Child Support is government tax
Too many people here are misunderstanding child support. Where did it come from? Why are Governments so invested in it? Why are they so determined to get it and what is it used for?
Child support was designed to get back tax for welfare payments made to single mothers raising their children on state care.
It was designed as a tax for the father to pay towards the social welfare money being paid out from the Government.
The formula was made and the actual designer of the formula had stated that this would not work on families outside of the welfare system. But the Governments didn’t care about that. They just wanted money to be coming in more than going out.
Why do countries operate child support systems?
This is a matter that needs to be deduced from the history. But time after time the answer always appears to be for one or both (ultimately both) of the following objectives. Everything else is just detail.
- To reduce child poverty.
- To reduce welfare spending.
Perceptions depend on the order in which things are done. For example, suppose that the social security (welfare) programme makes the first move (eg. Income Support) in order to relieve child poverty, and child support is added later. (This is the typical sequence – in the USA AFDC came before the latest child support reforms).
First: Income Support tops up a lone parent’s income to poverty relief levels. “Social security reduces child poverty.”
Later: Child support dictates how much the other parent pays. It enforces this payment. The child support goes to the lone parent, but the Income Support is reduced by exactly the same amount. “Child support is a Treasury-driven exercise to reduce social security expenditure (hence taxes), even though this keeps children at poverty-relief levels.”
But suppose things happened in a different order, and child support came first. (This does not normally happen. Child support tends to be an after-thought when nations realise they can’t afford the full implications of social security / welfare without help from the other parents).
First: Child support dictates how much the other parent pays, and this goes to the lone parent. It enforces this payment. “Child support reduces child poverty.”
Later: Income Support tops up the lone parent’s income to poverty relief levels, taking child support payments fully into account by reducing social security by exactly the same amount.“Social security is a miserly spending programme, exploiting the child support system in a Treasury-driven way in order to reduce social security expenditure (hence taxes), even though this keeps children at poverty-relief levels.”
The legal and financial end result is the same in both sequences. Only the perceptions differ. Child support is simply “child poverty reduction” and “welfare spending reduction” with a bad press, because it arrived later!
Much of the material here on European child maintenance / support systems originated in Corden, which is recommended for anyone with a serious interest in the many different faces of such systems across Europe. Here are some results from this book:
“The countries studied were Austria, Belgium, Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden and the UK. Each regime developed from a different legal and historical background, but the general pattern has been towards equal treatment for all children in respect of child maintenance, irrespective of the marital status of their parents. There has also been increasing emphasis on the rights of the child, with the Nordic countries in the forefront of this approach.
“In several countries, child maintenance is due to the child, rather than to the resident parent as in the UK. The more child-centred approaches are those in which there has been furthest development of schemes to ‘advance’ and thus guarantee at least part of the maintenance due. In comparison with other European countries, maintenance is withdrawn at an early age in the UK. By contrast, child maintenance remains due through university education in Austria, Finland, Germany and the Netherlands.
“Each country has different structural and administrative arrangements. Decisions about whether and how much child maintenance is payable are made variously by parents themselves (with or without help), by court judges or officials, or by administrative staff in social security or welfare offices. The courts have a greater role in maintenance determination in cases of divorce or separation in Germany, the Netherlands, France, Belgium and Austria, although procedures may build upon preliminary voluntary arrangements made between parents. In Norway and Sweden, it is local social security staff who assess liability of non-resident parents to repay the state for advanced maintenance, and in Finland, determinations of maintenance are handled by the municipal social welfare boards.
“In terms of the criteria used, the regime in Denmark stands out as one without major problems or negative outcomes for any participant groups. The level of entitlement in Denmark is relatively low, but in the Danish universalist welfare state, where the emphasis in support for lone parents is on labour market participation and state support, levels of child maintenance are not controversial.
“The regimes in the other Nordic countries also ‘work well’ in terms of: delivering support to all children with a formal entitlement; the transparency of determinations and responsiveness to change in circumstances; the speed at which determinations are made; and the absence of constraint on resident parents’ decisions to take work. However, these countries share with most others the problem that liability for child maintenance may introduce work disincentives for non-resident parents.
“Increasingly, in all countries, concern about relationships between parents, and between parents and children, is entering the debate about child maintenance. In all countries, there is much to learn about links perceived by parents between the maintenance due, their contacts with children and the way parents who live apart may share the care of their children.”
The model on which the reformed scheme is based
The reformed scheme, like the current scheme, is oriented towards:
“Lone Mother on Income Support with young children + Absent Father with significant income”.
Justification for this statement
This is justification for the claim above about what the schemes are based on. It is not justification for basing the schemes on this model!
