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Breakdown cover: Part 1

Date:20 MAR 2019
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Solicitor Advocate

The 25th anniversary of the opening of the doors of the Child Support Agency (now Child Maintenance Service (CMS)) was reached, with no enthusiasm on my part, on 3 April 2018. The Department for Work and Pensions presides over a Kafkaesque scheme. For example, it hopelessly delays necessary enforcement and needlessly involves five different courts and tribunals:

  • magistrates’ courts civil jurisdiction (eg committal for enforcement of arrears);
  • the family court (eg lump sum deduction orders);
  • the county court (charging orders: arrears);
  • first-tier tribunals; and
  • the upper tribunal (‘administrative’ appeals (to be explained in Part 2 of this article).

Beyond this are rights to appeal: to the High Court, Family Division, to the Court of Appeal and to the Supreme Court (with permission). Alongside this is judicial review, often the only means of challenge to child support delegated legislation and CMS civil servant decision-making (to be explained in Part 3 of this article). The number of courts almost randomly involved represents a pinnacle of bureaucratic ineptitude. To preserve the administrative appeals structure may be inevitable. Not to combine the rest of child support work in the family courts is sheer laziness where the scheme has undergone three major revisions since 1993.

The scheme was set up by the Child Support Act 1991 (CSA 1991). The original Act—much of which is still in force—has been extensively amended. It is probably twice as long as when enacted. It is based on administrative, not family, law principles; though, by definition, it deals with financial support for children whose parents have separated, which is normally the classic domain for the family courts. In contrast with the discretion-based disposals of most family cases, the 1991 Act scheme is grounded firmly in Diceyan principle.

So, said Professor AV Dicey, the law should reduce to a minimum the scope for discretion in a civil servant decision-maker. This means, in the case of child support, that the legislator—mostly by copious delegated legislation—must try to cover as many conceivable family breakdown variables as possible. For child support this is solely in relation to the narrow field of payment of weekly maintenance by the natural parents of the children; and provided that parents and children all live within the jurisdiction of the UK courts (CSA 1991, s 44).

This article provides an overview of the basic scheme and will touch on the potential for variation from Stage 1 calculated maintenance (see table below). Part 2 of this series will look at appeals from the calculation, while Part 3 will comment on the importance of judicial review and the child support scheme.

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How much to pay?

The 1991 Act scheme can only work if one parent is treated as the non-resident parent (NRP; and assumed here—as does the scheme—to be the father); and the other, the parent with care (PWC), of the natural children of each (CSA 1991, s 3). The CMS takes a figure for the NRP’s gross income (Child Support Maintenance Calculation Regulations 2012 (CSMCR 2012) Part 4, Ch 1)) and adopts a percentage of that gross figure according to the number of children and the extent of any contact (CSA 1991, s 4 and Sch 1). Gross income has been the income figure used by the CMS from the coming into operation of CSMCR 2012 in 2013 which brought into effect the Child Maintenance and Other Payments Act 2008. It is applied as set out in the table overleaf. Originally a net figure was used, but in certain cases this could produce unfair results: see eg Smith v Secretary of State for Work and Pensions & Anor [2006] UKHL 35, [2006] 1 WLR 2024, [2007] 1 FLR 166, [2006] 3 All ER 907 (an example of the appeal process mentioned above which took Mr and Mrs Smith from successive appeal tribunals, to the Court of Appeal and finally to the House of Lords).

The gross income calculation is represented by Stages 1, 2 and 3 (my terms) in the table below. Stage 4 is the variation direction scheme which—as ‘departures’ in 1995—reflected the realisation by the originators of the scheme that the initial plan to take earned income and apportion it (per the original CSA 1991, Sch 1) was too crude. It was not necessarily fair to the NRP (so he became entitled to certain ‘special’ deductions, such as travel to work or payments for a disabled step child); nor was it necessarily fair to the children and the PWC. Power to make variation directions, as they later became, is set out in CSA 1991, Schs 4A and 4B (as amended by the Child Support Act 1995). It was for the possible beneficiary of the direction—the NRP for ‘special expenses; the PWC for ‘additional cases’—to apply for any applicable direction (CSA 1991, s 28A–28F).

Variation directions

 Schedule 4B, para 4(2) contains a power for the Secretary of State to make regulations to take account of a NRP’s ‘additional’ income, as follows:

‘(2) … for example, [to] make provision with respect to cases where: (a) assets which do not produce income are capable of producing income; (b) a person’s lifestyle is inconsistent with the level of his income; (c) housing costs are unreasonably high;… or (f) travel costs should be disregarded.’

The range of variation directions were not limited to those in para 4(2). The original scheme (rebranded as ‘variation directions’) was in the Child Support (Variation) Regulations 2000, regs 18 to 20, namely:

  • ‘assets’ (see below);
  • ‘diversion of income’ and ‘income not taken into account’; and
  • ‘lifestyle inconsistent with declared income’.

