How will Universal Credit affect my family finances?

emberzburnout

Hi everybody, I'm a newly expectant mother and I was hoping people here might be able to help me (and my partner) with some financial planning and guidance.

Quick backdrop; me and my partner met 2 years ago, hit it off and began dating. Although he lived in Wales and I Birmingham. He was a single dad of three kids, married but separated from his wife for two years.

They had split and he kicked her out and retained residency of his kids after she turned to serious drugs misuse and having affairs behind his back whilst he was at work providing for his family... she was subsequently diagnosed with Bipolar.

So he's living single dad life and she gradually cleans up her behaviour over the next couple of years. She starts having the kids for regular contact and overnight visits whilst we are dating (in our limited spare time).

We're getting serious, and then she decides to kidnap the kids on one of her two nights a week contact sessions, and tells him she's taking him to court for residency.

At the same time we discover I'm pregnant. In the end he makes the decision that children should probably stay with mom in the Welsh village they grew up in , whilst he relocates with me.

The alternative was uprooting the kids (I really couldn't live in that Welsh village, and not with the ex wife on our back door step either), and us requiring large (four bed) and unaffordable accommodation, and also me taking over the main care duties of all his children whilst he goes out to work (he's the higher earner) - which is something nobody was prepared for.

So to compromise, we agree move to a city between Wales and Birmingham, from where we can both access our families. Out of the middle cities, where would largely depend on where he could find work (He works in the Print industry).

He found a new job, that came along with a promotion in Leominster, and so we began house hunting around the area... Pickings were slim, and we were pressed for time, but this October we finally secured a property in Hereford City.

A bit steep, but as we require a three bed for us, the baby, and his visiting kids, we had little choice. The rent here is £800 per calendar month, Band C of £1, 556 Council Tax per year.

Now we didn't think there was any point compromising on quality, rooms or location, for the £100 we could have saved going into a less suitable property. Either downsizing to two (making logistics of family visits living hell/impossible, or location as we need to be within commutable distance for his work and our families)

We didn't actually think this £100 splurge would be a problem as he's a working professional and his new job comes with an annual wage of £28, 000.

I was just a full-time care worker on a significantly lower wage of between £11- 12, 000 per year. (I was previously living in shared accommodation to keep my costs down).

Now the move has happened, he's started his new job, we have his kids for weekends twice a month, some holidays and my maternity pay has now kicked in.. Baby will be here early January.

He sold the mortgage on the "family home" back to his ex (the divorce is now being processed) wife, where she and the kids will now reside. That gave us starting up funds of £5, 000 which helped with the deposit (and half), first months rent, moving costs, and anything else we needed for the house. She now has the added benefit of a mortgage, which the cost of is quite low at £350 a month.

(My partner is struggling to adjust the the costs of everything being exceptionally higher in England than it is Wales)

Unfortunately, we've now been able to sit down and work out the costs of the bills (Now we know the final details of our circumstances , and we're not that well off at all - in fact, I'm wondering how we are going to survive once my maternity pay runs out.

So at present his annual salary is = £28, 000.
Monthly Gross Income = £2, 333.
Net income after Tax, NI & Pension = £1, 750.

My monthly income (maternity pay) = £600 (ish)

That's a current combined income of £2, 350 (pcm) (after tax)

Sounds good, but the bills are expensive and are as follows:

Housing (pcm):
Rent = £800
C.Tax = £130
Water = £35
Gas & Electric = £70
******************************
Total: £1, 035.

Car (pcm): (His, historically on finance before his circumstances changed)
Finance = £160
Tax = £14
Insurance = £65
***********************
Total: £239

Utilities/Other (pcm):
Mobile Phone 1: £40
Mobile Phone 2: £15
Internet Supplier: £35
******************************
Total: £90

Credit Card (pcm): (His, previously used for emergency)
Credit card = £50
*********************
Total: £50

Child Maintenance (pcm): (Ex has now applied for full amount)
Child Maintenance = £300
********************************
Total: £300

Household food expenses (pcm): (Average £45 per week, more when his kids are over)
Food = £210
*********************
Total: £210

Petrol (pcm):
For work commute: £80
4 Trips to wales and one to Birmingham: £80
****************************
Total: £160

Insurance on house & items (pcm):
Mixed = £30
*************************
Total: £30

Grand Total of expenses (which we've already got down as low as possible):
Grand Total Expenses: £2, 114

Leaving £236 out of our combined income of £2,350.

So that's okay for now.. and I say okay, because my partner is already wondering how he's supposed to afford Christmas for the kids, whom he has for nearly a full week this Christmas.
I did say that we just need to fill up their hampers with ingenuitive stuff, he grumbled said the things that kids want these days are expensive... which in turns makes me grumble.

We're paying his ex £300 a month now, we certainly can't afford to be getting his kids (12, 8 & 7) expensive gifts. Plus he likes to be able to take them for days out, but I don't see how that's going to be possible with the little pocket money we have left... through no fault of their own, his kids from the previously relationship are going to bleed us about £400-500 a month via combined maintenance, petrol, food, birthdays and activities money.

I know that once our baby arrives that Maintenance bill will go down slightly, maybe freeing up between £60-70 a month - but in the grand scheme of things...

So. Right now, we can afford all of these basics, just about. We're not hard to please, as long as the bills are paid and there's food in our bellies - we don't demand much else from life.

I know there are plenty of people out there far worse off, single parents for example - but I did decided that we we're going to try and raise our new baby in a family home, rather than me remain a single parent in Birmingham - which nearly became an option, as I considered not interrupting the my partners single dad status, but ultimately I had to think about my baby's interests and making a go of family life.

So as you can see from the above, we're financially "okay", but only whilst I receive my maternity pay. That will dry up when the baby is around 6 months old (I had to leave my job earlier than I would leave an office job due to the mentally and psychically demanding nature of Night Care Work & Moving house etc). Due to the relocation, I won't be returning to the same job.

So I've been trying to figure out what should happen once the baby is about 6 months old.
Am I supposed to stay at home with the baby, or look for work?

We are both struggling to understand the new Universal Credit system, for which we live in a Full Service Area.

I'm not a complete idiot when it comes to benefits, as I spent 3 years subcontracting for the DWP in a previous job for the Work Program, but a lot has changed in the last few years.