It isn’t that all features of the schemes are based on this model. It is that this is the starting point, and then different cases are handled by “tweaks” and “fudges”, not by building them into the starting point.
Word or phrase
The evidence that this is the government’s model
The reformed scheme implements “children sharing in the wealth of their parents” by transferring ever larger amounts of money from non resident parent to parent with care.
But this barely works if there is just one adult and no extra children in the household of the qualifying children. It goes badly wrong, with money being diverted away from the qualifying children, if there are extra people.
The equal sharing case chooses a parent with care according who claims Child Benefit. By default, that is the mother. So where there is no other way of choosing, it is assumed that the mother needs to be paid by the father.
On Income Support
The formula, including the percentages, were dictated by being Treasury neutral over a period of years. It was assumed that the Treasury interest was sufficient to dictate the formula. (In fact, probably less than one quarter of all the child support money calculated by the CSA will have any taxpayer/Treasury interest).
The White Paper says that the reasoning behind the need to choose a parent with care in the equal sharing case is to protect the taxpayers interests. But the reformed scheme doesn’t bother check whether taxpayers even have an interest! It simply takes it for granted that the taxpayers need to be protected by the equal-sharing parent who claims Child Benefit having to be paid by the equal-sharing parent who doesn’t.
With young children
The child support is awarded to the parent with care, not to the children.
Older children, perhaps at further education into their 20s, have to be handled via the courts, not via the CSA. There is no “join” between these – for example, no child support money can be put aside by the non resident parent to cater for the further education of the children, even when it is much larger than the Small Fortunes amount.
The formula starts with how a 100% absent parent pays a 100% caring parent. Then shared care is bolted onto this with an unfair “fudge” which is claimed won’t impact many people.
See “Mother” above.
Can Child Support Agencies ever work?
It depends on what you mean by “work”! What are they for? (This is not always the same as what people think they are for or are told they are for!)
Ensuring that children are supported by their parents instead of by taxpayers
This is a classic reason, with typical questions such as “why should taxpayers pay for other people’s children?” It applies more in some countries than others, depending on the extent to which the society feels that children are an individual responsibility or more of a social responsibility.
The UK is somewhere in between the USA, with its emphasis on individual responsibility, and some European countries, with more of a view that society has a large part to play. (And some countries see the family as a whole having a significant part to play). The more the parents have individual responsibility to pay, the higher the liability is likely to be, and the more parents there will be who simply can’t afford to pay “their share”.
And, of course, taxpayers do pay for other people’s children! Apart from paying for the infrastructure (schools, etc), in the UK the state (taxpayers) pay Child Benefit, a universal benefit which even rich parents can claim. A response to the knee-jerk question “why should taxpayers pay for other people’s children?” is “well, you’ve been doing so for years without too many complaints, so why stop now?”
In the UK’s reformed scheme, perhaps three-quarters of non resident parents won’t earn enough for the formula to cause them pay half the regular payments for a single child. (That isn’t saying they couldn’t‘t pay, but the force needed, with penalties and backlash, makes this impractical, or at least unwise politically). An even smaller proportion will earn enough to pay their share of 2 or more children.
However obvious this purpose is, it is not the only reason, and actually probably only has a minor part to play in the UK. The government will encourage people to take this attitude when it suits them, and will then simply give away lots of taxpayers’ money for other people’s children when it suits them to do that instead! For example, when Working Families Tax Credit replaced Family Credit, the government stopped trying to reduce the Treasury’s bill (now the tax credit bill rather than the social security bill, but so what?) And the answer to “can the child support system achieve this?” is “rarely”.
Reducing the social security / welfare bill
This is just a subset of “Ensuring that children are supported by their parents instead of by taxpayers” above. It is part of the way the Treasury views the same purpose, when it suits them. They may sometimes have different objectives that mean that this doesn’t suit them. As noted above, when Working Families Tax Credit replaced Family Credit, the government stopped trying to reduce the Treasury’s bill for that credit. This purpose was discarded because of a “higher” objective. It was worth (to the government) spending taxpayers’ money on other people’s children in order to get lone parents back to work, because of all the policy and economic advantages of that. (I am not aware of any consultation on this – it just happened in the Tax Credit legislation).
This is a narrower purpose than the above (“reduce” not “eliminate”), so the answer to “can the child support system achieve this?” is “often”. This was the primary purpose of the current child support system, and after significant losses in the first few years, it is now being achieved overall. Whether it is enough for any specific purpose is a different matter – how much do you want to reduce it by?
