Child support that worksby Jonathan Boston
The existing system of child support is next to useless at reducing poverty.
Child support is money paid by non-custodial parents to sustain their children’s living standards. The money is paid to custodial parents who have the primary responsibility for caring for the children. Child support is a legal obligation. Given the high child poverty rates of those growing up in separated families, it is reasonable to ask how effective the legislated child support system is in reducing child poverty.
The answer is next to useless. Most poor children in separated families are supported by a sole-parent benefit. In this context, Inland Revenue’s recent claim that child support provides financial assistance to around 210,000 children is misleading. About 130,000 of these children get no financial support passed on from the IRD because their parents receive a welfare benefit. The Government simply takes the child support to offset the benefit.
The current system of child support has many problems. First, effectively no child support is paid to the poorest children. By not passing on any child support to many children, our approach contravenes the United Nations Convention on the Rights of the Child and indeed the 1991 Child Support Act. Both of these state that parents have an obligation to support their children’s living standards.
Second, because the Government takes the money as a benefit offset, child support functions as an additional tax for many non-custodial parents, thereby discouraging payments. Third, using child support as a Government revenue-raising device contravenes well-established principles for efficient revenue collection, such as having a broad base and a low rate.
How might we redesign child support to help reduce child poverty? We should have a Child Support Act that is focused on meeting the needs of children, especially poor children.
As in many other countries, we should simply pass on much, if not all, child support to custodial parents. This would generate a rise in incomes for the poorest children, thereby complementing other policies to mitigate child poverty. Non-custodial parents would pay money to directly support their children, for which they would have a strong incentive, as the money goes to the child not the Government. As for the lost tax revenue, there are many better ways of raising it than taking the money off the poorest children.
We also need to design a child support system that pays more for younger children, who are more vulnerable to poverty and who require more parental time. Unfortunately the currently legislated system (in force from 2015) sets higher rates for older children.
We need to make the payments system more stable for custodial parents, with the Government acting as insurer and advancing payments when non-custodial parents do not meet their obligations.
Finally, we need to provide more employment support to non-custodial parents to pay child support, including access to in-work payments and additional active employment assistance over and above that granted to those without such obligations.
Jonathan Boston and Simon Chapple are co-authors of Child Poverty in New Zealand, published by Bridget Williams Books.
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