(Don't get me started on the problems with the Work Program or the DWP it's self - they're completely away with the fairies - a new Welfare Inquiry has just be launched this month on the back of the Universal Credit, Benefits cap, Employability and Pensions Inquiries - which found the DWP to be grossly negligent and incompetent - no surprises there).

From the calculations I've completed on the Universal Credit Calculators they seem to suggest that if I remain at home and don't work, we'll only be entitled to £40 housing benefit a week and £20 Child benefit a week. Which is monthly support of £240.

Which, from the breakdown above means we'll be operating at a short fall for all the bills.

On the other hand, if I return to work for 16 hours a week I can bring my income back up £500 something a month, and £80 a month Child Benefit (for the new baby) bringing us back up to that break-even with just a bit of pocket money position.

I'm wondering if this, as indicated by the calculators is the only way for us to meet the bills?

I think our joint entitlements under the Universal credit system is less because he is in a decently paid job. However, (at least) £300 of that is taken for his other children and I don't get to see it. If my interpretation of that is correct, I think it's unfair because its having a knock on effect on my income via our joint income evaluation . Likewise, Child maintenance do not take into account the paying parents living costs. (Can't win)

I'm not work shy, lord knows I'd need a reason to get out of the house... But with only the two of us here in Hereford and with no support network, he's going to have to watch the baby whilst I work nights - as he works 40 hours a week in the day.

Double shifts (work & baby watch) twice a week doesn't sound impossible for us to do, but it will be difficult on the back of his already really busy schedule.. and finding an appropriate job with the appropriate hours may or may not be hard for me. (I can do Admin, Care & Bar).

We're just wondering if we are missing anything that would make life easier?
He's sure there was much more support offered under the old Working & Child Tax Credit system. Under this system will I have to go out and find part time work?

If so, that's going to be a pain in the !!!, because what I really want to be able to do now is to go back to University and Graduate as a Social Worker. I've got a few NVQ's under my belt, and now prolonged experience in the adult social care setting, and what I would love to do is qualify and do something that I think I'll be good at. I'll be providing for the community (much desperately needed in today's society) and bringing in a good wage for my family.

But I don't see how I can do that if I'm going to be stuck taking on low-paid unskilled work just to keep on top of the bills until the baby reaches full-time care age.

And the cost of childcare is also something that worries us - for the 16 hours a week, external childcare providers might not be cost effective or sustainable - and then full time - from the stories I've heard, I'm already terrified.

Sorry this post is so long. Any advice or guidance on what to do maximise our earnings & education potential would be much welcome.

welshmoneylover

emberzburnout wrote: »

Hi everybody, I'm a newly expectant mother and I was hoping people here might be able to help me (and my partner) with some financial planning and guidance.

Quick backdrop; me and my partner met 2 years ago, hit it off and began dating. Although he lived in Wales and I Birmingham. He was a single dad of three kids, married but separated from his wife for two years.

They had split and he kicked her out and retained residency of his kids after she turned to serious drugs misuse and having affairs behind his back whilst he was at work providing for his family... she was subsequently diagnosed with Bipolar.

So he's living single dad life and she gradually cleans up her behaviour over the next couple of years. She starts having the kids for regular contact and overnight visits whilst we are dating (in our limited spare time).

We're getting serious, and then she decides to kidnap the kids on one of her two nights a week contact sessions, and tells him she's taking him to court for residency.

At the same time we discover I'm pregnant. In the end he makes the decision that children should probably stay with mom in the Welsh village they grew up in , whilst he relocates with me.

The alternative was uprooting the kids (I really couldn't live in that Welsh village, and not with the ex wife on our back door step either), and us requiring large (four bed) and unaffordable accommodation, and also me taking over the main care duties of all his children whilst he goes out to work (he's the higher earner) - which is something nobody was prepared for.

So to compromise, we agree move to a city between Wales and Birmingham, from where we can both access our families. Out of the middle cities, where would largely depend on where he could find work (He works in the Print industry).

He found a new job, that came along with a promotion in Leominster, and so we began house hunting around the area... Pickings were slim, and we were pressed for time, but this October we finally secured a property in Hereford City.

A bit steep, but as we require a three bed for us, the baby, and his visiting kids, we had little choice. The rent here is £800 per calendar month, Band C of £1, 556 Council Tax per year.

Now we didn't think there was any point compromising on quality, rooms or location, for the £100 we could have saved going into a less suitable property. Either downsizing to two (making logistics of family visits living hell/impossible, or location as we need to be within commutable distance for his work and our families)

We didn't actually think this £100 splurge would be a problem as he's a working professional and his new job comes with an annual wage of £28, 000.

I was just a full-time care worker on a significantly lower wage of between £11- 12, 000 per year. (I was previously living in shared accommodation to keep my costs down).

Now the move has happened, he's started his new job, we have his kids for weekends twice a month, some holidays and my maternity pay has now kicked in.. Baby will be here early January.

He sold the mortgage on the "family home" back to his ex (the divorce is now being processed) wife, where she and the kids will now reside. That gave us starting up funds of £5, 000 which helped with the deposit (and half), first months rent, moving costs, and anything else we needed for the house. She now has the added benefit of a mortgage, which the cost of is quite low at £350 a month.

(My partner is struggling to adjust the the costs of everything being exceptionally higher in England than it is Wales)

Unfortunately, we've now been able to sit down and work out the costs of the bills (Now we know the final details of our circumstances , and we're not that well off at all - in fact, I'm wondering how we are going to survive once my maternity pay runs out.

So at present his annual salary is = £28, 000.
Monthly Gross Income = £2, 333.
Net income after Tax, NI & Pension = £1, 750.

My monthly income (maternity pay) = £600 (ish)

That's a current combined income of £2, 350 (pcm) (after tax)

Sounds good, but the bills are expensive and are as follows:

Housing (pcm):
Rent = £800
C.Tax = £130
Water = £35
Gas & Electric = £70
******************************
Total: £1, 035.

