By all means raise the rate, but while we’re at it…

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With a majority of Australians supporting an increase to the Newstart allowance (current below the poverty line), the #RaisetheRate campaign has been taken up by many in the lead-up to Federal elections. In today’s blog, Sarah Squire (@SquireSarah) of Good Shepherd Australia New Zealand argues that, while raising the rate is the right thing to do, it’s also important to strengthen the other policies that govern differing aspects of financial security. This is particularly so for single mothers, who are often victims of both punitive government policies and post-separation economic abuse from former partners.

The problem with Newstart

The current #raisetherate campaign is gathering momentum in the lead up to the next federal election. Non-government organisations around the country are galvanising to push for an increase in the Newstart payment, which has not risen in real terms for 24 years. Even economists and business groups are on board, prosecuting not only the ethical case for fairness but also the economic case, since every spare bit of money received by someone on a low income goes back into the economy through consumer spending.

The low rate of Newstart is of particular concern for single parent families, 82 per cent of which are headed by women, with 41 per cent of children in single parent households living in poverty  - this is up from 37 per cent in 2012. The punitive Welfare to Work regime introduced by the Howard Government and extended by the Gillard Government pushes women receiving Parenting Payment Single onto the lower Newstart payment once their youngest child turns eight.

Research currently being undertaken by Good Shepherd Australia New Zealand confirms that the policy is not only counterproductive in terms of supporting workforce participation, but also negatively impacts financial and psychological wellbeing. In fact, new analysis shows that women-headed households are poorer now than they were four years ago. Part of this is due to changes in the rules for Family Tax Benefits, including removal of Family Tax Benefit B indexation, a reduction in the child care rebate, and the abolition of the Large Family supplement and the Schoolkids Bonus.

Who indeed? Supposedly gender-neutral policies enacted by an overwhelmingly male government leaves single mothers in poverty.  Photo credit: Time.

Who indeed? Supposedly gender-neutral policies enacted by an overwhelmingly male government leaves single mothers in poverty. Photo credit: Time.

Single mothers at a nexus of ineffective policies

It is in the interaction of the broader tax and transfer system and child support system where single mothers and children suffer financially. A critical but overlooked aspect of single parent poverty is the fact that child support payments, which are determined and administered by the Department of Human Services – Child Support (DHS-CS) via ‘Child Support Collect’ – are assumed to have been paid by the paying parent, even when they have not. This means that Family Tax Benefits and other payments such as rent assistance are automatically reduced. To remedy this situation, the onus is on the recipient parent to pursue the unpaid debt themselves.

It is at this point that the child support system collides with the everyday reality of life for women post-separation. With many single parents having left relationships due to family violence, the ‘option’ of chasing an ex-partner for money puts them in an impossible position: either put themselves and their children at risk by attempting to feed, clothe and shelter them with even less income, or put themselves and their children at risk of continued violence. If we listen to the stories of women it is clear there are many instances where ex-partners have continued to economically abuse them with the tacit consent of the state.

The problems with child support

This collusion of state and individual coercion was one scenario explored recently at the Child Support Symposium hosted by Swinburne University and the National Council of Single Mothers and their Children. As one speaker with personal experience of the scheme noted, the system provides multiple loopholes for paying parents to not only legally avoid paying their debts but allows perpetrators of abuse to lock their ex-partners into a continual state of financial victimisation despite, in her case, the existence of a protection order.

Sociologist Kay Cook has been analysing the child support system for several years, with current work examining the personal, practical and institutional barriers to child support faced by women in Australia, the UK and the US. At the symposium Cook explained that it is not known what the full amount of money owed to women and children is, because while 1.3 million women are registered in the Child Support Collect part of the system, this represents only 48 per cent of all transactions. DHS-CS estimated unpaid child support debt of $1.35 billion at the 2015 House of Representatives Inquiry into the Child Support Program. However, Cook notes that this represents the tip of an iceberg in terms of actual debt.

Very little is known about the majority of child support collected (or not, as is too often the case) through ‘Private Collect’ arrangements. These arrangements are actively encouraged by the government, justified presumably as an administrative cost-saving measure, but with no apparent regard for the acrimony that often accompanies the end of a relationship, even in the absence of violence. Aside from the powerful voices of women who have shared their stories publically, there is little data on these arrangements and their impact on women and children.

With between 21 per cent and 38 per cent of transfers not collected within the approximately 1,275,000 women in the Child Support Collect system (representing less than half of all payments), one can speculate that the real figure of unpaid debt is nudging 1 million cases.

