‘Solo mum sanction’ solution?

The Government are trying to solve a tricky problem, the ‘solo mum sanction’. The current way of trying to force solo mothers to name the father to avoid financial penalty is far from ideal, but the proposed solution may have problems too.

RNZ: Ending solo mum sanction could cost govt $25m a year

Scrapping a sanction against some solo mums will cost more than $100 million over four years and could result in fewer parents paying child support, ministry officials say.

Single parents who refuse to identify the other parent have $22 deducted from their benefit every week per child. After 13 weeks, another $6 per family is docked.

The policy was introduced in 1990 to ensure fathers paid child support.

The Labour-led government last year confirmed it would repeal the penalty, saying there was no evidence it worked.

A Ministry of Social Development report – obtained under the Official Information Act – said the government would pay out at least $25 million more a year as a result of ditching the sanction.

Officials said they could not predict how people might respond, but warned the cost could balloon, “potentially considerably”, if people were then incentivised to rip off the system.

For example, mothers might choose not to name the father so he could avoid paying child support to the Crown and could instead pay her privately under the table.

Acting Minister of Social Development Peeni Henare said there was no evidence to suggest that might happen.

Has anyone tried to find out if there is any evidence? Has the Ministry of Social Development got any evidence that there won’t be negative consequences or that costs won’t balloon?

Absence of evidence is not a good basis for policy change.

Fathers who don’t take financial or other responsibility for their children is possibly a significant social issue in New Zealand – I say ‘possibly’ because I don’t have evidence that it is.

Henare:

“This was a punitive measure… one that has actually proven to have no merit.”

Where is the proof it had no merit? Did it not encourage any fathers at all to be more involved in the support of their children?

He said the current penalty unfairly punished thousands of children in low-income families.

Is it unfair on children to allow their fathers to have nothing to do with their support? Is it unfair on tax payers to allow solo mothers to exclude fathers from the lives of their children?

It is certainly tough on a mother who wants to keep an arsehole father away from her family, but should the State just pick up the tab, no questions asked?

The current sanction system is far from ideal, but is there any evidence the proposed alternative will be better for children?

Child Support Amendment Bill passed

The Child Support Amendment Bill passed it’s third reading last night. Revenue Minister Peter Dunne emphasised:

I want to send a message to all parents out there: in the situation of a relationship breaking down, your primary responsibility, whatever aggravation there might be or bitterness might surround the situation, is to your children.

And your primary responsibility, both of you, is to sit down and try and negotiate arrangements that provide for the effective care and maintenance of those children.

If that cannot be achieved then child support is there to help you. But do not simply look at the system and say “That’s the default. We just go there automatically. And we both end up mutually unhappy.” Because the long-term losers from that are very clear to identify, the kids.

The kids are the one group who do not choose their parents, they do not choose their circumstances, but they are influenced dramatically by them.

Let us not kid ourselves that this legislation or any legislation is the ultimate answer, but this bill recognising contemporary situations is a vast improvement on the current Act.

It is one that will be much fairer in many respects for more people. It is in tune with the mood of contemporary society.

Parliament reported that the Child Support Amendment Bill passed by 71 to 49 National, NZ First, Maori Party, ACT, United Future and Brendan Horan in support. Labour, Greens and Mana voted against.

Labour supported the bill to select committee, but withdrew that support at the second reading as they believed the bill as it did not address enough of the problems with the system.

Revenue Minister Peter Dunne said the bill was the most fundamental change to the Child Support regime since it was set up in 1992.

It modernised the law and recognised that society had changed.

The support calculation was also being changed to reflect those changes, as well as individuals’ circumstances.

The bill’s starting date is now April 2014 instead of April 2013 to allow IRD time to implement the bill, a move Dunne said was regrettable, but necessary.

Dunne’s speech (draft transcript)

CHILD SUPPORT AMENDMENT BILL

Third Reading

Hon PETER DUNNE (Minister of Revenue): With a great deal of pleasure I move, that the Child Support Amendment Bill be now read a third time.

The measures that are proposed in this bill bring our child support scheme up to date and make it much fairer for the 210,000 children and families who are involved in the scheme.

Since the current child support arrangements were introduced in 1992, child support has been a backstop for families when separated parents are unable to reach agreement over the financial support of their children.

But times have changed since 1992, and the purpose of this bill is to update the scheme so that it better reflects the social changes that have occurred in parenting and workforce participation over the past 20 years.