Car (pcm): (His, historically on finance before his circumstances changed)
Finance = £160
Tax = £14
Insurance = £65
***********************
Total: £239

Utilities/Other (pcm):
Mobile Phone 1: £40
Mobile Phone 2: £15
Internet Supplier: £35
******************************
Total: £90

Credit Card (pcm): (His, previously used for emergency)
Credit card = £50
*********************
Total: £50

Child Maintenance (pcm): (Ex has now applied for full amount)
Child Maintenance = £300
********************************
Total: £300

Household food expenses (pcm): (Average £45 per week, more when his kids are over)
Food = £210
*********************
Total: £210

Petrol (pcm):
For work commute: £80
4 Trips to wales and one to Birmingham: £80
****************************
Total: £160

Insurance on house & items (pcm):
Mixed = £30
*************************
Total: £30

Grand Total of expenses (which we've already got down as low as possible):
Grand Total Expenses: £2, 114

Leaving £236 out of our combined income of £2,350.

So that's okay for now.. and I say okay, because my partner is already wondering how he's supposed to afford Christmas for the kids, whom he has for nearly a full week this Christmas.
I did say that we just need to fill up their hampers with ingenuitive stuff, he grumbled said the things that kids want these days are expensive... which in turns makes me grumble.

We're paying his ex £300 a month now, we certainly can't afford to be getting his kids (12, 8 & 7) expensive gifts. Plus he likes to be able to take them for days out, but I don't see how that's going to be possible with the little pocket money we have left... through no fault of their own, his kids from the previously relationship are going to bleed us about £400-500 a month via combined maintenance, petrol, food, birthdays and activities money.

I know that once our baby arrives that Maintenance bill will go down slightly, maybe freeing up between £60-70 a month - but in the grand scheme of things...

So. Right now, we can afford all of these basics, just about. We're not hard to please, as long as the bills are paid and there's food in our bellies - we don't demand much else from life.

I know there are plenty of people out there far worse off, single parents for example - but I did decided that we we're going to try and raise our new baby in a family home, rather than me remain a single parent in Birmingham - which nearly became an option, as I considered not interrupting the my partners single dad status, but ultimately I had to think about my baby's interests and making a go of family life.

So as you can see from the above, we're financially "okay", but only whilst I receive my maternity pay. That will dry up when the baby is around 6 months old (I had to leave my job earlier than I would leave an office job due to the mentally and psychically demanding nature of Night Care Work & Moving house etc). Due to the relocation, I won't be returning to the same job.

So I've been trying to figure out what should happen once the baby is about 6 months old.
Am I supposed to stay at home with the baby, or look for work?

We are both struggling to understand the new Universal Credit system, for which we live in a Full Service Area.

I'm not a complete idiot when it comes to benefits, as I spent 3 years subcontracting for the DWP in a previous job for the Work Program, but a lot has changed in the last few years.

(Don't get me started on the problems with the Work Program or the DWP it's self - they're completely away with the fairies - a new Welfare Inquiry has just be launched this month on the back of the Universal Credit, Benefits cap, Employability and Pensions Inquiries - which found the DWP to be grossly negligent and incompetent - no surprises there).

From the calculations I've completed on the Universal Credit Calculators they seem to suggest that if I remain at home and don't work, we'll only be entitled to £40 housing benefit a week and £20 Child benefit a week. Which is monthly support of £240.

Which, from the breakdown above means we'll be operating at a short fall for all the bills.

On the other hand, if I return to work for 16 hours a week I can bring my income back up £500 something a month, and £80 a month Child Benefit (for the new baby) bringing us back up to that break-even with just a bit of pocket money position.

I'm wondering if this, as indicated by the calculators is the only way for us to meet the bills?

I think our joint entitlements under the Universal credit system is less because he is in a decently paid job. However, (at least) £300 of that is taken for his other children and I don't get to see it. If my interpretation of that is correct, I think it's unfair because its having a knock on effect on my income via our joint income evaluation . Likewise, Child maintenance do not take into account the paying parents living costs. (Can't win)

I'm not work shy, lord knows I'd need a reason to get out of the house... But with only the two of us here in Hereford and with no support network, he's going to have to watch the baby whilst I work nights - as he works 40 hours a week in the day.

Double shifts (work & baby watch) twice a week doesn't sound impossible for us to do, but it will be difficult on the back of his already really busy schedule.. and finding an appropriate job with the appropriate hours may or may not be hard for me. (I can do Admin, Care & Bar).

We're just wondering if we are missing anything that would make life easier?
He's sure there was much more support offered under the old Working & Child Tax Credit system. Under this system will I have to go out and find part time work?

If so, that's going to be a pain in the !!!, because what I really want to be able to do now is to go back to University and Graduate as a Social Worker. I've got a few NVQ's under my belt, and now prolonged experience in the adult social care setting, and what I would love to do is qualify and do something that I think I'll be good at. I'll be providing for the community (much desperately needed in today's society) and bringing in a good wage for my family.

But I don't see how I can do that if I'm going to be stuck taking on low-paid unskilled work just to keep on top of the bills until the baby reaches full-time care age.

And the cost of childcare is also something that worries us - for the 16 hours a week, external childcare providers might not be cost effective or sustainable - and then full time - from the stories I've heard, I'm already terrified.

Sorry this post is so long. Any advice or guidance on what to do maximise our earnings & education potential would be much welcome.

You mention upthread the maintenance bill will go down once the new child arrives. Why is this? The older children will still cost the same amount of money whether you have one or two more children. Personally, I think this is really unfair on them, sounds as if you haven’t thought this through correctly but good luck. Sounds as if it’s going to be tough on you both. In addition, years ago ( before tax credits) it was common for parents to have wrap around jobs , ie, working shifts and sharing the child care , it’s probably something you may have to seriously consider and you may end up like ships passing in the mist!

emberzburnout

welshmoneylover wrote: »

You mention upthread the maintenance bill will go down once the new child arrives. Why is this?

Because he will have an extra child at home to feed.
CSA take this into account, on a percentage basis.

The older children will still cost the same amount of money whether you have one or two more children. Personally, I think this is really unfair on them, sounds as if you haven’t thought this through correctly but good luck.

What would have been the best method to thinking this through correctly?

Sounds as if it’s going to be tough on you both. In addition, years ago ( before tax credits) it was common for parents to have wrap around jobs , ie, working shifts and sharing the child care , it’s probably something you may have to seriously consider and you may end up like ships passing in the mist!