Is the child support system fulfilling its policy objectives?

The first iteration of the child support scheme was introduced in 1988 in with the dual objectives of: 1. Reducing child poverty in single parent families and 2. Reducing the state’s fiscal liability for supporting single parents and their children.

In relation to objective one, analysis comparing population survey data in Australia and the UK shows that when child support payments are received they reduce Australian lone mothers’ poverty rate by 21 per cent. Additionally, recent Australian research reveals that higher rates of child support both reduces poverty and increases rates of return to work. However, by comparison to lone mothers in the UK, Australian mothers derive a higher proportion of their income from child support and are thus more vulnerable to policy changes or non-compliance from ex-partner payers.

As evidenced from the level of unpaid child support debt described above, there is a high level of non-compliance within the Australian child support system. Non-compliance is facilitated by a range of both lawful and unlawful practices, including a lack of enforcement of unlawful practices by the state. For example, unlawful non-lodgement of tax returns is a common method used by payer parents to avoid an accurate assessment of income. Lawful non-compliance includes hiding income within family businesses or trusts.

Payers can also engage in multiple, vexatious claims for reassessment, which tie up payees’ time and resources as, once again, the duty to dispute the reassessment is placed on the parent who receives payments.

With the burden of enforcement often falling on low-income women payees, who are expected to navigate their way through a complex system, maintain a productive direct relationship with their ex-partner, and also manage care of children – plus meet activity or employment requirements for those with children over six – the second objective of the system is perhaps the most successful element of the scheme. With the onus on women to disprove reassessments and chase unpaid debts themselves in order to get their Family Tax Benefit payments back, many women find it preferable to avoid the formal collection system altogether, resulting in a large economic saving for the state. Shortfalls due to non-payment are borne by women and children at their own expense, financially and psychologically.

To the initial two policy objectives we can add a third: the magnification of gender inequality. As the work of Kay Cook and others has demonstrated, the administrative processes of the child support system largely benefit fathers by lowering their financial liability while impoverishing and disempowering mothers. Successive reforms have meant that the child support system has moved away from the objective of alleviating poverty to a point where it is fundamentally a system of coercive power and control.

Why can’t we have enabling policy for women and children?

Several mechanisms could be engaged to make the child support scheme less harmful to women and children. These include closing legal loopholes that allow payers to delay or evade payment, and the Australian Taxation Office prioritising their enforcement of the ‘failure to lodge penalty’ among those with child support liabilities who have not filed a tax return on time. Penalties could also be introduced by DHS-CS, with debtors asked show cause as to why they should not be financially penalised – for example, through compounding interest on their debts – for non-compliance. These changes would shift the onus for enforcement away from the recipients of payments and instead place a duty on the payers.

The link between Family Tax Benefit levels and expected child support payments could either be removed altogether, or the calibration of benefits could be made less immediate, accompanied by a simple process for payees to prove non-receipt of expected child support without the need for individual pursuit of the non-paying parent.

The state could also provide a safety net for recipients in the form of a payment guarantee. As outlined by Cook et al this approach would mirror European schemes where the state provides the payments to recipient parents in advance and then recoups the payments from payee parents.

A more substantial overhaul of the system would be to reconsider the original objective of reducing state liability for the cost of supporting single parent families. At the very least this would include removing departmental advice to applicants which encourages them to pursue payments privately and bring more payments under the administration of DHS-CS. A more radical shift would be to reconsider the notion of parental financial responsibility for children and the idea of children as a choice or a private good, and instead consider them – as Lyn Craig terms it – a ‘joint social concern’ where the cost of the care is more socialised as exemplified in social democratic countries.

In the meantime, a shift in mindset is required among those social services campaigning for higher social security payments. Any campaign to increase income support for those at the bottom cannot properly address women’s poverty without considering the administration of the child support system and its interaction with other payments. Raising the rate of Newstart will only do so much to help single mothers and their children, and doing so may inadvertently contribute to the ongoing invisibility around the child support system and its role in perpetuating economic deprivation and abuse of women.

Perhaps a #lowerthedebt campaign could be started to create a negative stigma around those who wilfully engage in child support non-compliance. Such a campaign would shift the stigma attached to single mothers and put the shame back to where it arguably belongs – to those who refuse to accept financial responsibility for their children and the state which supports them to do so.

This post is part of the Women's Policy Action Tank initiative to analyse government policy using a gendered lens. View our other policy analysis pieces here.