That includes a new child support calculation formula that recognises the different circumstances of parents today; the latest research available on how much it costs to raise a child; and improvements to the payment, penalty, and debt rules in order to reduce the risk of parents dropping out of the system because they are simply overwhelmed by the growing burden of debt.

They are the main features of the bill, but its underlying principles are simple—that child support payments are fairly calculated and collected for the benefit of the children they are intended for, and that parents continue to take financial responsibility for their children when a relationship breaks down.

I feel particularly strongly about that latter point. About 40 percent of the correspondence that I receive as Minister of Revenue relates to child support.

I am shocked at the number of parents who want to deny any responsibility for their children because the relationship may have been a long time ago.

The majority of parents fully understand their responsibilities and they do attempt to adhere to them. That is good.

But there are those, unfortunately, who seem to think this is the most ultimate case of out of sight, out of mind.

I am grateful to those good, loyal, hard-working parents who want to see a fair system, and for the many others who took the opportunity through the extensive consultation process associated with the development of this Child Support Amendment Bill for their input.

I am also grateful for the efforts of officials across several agencies who collaborated on the policy development work, and the legal drafters who worked on the detail of this legislation.

This has been a long journey. It began in 2008 during the term of the previous Government. It saw a discussion paper issued around the time that the Government changed. It saw the legislation that arose from that discussion process introduced in, I think from memory, 2009.

The select committee process that took place following that, and now it is passing through the House. The first set of changes will take effect from April 2014. The second set a year later.

We still have a long way to go. But as this bill now stands we are a lot closer, I think, to achieving better and more equitable outcomes for the children and the parents who are involved in the child support scheme.

I want to make this point, as I have made at every stage of this debate, child support is not a default position. It is the back stop when things fail. The emphasis has to be on parents seeking to reach equitable and cooperative agreements amongst themselves.

We have got to stop this mentality of simply leaving it all to child support, because that is where the divisions arise and that is where the tensions occur.

I want to see much greater emphasis placed on parents reaching their own mutually acceptable arrangements. I know this was a point that came through very strongly during the Social Services Committee’s consideration of the bill. I thank them for their efforts, their consideration of the legislation, and for the recommendations to change the bill in various areas that they proposed.

Child support is a vexed area. It is not one that you can ever legislate for every circumstance because of the nature of the way in which families form and relationships occur. But what this legislation can at best do is provide a framework. This is what I think we have achieved in this bill.

There will always be those who will fit at the boundary, or not fit, or who will feel that the system somehow is unfair in respect of their circumstances. There is not a great deal we can do about that.

The challenge that we face in looking at changes to the legislation, and it was a point that was highlighted by the Opposition at several stages of the debate, is simply this we have a system at the moment under the current legislation that in my view is unnecessarily inflexible.

It imposes a very rigid formula that takes little account of individual circumstances. That is easy to run because you just simply draw the line and say this is the side of it that you fall, if you feel aggrieved, tough.

The criticism we faced during the development of this bill and at the select committee was that we were going to be introducing a more complicated system. That is the trade off for one that is more flexible and for one that takes greater account of individual circumstances and of individual stages of a child’s life, and the formula reflects payments accordingly.

I say to those who say that the system will now be more complex, and then they say you have got to get an accountant or a lawyer to work your way through it, that is absolute bunkum. You do not.

But I say to people who run that line, you cannot then argue for a fairer more responsive system without accepting that flexibility brings its own challenges.

No one—no one stands up for child support as it currently stands. It is difficult to administer. We have high levels of non-compliance. We have aggrieved parents on both sides of the argument.

What this legislation does, by recognising the change in circumstances over the last 20 years, by increasing the formula for shared-parenting arrangements, by also addressing, as I say, the application of the child support formula itself, is make a genuine attempt to recognise the circumstances of the parents who take advantage of that system.

But I close on this point: I am delighted at the end of what for me has been a 6-year journey on this bill to see it is going to pass tonight. I am really delighted about that.

But I want to send a message to all parents out there: in the situation of a relationship breaking down, your primary responsibility, whatever aggravation there might be or bitterness might surround the situation, is to your children.

And your primary responsibility, both of you, is to sit down and try and negotiate arrangements that provide for the effective care and maintenance of those children.

If that cannot be achieved then child support is there to help you. But do not simply look at the system and say “That’s the default. We just go there automatically. And we both end up mutually unhappy.” Because the long-term losers from that are very clear to identify, the kids.

