Ardern Jacinda: Child Support Amendment Bill — In Committee 
Text is incorporated into the Bound Volume 
Ardern Jacinda: Child Support Amendment Bill — In Committee 
[Sitting date: 27 February 2013. Volume:687;Page:8278. Text is incorporated into the Bound Volume.] 
JACINDA ARDERN (Labour) 
: 
 We have just been told by Peseta Sam Lotu-Iiga the chair of the Social Services Committee which I have the privilege of being a member of and which heard the submissions and deliberated on the Child Support Amendment Bill that this bill will make child support—what was it—more effective fairer and more efficient. I would not mind running through that criteria and really testing whether or not that is indeed what this bill has achieved. Unfortunately on this side of the Chamber that is not the impression that we have been left with having traversed this bill in the select committee. 
I would like to start with the general principle of why child support is there. We were just told by the chair of the select committee that it is not actually about child welfare and well-being. Well what is it about? What is it about? If it is not about the welfare of the child about making sure a child is well supported whether they are with one parent or two then what is it about? What we strongly argued in the select committee was that surely if that is what this should be about—if it is about income adequacy when parents for whatever reason no longer combine their incomes—then surely that is about the welfare of the child. And if it is why would we not put the paramountcy principle up front in the centre of this legislation? 
The interesting debate that was had at the select committee was that it was pointed out to us by officials that putting in a principle that said that decisions should ultimately be made based on the welfare of the child was actually contrary to the principles of the bill. Nothing could be more stark in pointing out that in our view we lost our way about what this issue is actually about. Within the complexity of the formulas and the potential feuding of parents—because we know that those parents who use this legislation are generally less satisfied with their child support payments than if they set up a payment system outside of this regime—we get so caught up in all of that that our fear was that we were losing sight of what it is all about. I understand the legal reasons the drafting reasons that made the paramountcy principle difficult but that triggered in my mind the thought that the Minister of Revenue should have started with a first-principles review with this legislation rather than adding layers of complexity to an already complex and ineffective formula. That is the principle of why surely we should be discussing this. 
The second point that the chair tried to make was that this was about making it fairer. Well even in the select committee we came up with a different threshold for care than the Minister did. So to try to argue that somehow it was an easy thing to establish fairness is I think quite contrary to the experience we had even deliberating on this bill. The notion though that you could claim that it is more efficient I found quite simply laughable. As the Green Party member has pointed out it will cost $91 million to administer this piece of legislation. That is probably more than what it would cost if we instituted a pass-on mechanism. I am not entirely sure but it would be a significant chunk of that anyway. 
This is going to be a difficult piece of work to administer. The member is also right to point out that the Inland Revenue Department’s systems are going to struggle with it. I would say this seems even more tricky than Working for Families and that was probably a test for it in the first instance. I think the fact that the Inland Revenue Department will have—what was it—a 15 percent increase in workload for case managers trying to navigate this as well also points out the complexity. 
But ultimately I think probably what demonstrates better than anything else the fact that this is not going to make our system more efficient more effective or fairer is that you are probably yet to hear any speaker in this Chamber elaborate on how the formula is going to work. We heard the chair say that it will take a modern approach to the care of children in the calculation whatever that means. Let us be honest members of the select committee: there were whiteboards brought out to try to explain to us how this calculation was undertaken. It is not a simple formula. This is not about insulting the members of the public; this is about being honest that when trying to establish a regime that reapportions income across a liable parent and a caring parent and that takes into account thresholds of care and different income levels it is complex. We cannot deny that. Surely that is something that we would agree on. So the first point I wish to make is that Part 1 ultimately should have included the paramountcy principle. 
Secondly if we were going to take a first-principles review of this legislation we should have looked at using a pass-on mechanism. We are being very honest on this side of the Chamber. No one is denying that pass-on has fiscal implications. But I think most New Zealanders would be shocked to know that childcare payments that are paid from one parent to another parent who may be on Government support for their income do not go to their child. I think most New Zealanders would be shocked to know that. Given that we know that the majority of children who are living in poverty are in sole parent households and that sole parent households from time to time are going to be reliant on Government support particularly if their children are at an age where they need full-time care responsibilities we know that roughly 88000 children from memory—around that mark—who are living in poverty are going to be reliant on sole parent support in that form. So they are the kids who are not getting child support payments—those kids who need it most. 
All that we asked on this side of the Chamber acknowledging the fiscal cost was that the Government at least look at it—at least look at it. That is what the Expert Advisory Group on Solutions to Child Poverty recommended. We at least wanted to take a look and to analyse it collectively as to whether or not we should be doing it. 
The second big issue that we grappled with as a select committee was indeed the funding formula. I am going to have a little go at sharing how the formula is at least elaborated on in the legislation. If you go to Part 1 clause 7 it states in new section 4A(4): “The amount of annual child support payable by a liable parent for a qualifying child is determined under Part 2 and is worked out by deducting the liable parent’s care cost percentage from their income percentage and then multiplying the result by the appropriate amount set out in the relevant child expenditure table (which identifies amongst other things the average annual expenditure on children in New Zealand by reference to average weekly earnings).” Did everyone follow? 
There are three variables in this formula. The first is the proportion of care and that was something under much debate. When this bill first came in there was a recommendation that we reduce the threshold. So a parent to reduce the amount of child support they paid had to care for their child for at least 40 percent of the time. That is where it was. This bill came before us and it said it was 28 percent of the time. Our issue on this side of the Chamber was that in the majority of cases we are talking about women caring for children. You take 28 percent of the care and that means that you might be picking up just a weekend. Is that impinging on your ability to then be a full-time earner? Probably not. Is the mother able to be a full-time earner when she is caring for the children the rest of the time 5 days of the week? It is much more difficult. So we felt that that threshold needed to be adjusted and to a certain degree that has been built into the bill. So that is the threshold element. 
The second part states that it is worked out “by deducting the liable parent’s case cost percentage from their income percentage”. What is the income percentage based on Mr Chair? 
Peseta Sam Lotu-Iiga 
: Don’t bring him into the debate. 
JACINDA ARDERN 
: I am talking to the chair of the select committee at this point. The income formula—as the chair will remember I am sure—is actually based on a core living cost for an adult which is based on what? I hear silence on that side of the Chamber. It is roughly based on the DPB. We use that to say well how much does someone need to earn to survive? Some might question actually whether that is enough to earn to survive when you use the DPB as the base for how much an adult might need to survive. Then we reapportion the leftover income. 
I am being very crude in my explanation here but crudely that is what that formula does. There are lots of variables in it and there are lots of holes and you could ask whether or not even the base income threshold that we used to establish it is sufficient for an adult. But that is what we have run with here. To try to claim that all of that is effective fairer and more efficient—I still think there are plenty of holes in the argument that was presented from the chair of the select committee in that regard. 
I want to come back to the discussion on the threshold of care—the 28 percent versus the 40 percent. Yeah we agree—40 percent is a high threshold before you start taking into account monetary deductions from your childcare. But we are also making a crude assumption that if you take up the part-time care of your child you are therefore picking up the cost. Are you picking up an equitable cost of doctors’ visits? Are you picking up the costs of their school fees? That is not the kind of thing that is roughly calculated on that threshold.