Relieving child poverty
This interacts with the above purposes. One way of relieving child poverty is for the state itself to hand out lots of money to parents. Well, that solved that problem!
Governments don’t want to do this, because they believe they won’t get re-elected if they relieve child poverty this way. In the UK, the Child Benefit bill is about Â£8 billion – Â£9 billion per year. Small Fortunes found that Child Benefit paid about one-fifth of the average regular spending on a child. Increasing the spend to about Â£44 billion per year might just about pay for the children, but would be about 45% of the total social security bill, and the extra money would be about Â£600 per year for every person in the UK – which means a lot more than this for voter-taxpayers! No, they won’t go for this – at least in one jump.
The degree to which this is acceptable depends on the society. In the USA the state / taxpayer support is relatively small compared with the UK, and voter-taxpayers want to keep their tax bill small. The UK has an intermediate position, with some European countries being willing to pay more per child. The USA tends to take a “moral” (in some sense) position, that it is the responsibility of the parents rather than the state to pay. This is somewhat true in the UK too, hence “why should taxpayers pay for other people’s children?”
Can the problem be solved instead using child support rather than state benefits / welfare? This is similar to asking “can child support reduce the social security bill for lone parents to zero?” And the answer to “can the child support system achieve this?” is “rarely”, for the same reasons. Most non resident parents don’t earn enough to pay sufficient to move their children out of poverty by themselves. At most it can only be one component of reducing child poverty.
Social engineering of various kinds
Is the child support system intended to change behaviour rather than achieve a simple financial objective? There are various possibilities.
Helping / encouraging the parent with care get to work
It wasn’t established to do this, although having a Â£15 disregard in Family Credit may have helped. The “child maintenance bonus” in the 1995 Child Support Act could have helped, but appears to have had little or no effect at all, and perhaps wasn’t even understood by non resident parents.
But having a total disregard in WFTC, combined with a more generous amount than Family Credit, plus New Deal for Lone Parents to help seek employment, means that child support can act as an incentive for people to move from Income Support to WFTC – it acts like an extra top-up in addition to WFTC. This works when the non resident parents earns enough to pay a significant amount. Most don’t.
Helping / encouraging the non resident parents get to work
If the rule was “pay Â£X per week whether you can afford it or not”, this may be an incentive (or at least a big stick) to cause non resident parents to earn enough to pay Â£X. (Although it is also an incentive for some of them to drop out, disappear, or commit suicide).
But a scheme where the liability is means-tested, with low earners paying (say) Â£5 or even nothing, while higher earners pay a substantial proportion of the cost of a child (or more), will result in a marginal increase in the rate of deductions as non resident parents earn more which will act as a disincentive. When added to tax & NI, the results can be very discouraging.
Encouraging men and/or women to be more sexually responsible
Women – possibly not.
Men – possibly.
Encouraging parents to share the care of their children
Child support systems probably act against this.
Making people feel better
Making parents with care feel better
Some parents with care say something like “I want him to pay something, even if it is only Â£5 per week, so that I know he has an ongoing responsibility”. Some want their children to know that the father is still paying. Whether or not these are good purposes, the child support will normally be able to achieve these.
Making members of society feel better
Making children feel better
This would probably need changes to ensure that children knew fully about the child support.
In the last few years, I have moved from the typical childfree-taxpayer’s view “why should I pay for other people’s children?” to a realisation that every future UK government is going to force me to do so anyway! The real questions are – “how much?” (which may not vary a lot from one government to another) and “in what way?”. The latter question is a key policy & political question. Will my taxes pay directly for the child’s consumables, or will they instead provide infrastructure (childcare facilities, say) and incentives for the parents to earn more to take on more of their own responsibilities towards their children?
Economically active parents, net contributors to the Treasury, able to support their children themselves, setting a good example, buying services such as childcare which keep others employed too – this is an aim of most governments. It appears to be a worthwhile use of my taxes.
The child support system should be designed to help, or at least not hinder, both separated parents become (more) economically active. And when they are economically active, it should supplement the earnings of whoever cares for the children at any time to bring the child out of poverty. It should not be intended primarily to try to relieve child poverty on its own, because it won’t succeed often enough.
This is similar to some government thinking, except for one key problem – the UK’s child support system appears to inhibit, not help, an non resident parent become economically active. It tends to lead poor non resident parents to the view “stuff it, why bother to try to earn more?”
Child support is so important to Governments that they have an International group set up.
When Governments invest this much interest into taking taxes off people, they are invested into working the horse to death. After all, every cent they make from the father is one less cent they pay out.
This is one very interesting page on child support going back centuries.
It explains all countries even Muslim countries. Great website.