You may be right, I've been doing some reading of the Child Maintenance Service Inquiry.

Apparently my interpretation of the unfairness in regards to our joint income and any joint income under the Universal Credit system was correct, state support is biased towards the Resident parent, regardless of the paying parents circumstances:

Written evidence from Dr Christine Davies
(CHM0079)

Dr Christine Davies is Visiting Senior Lecturer in Mathematics at Royal Holloway University of London. Her involvement in child maintenance arose in 2011 through the case of a fully committed father who was faced with a child maintenance assessment that he could not possibly meet. Investigation revealed that this was a consequence of the maintenance calculation regulations and that many were affected. She has worked since then, with growing understanding, to get the issues addressed.

Dr Davies contributed to the Centre for Social Justice 2014 Family Breakdown report Fully Committed? How a Government could reverse family breakdown[1] (CSJ 2014). Other recent work includes an invited paper[2] (CMD 2015a) at the ESRC International Research Seminar on Child Maintenance and a briefing paper[3] (CMD 2015b) prepared for the Joseph Rowntree Foundation.

Executive Summary

The ultimate success and effectiveness of the Child Maintenance Service rests on the appropriateness of the 2012 Scheme regulations for calculating maintenance – do they give assessments that will be considered fair and reasonable and, above all, assessments that it is possible to pay.

The 2012 regulations are inappropriate – they produce maintenance amounts that are beyond the reach of many non-resident parents, especially those on low income.

Under Universal Credit, non-resident parents paying for 1, 2 or 3 (or more) children on the 2012 Scheme through the CMS collection service have “marginal tax rates” of
92.5, 102 and 109.2 percent as weekly earnings pass £100
90.6, 95.4 and 99 percent for weekly earnings above £200

Assessments that are impossible to pay lead inevitably to non-payment, growing arrears and expensive (often ineffective) enforcement.

Unaffordable assessments raise unrealistic expectations for the parent with care, increase parental conflict and prevent non-resident parents from fulfilling their parental role, supporting their children in every way as they grow into adulthood.

The problems with the 2012 Scheme calculation regulations

The ultimate success and effectiveness of the Child Maintenance Service rests on the appropriateness of the 2012 Scheme regulations for calculating maintenance – do they give assessments that will be considered fair and reasonable and, above all, assessments that it is possible to pay. The core purpose of this evidence is to show that these regulations are inappropriate – they produce maintenance amounts that are beyond the reach of many non-resident parents, especially those on low income.

The situation was exposed by the Centre for Social Justice (CSJ 2014).

The inappropriate nature of the calculation regulations is a root cause of many of the child maintenance problems. Assessments that are impossible to pay lead inevitably to non-payment, growing arrears and expensive (often ineffective) enforcement, let alone the human impact on parents, children and their relationships. They also give the parent with care unrealistic expectations and consequent disappointment.

Essentials of the 2012 Scheme
The 2012 Scheme maintenance calculation regulations (based on gross income) have the same structure as those for the 2003 Scheme (based on net income) and are intended, overall, to produce the same results. (See Appendix A.) The essential features are:
The non-resident parent is required to pay a percentage of their weekly income to the parent with care. The percentage depends on the number of qualifying children.

There is no self-support allowance for the non-resident parent; the parent on the basic rate pays a percentage of their total weekly income rather than a percentage of the income above a certain amount deemed necessary for their own essential living costs. This differs from what is regarded as best practice[4] and also unlike the situation for income tax.

No account is taken of the income of the parent with care, even if that parent is a high-earner and the non-resident parent in part-time low paid work. Again, this differs from what is regarded as best practice[5].

Since a simple percentage cannot work for very low incomes, the 2003 and 2102 Schemes include two thresholds: below the first the non-resident parent pays only a nominal sum (the flat rate), above the second they pay the full amount (the basic rate), and in between they pay a reduced rate which provided a smooth transition.

The two thresholds were assigned the values £100 and £200 net weekly income in the 1998 Green Paper CHILDREN FIRST: a new approach to child support which set out what became the 2003 Scheme. The same values are in place today, 18 years later. They have little relevance to the cost of living in 2016.

The structure of the 2003 and 2012 Schemes, together with the fixed values of the thresholds, creates problems of unaffordability, especially for non-resident parents on low earnings.

A simple demonstration of unaffordability
The impact of the child maintenance regulations is most simply demonstrated for Universal Credit and the 2003 Scheme, since both relate to net income. For every extra £1 of net income between the £100 and £200 thresholds:
Universal Credit is withdrawn at a rate of 65p in the pound
Child maintenance increases at a rate of 25p, 35p or 45p in the pound (1, 2 or 3+ children)
A paying parent on the National Living Wage of £7.20 who increased their work from 14 to 29 hours would gain just £10, or nothing, or be £10 worse off. (For simplicity, withdrawal of Council Tax Reduction has not been included.)

Universal Credit and the 2012 Scheme
Between the £100 threshold and the threshold for National Insurance (£155 in 2016/17) for every extra £1 of income:
Universal Credit is withdrawn at a rate of 65p in the pound, Council Tax Reduction at 7p[6]
Child Maintenance is increased by 17, 25 or 31p in the pound (1, 2 or 3 (or more) children)
The paying parent has an effective “marginal tax rate” of 89, 97 or 103%. For each extra £1 earned a paying parent gains 11p or 3p or is 3p worse off.

Above the £200 threshold and the threshold for Income Tax (£11,000 in 2016/17, £211 a week), for extra every £1 of income:
National Insurance, Income Tax and Universal Credit withdrawal take 76.2p in the pound
Child maintenance is increased by 12, 16 or 19p in the pound (1, 2 or 3 (or more) children)
The paying parent has an effective “marginal tax rate” of 88.2, 92.2 or 95.2%.

Collection fees
Since August 2014, parents using the CMS collection service have been charged - the non-resident parent pays an additional 20% and the parent with care receives 4% less. For earnings between £100 and the National Insurance threshold, the effective “marginal tax rate” for the paying parent becomes 92.5, 102 or 109.2%; once paying Income Tax, it becomes 90.6, 95.4 or 99%.
Worst case scenario

To give the worst scenario, a non-resident parent on Universal Credit paying for three children through the CMS collection service, would be 9.2p worse off for every extra £1 earned as the weekly income passed £100. If the parent earned enough to pay Income Tax they would gain just 1p for every extra £1 earned.

