UK Family Law Reform

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http://www.res.org.uk/society/mediabriefings/pdfs/2006/mar06/walker.asp

ECONOMISTS CALL ON CHILD SUPPORT AGENCY TO ‘REPLACE’ DEADBEAT DADS

Royal Economic Society - RES Media Briefings: The Economic Journal 2006

Researchers at the Universities of Warwick and Kent are calling on the Child Support Agency (CSA) to replace ‘deadbeat’ Dads. Where fathers fail to pay a CSA assessment, the CSA itself should simply pay mothers the amount due.

Such an arrangement would create a sharp financial incentive for the CSA itself to be more active in pinning down recalcitrant fathers. The agency would have to have new powers (and be prepared to use existing powers) to effect compliance and seek new effective powers such as mandatory withholding via the tax system.

Drawing on their research evidence published in March 2006 issue of the Economic Journal, Professor Ian Walker and Dr Yu Zhu say:

‘Child support (CS) is a really good idea that needs to be made to work. Policy so far has been about trying to make Dads better at paying if they leave. But policy should also be about making Dads into better Dads if they stay.’

The original CS formula was doomed to fail in many cases. Determining liabilities was so complicated that few Dads could understand why they owed so much, and many felt that they had settled long before with a ‘clean break’. The CSA assessments were late coming – because the rules were complicated and because Dads didn't want to pay and were reluctant to provide the information required. And the CSA had no resources left to pursue ‘deadbeat’ Dads because the system was so expensive to administer.

For their part, Mums often did not care much because, if they were on Income Support (IS, now called Jobseeker's Allowance), they did not benefit much from anything that Dads paid – because the welfare system just reduced their welfare payments pound for pound. Indeed, given a choice, Mums would rather have some money from the Department for Work and Pensions (DWP), which almost always pays on time, than from Dad, who usually paid too little, too late.

If the system could be made to work better, we would expect high potential CS receipts to make Mums better able to exit from a bad partnership. And having more money in that event is good for the children. On the other hand, we would expect high potential CS liabilities to make Dads think twice before leaving – or behave better so they don't get thrown out. And better Dads are also good for the children.

Despite the large failure rate in the collection of CSA assessments, the mere threat of a large assessment has already had a significant impact on the thinking of many fathers when deciding whether or not to leave the family unit. The researchers examine a large sample of households who have been followed since 1991 and find strong evidence that the large child support liabilities, arising from the 1992 rules, significantly reduced the risk of separation. Indeed, the results are big enough to explain all of the approximately 15% fall in divorce rate for parents with dependent children that has occurred since 1992. The researchers believe this effect would have been much larger if the CSA had been more effective at achieving payment compliance from fathers.

The researchers feel that the new CSA rules still fail to resolve the key problems and indeed may make them worse. The formula is much simpler – only one piece of information is required: Dad's income. So it’s simpler for Dads to understand why they owe so much. And now there is a disregard in the IS system (albeit a very small one) that allows Mums to keep the first £10 per week of CS paid. It is also meaner, on average, to Mums (and more generous to Dads). The hope was that all this would transform compliance. It hasn't: simpler has meant cruder at matching liabilities with the ability to pay and compliance has even got worse. And the separation rate of parents has started to increase in response to the lower liabilities.

We need a system that pays up in the event of separation. So it provides real resources to make for better children. And is sufficiently generous that it provides real incentives for parents to get on better, and for parenting to be taken seriously. It is possible to do this. The CSA should pay if the father does not. Making the CSA pay would ensure that the CSA has sharp incentives to get full compliance.

But if the CSA does provide what is effectively full insurance cover against the risk of children having deadbeat Dads, then this increases the incentives for Dads to be deadbeat. So it needs to be backed by the power to effect compliance – mandatory withholding via the tax system will work for most Dads, and the ultimate threat of prison works for most taxpayers. Denmark has no problem doing this, CS liabilities are as large, on average, as in the UK and non-compliance is almost unheard of.

But it will now be difficult: we have had more than a decade of dithering where we have firmly established a culture of not paying child support. Changing entrenched habits will require firmer action than if those habits had not taken hold. And it will be expensive: tough compliance and effective collection measures are likely to be expensive. While its tempting to ask parents to pay – say in the form of lower child benefit, it seems simplest to ask the taxpayer – since we all benefit if children from ‘broken’ homes do better in life and, in any case, most taxpayers have (or have had, or intend to have) children.

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