The kids are the one group who do not choose their parents, they do not choose their circumstances, but they are influenced dramatically by them.

Let us not kid ourselves that this legislation or any legislation is the ultimate answer, but this bill recognising contemporary situations is a vast improvement on the current Act.

It is one that will be much fairer in many respects for more people. It is in tune with the mood of contemporary society. I think it is a good step forward, and I am delighted that Parliament is going to give it its third reading this evening.

InTheHouse video of speech: Child Support Amendment Bill – Third Reading – Part 1

Peter Dunne – the week that was

Peter Dunne has done “my latest video blog” – The Week that Was.

He admits “it hasn’t been the best of weeks”, with some prominent but relatively minor setbacks. But he turns his focus to positives. Small parties get scant coverage of what they are beavering away at.

So Dunne details “all the other things that are happening that United Future is playing a major part in”.

  • Our synthetic drugs legislation, our psychoactive substances bill…is seen as world leading, innovative, and a step that all other countries should follow.
  • In the next couple of weeks or so, the child support legislation, bringing about the major child support change for the first time since the scheme was implemented over twenty years ago, the culmination of a four year project.
  • The whole issue of superannuation back on the agenda…United Future’s flex-super, we’ll have a discussion paper out in the next few months.
  • We’re also going to release in the next couple of months our new national suicide prevention action plan for the next three years, that’s the culmination of a lot of work over the last year to eighteen months.
  • We’ve got the game animal council bill about to come back through parliament.

Like any politician who has been around for two or three decades Dunne has accumulated many detractors, and he attracts many more simply because of his current coalition connections. But he works away and gets things done.

There won’t be many MPs that cover such a varied workload as Dunne – Minister and Associate Minister, party leader and sole representative in Parliament, plus electorate MP.

Within a week or so recently he went from:

  • Accountants and Tax Agents Institute NZ Annual Conference in Blenheim

to

  • UNODC narcotics conference in Vienna (where the Psychotic Substances bill being implemented here received much interest and praise)

back to

  • International Fiscal Association tax conference in Queenstown, keyonote address on current tax issues

then back to the fray in Wellington, birthday on Sunday, then to find his carpack tax consulting process had been sabotaged by special interest groups.

Someone at Kiwiblog called that troughing!

And after all that he’s put together this shoulder shrug, positive look forward video.

I have to admire Dunne’s doggedness and determination to keep doing what he can. A bit of a car park quibble is pretty minor.

Child support reform

A bill has been introduced to address the problems with current child support policies practices. It’s been a very contentious issue, with many families caught up in difficult and often emotional circumstances which can be financially crippling.

Child support system to get huge overhaul

New Zealand Herald – Child support is set to be overhauled in the biggest proposed changes to child support law in 20 years.

First steps taken in child support reforms

(NewstalkZB) MPs voted 106 to 15 last night in support of the first reading of legislation that amends current child support laws.

Revenue Minister Peter Dunne says the law change will introduce new calculations for child support that better reflect changing social and employment patterns.

“The changes in this bill provide for a fairer and more transparent assessment calculation for child support payments that takes a wider range of individual circumstances and capacities to pay into account.”

And a parliamentary release on it, with Questions and Answers on the proposed changes:

Child Support bill big step to fairer scheme

The Child Support Amendment Bill now before Parliament is the culmination of “the most major review of the Child Support scheme since its inception”, Revenue Minister Peter Dunne told Parliament at the Bill’s first reading today.

He said issues of fairness had come to dog the scheme, with around 40 percent of the correspondence he received as Minister relating to child support issues.

“The scheme is long overdue for updating and today it has come a big step closer to becoming fairer for all concerned,” Mr Dunne said.

The bill proposes changes which fall into three categories:

  • a new child support calculation formula that reflects changed social and work realities faced by New Zealand families today
  • secondary changes to update the child support scheme more generally, and
  • amendments to the payment, penalty, and debt rules for child support.

The main change is to the formula used to calculate child support.  Mr Dunne said that changing the formula was necessary as it had failed to keep up with changes in society and the reality of life for many families, such as shared parenting and both parents going out to work.

He said the scheme needs to provide a better balance to reflect the needs of children and parents today.

“For instance, there is now a greater expectation that both parents should share responsibility for the financial support and emotional well-being of their children.  The child support system should reflect this expectation, whilst also providing better incentives to pay,” Mr Dunne said.