The total income for this parent would effectively peak when earning £100 a week. Their income would not reach that level again until their Universal Credit ran out. A parent on the National Living Wage might not be able to work sufficient hours to ever reach that point.

Appendix B gives the effective marginal tax rates for both the 2003 and 2012 Schemes under both Universal Credit and the current welfare system. CMD 2015a and 2015b provide a more detailed analysis of the impact of both Schemes on low-earning non-resident parents.


How many parents are affected?
Parents on low income make up a large part of the statutory scheme caseload. The 2006 Henshaw Report[7] referred to the “volatile income, regular movements in and out of work” of a “large portion of the client group”.

The CMS does not publish any data on the income of paying parents; it says that the information “is not readily available … and could only be provided at disproportionate cost.”

However, information in the Child Support Agency Quarterly Summary of Statistics[8] (CSA QSS) provides a reasonable starting point.

In June 2016, 82.3% of the live caseload had an assessment of £30 or less. £30 would be the assessment for a non-resident parent with a net weekly income of £200 paying for one child.
In September 2013, (the last time this information was given) 44.0% of the assessed non-resident parents were unemployed.

A Freedom of Information request relating to the March 2012 CSA QSS showed that, of the 1,128,400 live and assessed CSA cases, 518,700 (46%) were not in employment, 120,200 (11%) had an annual net income of less than £9,500 and a further 170,400 (15%) an annual net income between £9,500 and £14,000.

Response to Inquiry Questions

How well is the CMS performing for children and parents?
17. The good intentions of the CMS are undermined by maintenance calculation regulations which produce assessments that are beyond the reach of many non-resident parents.

18. Applications to the 2012 Scheme must go through the CM Options Gateway. This provides much sensible advice:

The contribution of the second parent to the upbringing of the children does not have to be financial. For example, the parent could have the care of the children for some of the time.
Financial support does not have to be in the form of regular payments. For example, the parent could pay for specific items such as school uniforms or mobile phone bills.
Any regular payments must be sensible, fair and affordable – only then can they continue.

There is an unwritten assumption that non-resident parents may have limited financial resources.

However, parents are also directed to a calculator which will give the 2012 Scheme liability and it is suggested that this can be used as a guide. This calculated liability is beyond the reach of many non-resident parents.

19. Parents with care may be loath to agree a realistic, affordable sum in place of what they regard as the ‘entitlement’ of the much higher CMS calculation. Regrettably, there are also parents with care who wish to exert maximum damage on their ex-partner and use child maintenance as a weapon – they know the non-resident parent cannot pay.

20. The parent with care can insist on an unaffordable CMS amount being enforced through the collection service, with 20% being added and the non-resident parent being charged for any enforcement action.

How could it be improved?
21. The aims of the CMS cannot be achieved with the current child maintenance assessment regulations. Until these regulations are amended:

*CM Options should not suggest that parents use the 2012 Scheme assessment as a guide
*Collection fees and charges for enforcement activities should be dropped
*The “ability to pay” should be assessed before any attempted enforcement


What problems do parents face – both for the parent with care and the non-resident parent?

Ability to maintain parental relationship with children
22. Many non-resident parents find it difficult to continue their role as parent. The difficulty may be caused by the parent with care not keeping to the shared care or contact agreements, or by parental alienation. It can also be caused by financial or health problems.

Financial problems
23. Focus is usually on the situation of the parent with care. However, problems can be more severe for the non-resident parent because of the way in which the state supports the two parents.

24. The primary carer receives the same support as a “single parent” and gets the same support as a two adult household on the same income; no account is taken either of the share of care provided by the second parent or the child maintenance received. In contrast, the second parent is treated as a “single adult without children”; again, no account is taken of their share of care or the child maintenance paid. In consequence, the primary carer parent can be better off after separation than when the family were together whilst the second parent is much worse off (Davies 2015b).

25. The second parent is subject to the “bedroom tax” - one under thirty five is only entitled to a room in a shared house, one over thirty five only to one-bedroom accommodation.

Child maintenance payments
26. These payments are unaffordable for many non-resident parents. They can find themselves better off if unemployed and that increasing the hours worked makes things worse (Davies 2015b). Some non-resident parents may give up work. (In September 2013, 44.0% of the CSA caseload were unemployed). However, failure to accept work may to lead to withdrawal of unemployment benefits.

27. The second parent has an obligation to pay child maintenance to the primary carer, even when the care is almost exactly shared and regardless of the incomes of the two parents.

Non-resident parents with second families
28. Paying unrealistic child maintenance for the children of the first family can leave non-resident parents with inadequate resource for their new family obligations. The children of this family suffer in consequence.

Health issues
29. Many non-resident parents suffer stress and other health problems arising from the above and the further pressure of enforcement. This can damage their earning potential and affect their ability to continue in employment.

Are levels of child maintenance set correctly?
30. No

Additionally:

Further written evidence from Dr Christine Davies
(CHM0098)


Background

I have already provided formal written evidence to the Committee (CHM0079). However, attempts to stay within the recommended size limitations may have limited its effectiveness. The purpose of this supplement is to remedy that defect by providing sufficient explanation to enable the Committee to understand the problems with the current child maintenance regulations and thus conduct its Inquiry effectively.

The two Oral Evidence Sessions addressed many important issues. However, the ‘elephant in the room’ of flawed regulations was not probed.

This supplement starts with a summary of the essential points and then provides a fuller discussion. I will be happy to answer in person any concerns or queries.

Flawed Child Maintenance Calculation Regulations
The calculation regulations in the 2003 and 2012 Schemes are fundamentally flawed:
The threshold values for reduced and basic rates, intended to keep payments affordable for non-resident parents on low income, still have the values of £100 and £200 a week assigned to them in 1998.

The withdrawal (taper) rates for welfare support combine with child maintenance payments to give effective ‘marginal tax rates’ close to or exceeding 100%.

These are simple, indisputable facts which can be easily confirmed.

