not decide that the new system is working well and it would be reasonable to assume that the Government will decide no later than the end of the summer that the existing cases which were begun before April should be recalculated in the form of the new system. From that date (the “C” date) all such cases will be recalculated using the new formula. They will, however, not be made effective until they have all been recalculated. At a very rough guess this system of recalculation may take a year or so.  Once the recalculation work has been finished the new system will begin to apply to all pre-April cases at once. There will be a system of gradual introduction to avoid a sudden leap up or down in Child Support Maintenance at that time. The details of this gradual introduction have not yet been resolved but it seems certain that the gradual introduction will be completed after a period of five years. The existing system of supersession on the ground of changed circumstances will continue to apply to pre-April cases and this may delay the completion of the work for converting old cases.

Problems which will remain
Although the maintenance calculation is a major problem of the present Child Support System the most common complaint of parties is that the Agency fails properly to apply the present rules. Mothers complain that the Agency is too slow in enforcing payment of Child Support Maintenance and in chasing up the NRP when he tries to avoid payment. Many fathers complain that the Agency fails to take into account genuine variations in income and is far too slow in effecting changes of circumstances which they may suffer in their income or in their housing expenditure. The self employed will continue to be a headache for the Agency even though the Agency will have powers to require accountants to provide information. Again, the fact that the Agency has powers may or may not result in the Agency using these powers to best effect.

Furthermore the Agency may continue to negotiate a rate of recovery of arrears with an NRP, failing to take into account the financial position or even the wishes of the PWC. Such a policy is wrong and certainly in contravention of Article 1 of Protocol of ECHR. It is a matter which should always be challenged when acting for a PWC. There is unfortunately nothing in the new system which leads one to believe that that problem will diminish.

The new system, while simpler, is even less capable than the old one for taking into account some arithmetical reality. If an NRP has large moveable debts which he has incurred with a new partner in the interests of children of his new family unit then these debts cannot be taken into account in calculating the amount which he must pay his former partner who may well have very much greater resources either in her own name or in the name of her own new partner.

Practical hints
The Child Support Appeal System is very much underused in Scotland. If your client believes that his or her opponent has misrepresented a true financial position and you are unable to obtain vouching of that position, lodge an Appeal with the Appeals Service. The Appeal Tribunal will establish only whether or not the assessment is right or wrong but you will have an opportunity to prepare your client’s opinions and evidence about relevant matters.

The staff at the Child Support Agency are not your enemies. They have the appallingly difficult task of seeking to administer a botched legislative and regulatory package which leaves out of account many matters which any sensible Sheriff would consider relevant. The system of Child Support is not their fault.

Don’t shout at them. On the other hand you should refuse to speak to any member of their staff who refuses to reveal their surname. Demand to speak to a supervisor if any CSA staff member declines this information.

When sending a mandate to the Agency on behalf of a client, be sure that the mandate appoints you not only as a solicitor but as Authorised Representative. The Agency is unlikely to discuss matters with you without that specific appointment.

Finally, don’t forget that money gained or preserved under an Advice and Assistance Certificate is not subject to clawback if your client has gained or preserved income or arrears of Child Support Maintenance.

John M Fotheringham leads the child support consultancy, part of the family law service of Ross & Connel, Dunfermline and Inverkeithing. He is an accredited specialist in Child and Family Law and a former Chairman of the Child Support Appeals.