Along with calculating child support more fairly, it is also important to help ensure the stability of child support payments.  The Child Support scheme has reached record levels of debt with a large part of the debt made up of penalties. Mr Dunne said that when penalties are seen as insurmountable, they effectively became an obstacle to paying parents meeting their responsibilities.

“For the sake of the children and parents involved, we need a scheme which is both fair and accurate and which helps ensure payments are made on time.

“If paying parents see that we have taken more account of their situations and are applying a more transparent formula then they will see the scheme as fairer and be more likely to comply,” he said.

Questions and Answers

Why is the child support scheme being changed?

The current system was introduced in 1992. Some of the assumptions that underlie the current system, the formula, and the penalties and write-off rules that underpin it are out of date. There is now a greater public expectation that both parents should share responsibility for the financial support and emotional wellbeing of their children. The child support system should reflect this expectation, while also providing effective incentives for parents to pay.

How many children are in the child support scheme?

The Government child support scheme helps provide financial support to approximately 210,000 children.

What are the changes to the child support formula being proposed?

After receiving over 2,000 submissions during the 2010 public consultation, it was considered that the child support formula should:

  • be based on more up-to-date estimated expenditures for raising a child;
  • recognise shared care of a child at lower levels than the current 40 percent of nights test – instead, shared care will be recognised using a tiered system starting at 28 percent of nights; and
  • take the income of both parents into account, rather than just the paying parent’s income.

Why are more up-to-date estimated expenditures being used?

Child support payments should reflect a fair estimate of what it costs to raise a child and what a parent would normally be contributing towards meeting that expenditure if both parents were living together.

Why are greater degrees of shared care to be taken into account?

There are concerns that the current shared care rules do not recognise the contributions of some paying parents who have regular and substantial care of their children, but do not satisfy the 40 percent of nights test.

Why are the incomes of both parents taken into account?

The current scheme is based on the assumption that the parent who is the primary caregiver will perform this task full-time, and will not be engaged in paid employment. This assumption is less relevant given that women’s workforce participation has risen in recent years. Taking both incomes into account for child support purposes better reflects the financial responsibilities of both parents.

What are the other main changes being made to the child support scheme?

These include:

  • changing the definition of “income” for child support purposes so that it excludes tax losses and includes certain trust income;
  • making it compulsory for child support payments to be automatically deducted from salary and wages;
  • changing the late payment penalty rates for child support; and
  • relaxing the circumstances in which penalties can be written off (for example, when a payment arrangement is entered into).

Why is the definition of “income” for child support being changed?

To improve the child support scheme’s integrity and fairness, and to ensure that the definition used better reflects the real income that parents actually have available to them.

Why are child support payments to be compulsorily deducted from salary and wages?

Paying parents will have their payments automatically deducted from their salary to ensure that as many child support payments as possible are made, and made on time.

Is it fair that all salary and wage earners must have compulsory automatic deductions?

It is recognised that some paying parents will have concerns with this, for example about their employers knowing that they are making child support contributions, however the public interest in operating an effective child support scheme should outweigh these individual concerns.

Why are some late penalty rates being reduced?

Although penalties play an important role in encouraging parents to meet their child support obligations, if they are excessive they can discourage the payment of child support. This is to the detriment of the children concerned. Reducing penalty rates in certain circumstances, combined with other effective enforcement measures (such as more intensive case management), will help parents resume making child support payments.

Why are changes being made to the penalty write-off rules?

Writing off penalties in certain circumstances – for example, when entering into a payment arrangement with a paying parent – may help facilitate the regular payment of child support. Alternatively, it may be justifiable on certain hardship grounds.

Is reducing child support payments for some receiving parents fair?

The Government’s concern is about increasing the fairness of the child support system. Although it is recognised that, for some parents, changes to the formula will result in lower amounts being received, any move to a revised formula would be made with the aim of reducing current inequities to ensure the system is more balanced, that paying parents honour their responsibilities to their children and that it is perceived to be fairer overall. It should also be noted that the other (non-formula) changes to the child support scheme are designed to improve child support payment rates, meaning that more receiving parents will receive child support payments than is currently the case.

What are the current child support debt figures?

As at 31 March 2012, child support debt assessed and unpaid was $637 million. In addition there are $1,668 million worth of unpaid penalties, giving a combined total child support debt of $2,305 million as at 31 March 2012.

Since the scheme’s introduction in 1992, Inland Revenue has collected over 89.2 percent of all child support payments assessed.