Consequences of these flaws
Many non-resident parents cannot pay the calculated liabilities. The Government’s own research[1] refers to ‘inability to afford payments’ and ‘prioritisation of other bills (e.g. related to ‘survival’ such as rent and heating …)’ as reasons for non-compliance. The evidence from Families Need Fathers provides the human stories.

Non-resident parents can be worse off in full-time work than when unemployed and working more hours can make them worse off (see Figures 2b and 3b). Marginal tax rate profiles show the reason for this (see Figure 4).

Further information and explanation
The Figures referred to above are taken from the paper ‘Separated families - poverty and child maintenance’ (CMD 2015b) referenced in CHM0079. This supplementary evidence uses an informal approach to highlight some of the essential points of that paper.

Further technical details are provided in CMD 2015b. That paper also addresses other issues not covered here.

Questions:
Why do the income threshold values for reduced rate and basic rate payments still have the values of £100 and £200 a week assigned to them in 1998?

Why is no account taken of the interaction of child maintenance payments with the withdrawal (taper) rates for welfare support?

Why is no monitoring done to assess the appropriateness of the regulations and the affordability of maintenance payments?

What action is planned to resolve this situation?

....

Summary:
Marginal Tax Rate (MTR) profiles provide an excellent way of demonstrating the interaction of child maintenance payments with the withdrawal (taper) rates of state welfare support.

In the case illustrated in Figure 4 the MTR exceeds 100% throughout the region between the £100 and £200 thresholds and is then 99% until Universal Credit runs out.

A parent on NMW receiving Universal Credit would have a maximum income when earning just £100 a week. Changes in the withdrawal (taper) rate for Universal Credit affect the effective MTR of parents paying child maintenance.

Questions:
What action is planned to ensure that, for parents paying child maintenance, the MTR does not approach or exceed 100%, so that ‘work will always pay’ for these parents as it does for other citizens under Universal Credit?

What procedures will be put in place to monitor the impact of changes in welfare provision on the MTR of parents paying child maintenance?

A note on state welfare provision for separated families
The problems of unaffordable child maintenance assessments are exacerbated by the way in which the state provides welfare support for separated families.

The non-resident parent has a legal responsibility to contribute towards the cost of raising their children; child maintenance legislation quantifies that legal obligation. The state also provides financial support for many families and for low income families this support can make up a significant proportion of the family income. In effect, the responsibility for providing adequately for children is a three-way partnership – mother, father and the state.

When a family separates, all the state support goes to the parent with care, who is treated as a single (lone) parent. In contrast, the non-resident parent receives no support for their parenting role and receives only the support due to a single adult.[16] This is regardless of how the care of the children is shared between the parents - the share of care could be exactly equal and one parent would still get all the state support, the other none.

The state support for the parent with care disregards any child maintenance received. The child maintenance is an extra income for that parent.

The state support for the non-resident parent also disregards any child maintenance paid. Not only does this parent get no state support for their share of the care of the children, but they also have the additional expenditure of child maintenance payments. This is regardless of the respective incomes of the two parents.

The consequence of this policy is that, for a low-income family, the family of the parent with care can, in practice, be better off after separation than when the family were together[17], even before the receipt of child maintenance (CMD 2015b). In contrast, the non-resident parent is much worse off but must then pay child maintenance.

A brief note on second families
The problems of unaffordable child maintenance assessments can be even worse for non-resident parents who are also responsible for children in a second family[18]. The 2003 Scheme includes the tax credits received for the benefit of these children in the income of the non-resident parent used for calculating child maintenance. This increases the payment to the parent with care (CMD 2015b) but means that the second family does not receive the state support to which it is entitled.

The 2012 Scheme does not include the tax credits in the income. However, for both the 2003 and 2012 Schemes, the withdrawal rates of the welfare support provided for the second family combine with child maintenance payments to give MTRs close to or exceeding 100% to a much higher income level than for a single adult.[19]

Final Comments:
The design of a good child maintenance system is challenging. Parents with care, non-resident parents and Government will all view the arrangements from different perspectives and it may well be impossible to please them all. Also, no matter how good the system is, there will always be those who seek to ‘cheat the system’.

However, as a basic minimum the calculation regulations must have integrity, in the sense that the assessments must be possible to pay. Non-resident parents must be left with enough for their own basic survival and must benefit from their labours. Only then can they continue to support their children in the most important ways. The 2003 and 2013 Schemes fail this basic test of integrity.

So you may think it's unfair on his children but the evidence seems to suggest that it's actually most unfair on Non-Resident parents with a Low Income and Second Families.

So as it stands his ex can claim her sickness benefit, housing benefit, child benefit, council tax reductions, tax breaks, and child maintenance of £300 pm.

Between maintenance and child benefit she'll be getting £437pcm for the children
and around £400pm for herself... whilst having her housing costs paid for her.

Meanwhile the working Non-Resident parent must pay all their taxes, Child Maintenance, all their bills and support their second family, all the while not having their survival costs factored in whilst having their joint income entitlements unfairly reduced (via the child maintenance black hole), meaning (in my case) that two parents will be forced to go out to work whilst caring for a child under one - just to cover the rent, food and petrol!

I dunno, maybe I should start engaging in wanton, reckless behaviour, get myself diagnosed with Bi-Polar, split up with this guy and take him and the state to the cleaners!

:j

micky2phones

Hi, from what i have read from your posts so far IMO i think you will do just fine, yes it will be hard and money will be tight, i dont know your age but you are very switched on.

emberzburnout

micky2phones wrote: »

Hi, from what i have read from your posts so far IMO i think you will do just fine, yes it will be hard and money will be tight, i dont know your age but you are very switched on.

Thanks.

I thought I was intelligent in deciding to raise this baby in a two parent home, but as it stands I hadn't factored in the costs of child maintenance.

That £300 (minimum) contribution is the difference between our bills being paid, and not being paid.

I've gone through all three benefits calculators and the Entitledto Calculator suggests when my maternity runs out we'll be entitled to £290 support per month (including child benefit). The Turn2us Calculator suggests a similar amount.

The Policy in Practice Calculator is more confusing and seems to be wrong - or I've incorrectly entered something, it suggests we would be entitled to £900 Universal Credit per month. I know that's wayy too optimistic. I should run this calculator again.