When the scheme under CSMCR 2012 came in, finally, those original variations, unaccountably, were cut back to the requirement that calculation of child support maintenance, on the application of a PWC, can take account of:

  • any unearned income of over £2,500 per annum (reg 69); and
  • diversion of income (reg 71).

Out, therefore, went one variation direction which had been extensively used by PWCs, namely that of ‘assets’, cumulatively worth more than £65,000. Family lawyers could easily spot this in a PWC’s properly disclosed Form E (financial statement on Matrimonial Causes Act 1973 financial relief proceedings) and advise their client to apply for an ‘assets’ variation direction accordingly. The applicable assets could be treated as having a notional income based on their value, which had been aggregated with other assessable gross income. It was a direction which came first in Parliament’s list (at para 4(2)(a)) in 1995.

A new reg 69A variation and its operation

Exclusion of the assets direction attracted the attention of Mostyn J in Green v Adams [2017] EWFC 24, [2017] 2 FLR 1413, [2017] All ER (D) 20 (May) in the following terms:

‘[22] ... For reasons which I cannot fathom the “assets” ground of variation has been removed from [the 2008 Act] regime. Therefore, it is possible, as in this case, for a father to live on his capital, which may be very substantial indeed, and to pay no child support at all. The father was only required to pay the pitiful minimum sum of £7 a week from the early part of this year because it was then that he received his state pension. In my opinion the government needs to consider urgently the reinstatement of the “assets” ground of variation.’

Mr Adams had ‘in his sphere’ (as Mostyn J explained it) over £5m which was, since 2013, unavailable for calculation of child support maintenance.

Mostyn J will now learn that ‘assets’ as a ground, in slightly different terms than under the original 1995/2000 regulations, is back (CSMCR 2012, reg 69A). A NRP’s assets which are not earning income come back in. Each asset must exceed £31,250 in value (reg 69A(5); though formerly the value was cumulatively £65,000).

The new variation direction does not apply (reg 69A(4)) to certain assets, including:

  • land which is ‘the primary residence of the NRP] or any child of [his]’;
  • damages for personal injury; and
  • assets used in the course of the non-resident parent’s trade or business.

And so, as the amendment regulation’s explanatory note says: ‘The new regulation makes provision for specified assets to be calculated as having a weekly value which is taken into account in order to vary a maintenance calculation.’

The rate of interest brought into account is, as before, ‘interest at the statutory rate prescribed for a judgment debt’. And what actual rate applies? The Judgments Act 1834, s 17(1) (as amended) provides for the very favourable rate of eight per cent; and that rate is applied to the value of any asset of the NRP which is worth over £31,250. The resultant figure is added to the NRP’s gross income to calculate the figure at Stage 1.

It is for the applicant PWC to spot the assets and to produce a valuation. This is likely to be accepted at face value on the initial calculation by the CMS. If the resultant figure, or the inclusion of the asset at all, is challenged by the NRP that is the stuff of an appeal to the first-tier tribunal, which will be considered in Part 2.

Child support: the formulae*

Child support maintenance is calculated by taking a figure for a NRP’s gross income (as further explained in CSMCR 2012) and adding to it any variation direction income. To the resultant figure the following formulae are applied:

Stage 1

The first stage is to assess whether the payer is a ‘basic’, ‘reduced’, ‘flat’ or ‘nil’ (ie is receiving benefits, is a student etc) rate payer, as follows:

Basic rate

(1) Gross income of £200–£800 a week

  • 12% for one qualifying child;
  • 16% for two qualifying children; and
  • 19% for three or more qualifying children.

 (2) Gross income of £800–£3,000 a week

  • 9% for one qualifying child;
  • 12% for two qualifying children; and
  • 15% for three qualifying children and more.

Reduced rate

This rate takes the calculation on a straight-line graph from £7 where payments are required at the flat rate (below) to payments at the basic rate on an income of £200 (ie start of ‘basic’ rate, above) or more, achieved by reference to a formula in CSA 1991, Sch 1 (as amended).

Flat rate

This rate applies to income less than £100 a week and certain prescribed benefits: £7 a week is the fixed amount of child support maintenance.

Stage 2

Relevant other children

Where NRP is living in a household where there are other dependent children (ie not necessarily his, but for whom child benefit is payable), his Stage 1 income is reduced proportionately and before the Stage 1 calculation is carried out, as follows:

  • 12% where the non-resident parent has one relevant other child;
  • 16% where the non-resident parent has two relevant other children;
  • 19% where the non-resident parent has three or more relevant other children

Stage 3

Shared care

If the non-resident parent has ‘shared care’ for an average of one night a week or more, there is a proportionate reduction to the calculation: 1/7 for 52 days and more a year, 2/7 for 104, etc (per CSA 1991, Sch 1, para 7).

Stage 4

Variation directions

CSA 1991 (as amended) s 28A–28F, Schs 4A and 4B and CSMCR 2012 may vary — upwards (‘additional income’ considered in the article) or downwards (‘special expenses’). That varied income goes into the calculation at Stage 1.

* Based on commentary in Family Court Practice.

This article was first published in New Law Journal.