That would be sufficient if we got to keep his £300 a month child maintenance - that would bring our income, in addition to his net wonthly Wages (£1,750) back up to the £600 mark. Which is what we need for all bills and pocket money - we wouldn't fair too badly, even on Universal Credit.

Alas, the obligation needs to be paid.
(Which if it didn't break the bank, I wouldn't be batting an eyelid at).

And the fact that the income thresholds haven't been updated since 1998 is just scandalous. That's 20 years of inflation and the cost of living unaccounted for.

And revisiting the previous comment about "fairness", Child benefit provided by the state for one child is £89 a month. That's what my new born will be entitled to. Her siblings, at present each receive £100 a month from dad alone (and their child benefit from mom)... So I'd say outright the costs are more than fair to the children, but completely unfair and disproportionate to the Non-residents parents pay packet.

As the bills currently stand, the Universal Credit entitlement of £295pm and his net monthly wage of £1750 brings our total income to £2045. Which is still a short fall of £69 that we'd need to cover all the bills... which is breadline indeed.

We'd need to cut corners and live frugally to balance that sheet - and there'd be no pocket money, savings or days out, and no emergencies please!

If I'm to stop us falling into any arrears, I had best make sure I have a job by the time that maternity runs out.

The only other alternative would be to downsize to a two bed roomed property. Which could potentially free up about £300 a month. Unfortunately that would then mean he couldn't have his kids stay over weekends and part holidays.

I think I'm beginning to understand why so many non-resident fathers have always regarded the system and mothers with such resentment... they really do get stung by the one way financial bias, which means they often have to give up accommodation and contact to pay the maintenance bills.

I'm a (27 yo) woman (expecting first child), so their plight never really interested me before. Now it does.

So for sustainability, I have to go straight back to work, or we have to downsize.

If I had of known this, it might have been better for us to live separately - we probably would have split up in time, but I think we could successfully co-parent.

My transition into work would have to be seamless to avoid debts, we'll have child care to juggle around work, I might not get the time or opportunity to go back to university, and I'll probably resent having to do all of this because of the large costs of his previous children who are still going to need additional enrichment from dad in the form of electronics, trips and holidays - otherwise he'll come off as a deadbeat tight !!!!... I don't like the way this is heading

We figured that if I qualify and get a career on track we'd have two average-middle earners as professional role models for all the kids.. But I can see now that the first few hurdles are going to be the hardest. We're going to need a whole lot of perseverance and patience.

Craig1981

The Policy in Practice calculator is relatively new, and yes, confusing !! (I use this daily for my tenants as recently the area is full service UC)

but nevertheless it is the better one to use. Unfortunately your income and affordability will include the £300 maintenance, that is what it is - cant change that

looks like you have done a lot of research on the matter. What i would suggest is trying to get to the jobcentre for someone to help you with the Policy in Practice calculator and the two different scenarios

a quick calc from my end based on you not woring, and partners income of £1750, child benefit for one child, will give you UC of around £291 a month

K80_Black

emberzburnout wrote: »

I dunno, maybe I should start engaging in wanton, reckless behaviour, get myself diagnosed with Bi-Polar, split up with this guy and take him and the state to the cleaners!

Mental illness isn't a joke. Please don't make light of it. There's far more to being bipolar than the 'manic' phase, and being diagnosed with it often comes with a lifetime regime of medication with horrendous side effects. Those that claim benefits for mental illness are no more 'taking the state to the cleaners' than someone with a physical disability. Just because you don't see it doesn't mean it's not there.

JamoLew

£300 a month won't even come close to the actual cost of feeding,clothing and housing of 3 children.
You have £236 a month spare and state you can't afford to have the kids for a week -- yet you think £300 a month to be too much !!

welshmoneylover

JamoLew wrote: »

£300 a month won't even come close to the actual cost of feeding,clothing and housing of 3 children.
You have £236 a month spare and state you can't afford to have the kids for a week -- yet you think £300 a month to be too much !!

I am always amazed by nrp who have second families and moan about the cost of cm , perhaps they need to consider not having any more children if they can’t afford the first family. Children grow up and anybody with teens know how expensive they can be. Teenage boys especially are like empty dustbins always hungry!

swingaloo

So he has decided its best to 'relocate with you' leaving behind 3 children with a mother who has turned to drugs in the past because you couldn't live in a Welsh village.

He wants to buy his kids 'decent presents' at Christmas, you want him to fill their hampers with cheaper stuff.

Despite having 269 spending money a month he wont be able to take his kids for days out.


This has got disaster written all over it.

Perhaps it would have been prudent to do some 'financial planning' before deciding to have a second family with this man.

His first family will not be inferior to your child and neither should they be. You have a lot of years of compromise ahead of you and you seem to be resentful of them already.

emberzburnout

K80_Black wrote: »

Mental illness isn't a joke. Please don't make light of it.There's far more to being bipolar than the 'manic' phase, and being diagnosed with it often comes with a lifetime regime of medication with horrendous side effects. Those that claim benefits for mental illness are no more 'taking the state to the cleaners' than someone with a physical disability. Just because you don't see it doesn't mean it's not there.

I never said "mental illness is a joke" and I'm not making fun of mental illness as a whole... Although I am poking fun at this particular instance of "mental Illness".

There's actually much controversy around the evolution and application of the DSM (Diagnostic and Statistical Manual of Mental Disorders), and Bi-Polar is one of "illnesses" definitely up for debate.. what came first, the chicken or the egg? Bi-Polar is mainly characterised by reckless, self destructive behaviour and temperamental mood swings.

At what point does a fickle mentally equate to a "mental illness"?
But that's a debate for a whole other (medical and psychiatric) forum.

I happen to take mental illnesses quite seriously, my brother has just gone into psychosis, through trauma. That's a legitimate mental illness. On the other hand, this Bi-Polar case couldn't keep her legs closed or the drugs out of her nose and now wants to blame her reckless behaviour on her "Bi-Polar" - which just happens to share the same descriptors as typical unscrupulous behaviours often seen in delinquents who refuse to grow up and take any ownership for their actions.

She's "not fit enough to work", but she is fit enough to get on with just about any other daily activity and weekend activities of partying hard.

Personally, me and my brother had a traumatic upbringing by a single alcoholic parent (which has seriously damaged his mental health - though he always worked up until his recent traumatic experiences), I myself suffer anxiety and have only recently got over serious depression (through self therapy), although I don't consider these "illnesses" as a get out of work clause - Life is traumatic from birth till death, it's a normal part of the human experience... But you roll your sleeves up and you get on with it.

I also suffer two herniated disks, sciatica, piriformis syndrome and chronic fatigue But so long as I can drag myself out of bed, still do physical activity and maintain a coherent dialogue with others, I'm fit for work and fit for being a positive contribution to society, and fit for being a positive role model to my future child. I generally have to call in sick to work twice a year when my pain becomes unbearable (it fluctuates), but there are thousands out there claiming sickness benefit for the same illnesses.

Some of these people will be in serious chronic pain, others are just mentally and physically fickle and they would rather give up their own personal agency and let the state support them long term (which it's most incompetent at doing).

I'm not a person who likes to give up autonomy and self owner-ship. Unlike so many others.

But what ever, I'm still a social activist and I'll still support peoples right and access to the welfare state, even if I think some of them are being lazy and self-righteous - those are in the minority. The job market is a difficult place to navigate and not all are equipped to deal with it, heck I can just about deal with it. (Country's gone to pot, we all know it - It's not like there's enough jobs to employ everybody anyway. The numbers don't add up, the system is stacked against you from the get go. The joys of capitalism.

JamoLew wrote: »

£300 a month won't even come close to the actual cost of feeding,clothing and housing of 3 children.
You have £236 a month spare and state you can't afford to have the kids for a week -- yet you think £300 a month to be too much !!

How much does it cost to feed clothe and house 3 children?

Firstly, he transferred the cheap mortgage over to her and she gets that paid by Housing Benefit. Secondly she gets Child Benefit from the state for all of them. Thirdly, she gets her own personal allowance on behest on the tax payer (again). Fourthly, she also fraudulently claims disability for one of the children by lying and saying the child needs hearing and visual aids for Autism. That child in currently in my kitchen simultaneously playing on a laptop, playing with a deck of cards and making a hell lot of noise. No visual or hearing aids required.

Additionally that £100 each to them a month in maintenance is still more than the state provides for (which my kid will receive) of £89 per month. (But they are receiving both provisions - my child will not). She's also entitled to free legal aid, whereas we are not.

Lastly, if you decided to actually pay attention you would see that as it stands I'm on maternity pay and that leaves us with the £200 something "disposable" income after child maintenance has been paid. I said we are happy to live withing these means for the mean time. No begrudgement there. Although I "-" the "disposable" aspect, because I'm sure that won't go far between the new baby and still supporting the other three kids by alternative means, and we won't be able to afford any household emergencies.

The kicker is when my maternity runs out, my earning potential is minimised (due to having a child under one) and we have to make a claim to Universal credit. There is an inherent incompatibility between Universal Credit taper rates and the Child Maintenance rates which is having a detrimental effect on our combined joint incomes. When my maternity pay runs out, we'll be £600 down, and only entitled to £295 Universal Credit support - which actually leaves us in the RED.

It's not that I think that £300 is too much. The fact is that £300 is too much to cover our basic living expenses (which have not been taken into account since 1998!!) - meanwhile we pay for his kids four ways ways, 1) Paying our full taxes (both have done for years) in order to fund that Welfare bill that mother claims, 2) In child maintenance 3) In unclaimed welfare due to the incompatible taper rates of UC and 4) When we have them over here and still need to find a way to fund activities and presents.

I can't post links, but I suggest you brush up on your facts. None of this would be a concern if I'd already qualified and we were both earning to our full potential - but I'm not and this incompatibility between Universal Credit and Maintenance will significantly hinder my (new mother) 1 year off work and any hopes I had of becoming a full time student in order to re-qualify.

So the only solutions to this problem seem to be

1) I go straight back into work, and we work opposite shifts to cover bills and care for baby & I indefinitely post-pone University

2) We down size and he stops getting over night visits with his kids

3) We split up and I become a single parent, unravelling our finances - at the cost of a happy family and further cost to the state. (I'll need more financial support).

Written Evidence from Dr Christine Davies
(UCR0193)

I am a Visiting Senior Lecturer in Applied Mathematics, Royal Holloway University of London. My previous evidence to this Committee (UCU0154, in the last Parliament, and UCR0062) drew attention to the problems causes by the interaction Universal Credit with payments made under the CSA and CMS statutory child maintenance schemes. I also submitted evidence (CHM 0079 and CHM 0098) to the Committee’s Inquiry into the Child Maintenance Service (CMS) in the last Parliament.

Fundamentally flawed child maintenance calculation regulations are causing serious damage to separated families because they give amounts that many parents find impossible to pay. This aspect of child maintenance legislation was outside the remit of the CMS Inquiry and beyond the scope of the present Inquiry. Nevertheless, the problems are so severe that, sooner or later, they will have to be addressed. I take this opportunity to illustrate the problems in ways which might be helpful to the Committee’s more general deliberations.

I formally request that the Committee draw the Government’s attention to the problems arising from the Child Maintenance Calculation Regulations, either by referring to evidence already received or by making it the subject of a separate inquiry.

I restrict this evidence to the Inquiry into UC roll-out to the aspect of work incentives.

Executive Summary
The intention of UC is to ensure that ‘work always pays’, that a person will always be better off working than when unemployed and working more hours will always give an increase in overall income. In general, this intention is fulfilled.

However, the intention is not fulfilled in the case of parents paying child maintenance through the statutory schemes. They can be worse off working than when unemployed and working more hours can give a lower income.

This is illustrated by means of income profiles showing the after housing costs income as an adult on national minimum wage moves from unemployment to full-time work and by marginal tax rate profiles.

Tables of effective marginal tax rates (MTRs) show that a parent paying through the CMS pay and collect service can have an effective MTR of over 107%. This would mean that they would be 7p worse off for each additional £1 earned.

Child maintenance is outside the scope of the current Inquiry. This evidence seeks to demonstrate the serious consequences arising from the interaction of UC with the current flawed child maintenance calculation legislation. It puts down a marker for further work. A thorough review is urgently required.