Government had been warned about child support budget blowout
THE Government was advised by officials to abandon controversial changes to the child support system last year after a second massive budget blowout, documents show.
A new formula for child support that came into effect in April is designed to be fairer by recognising both parents’ income and how often they take care of their children. But it has come at huge cost. Inland Revenue revealed in March that the cost of reforming the child support system had blown out by $129 million from an original 2011 estimate of $34m to a new forecast of $163m.
Treasury, the State Service Commission and Government Chief Information Officer (GCIO) Colin MacDonald recommended in February last year that the Government abandon the reforms and write off the tens of millions of dollars that had been spent, according to a Treasury email released under the Official Information Act.
‘‘Based on the limited information provided, Treasury, the SSC and GCIO (from a technology perspective) recommend that the delivery of the child support reforms is discontinued, despite the large sunk costs,’’ the email said.
The Government decided instead to press ahead with the reforms while paring back some features of the new system that were designed to rein in child support debt. Without the $47m of ‘‘savings’’ that decision generated, the estimated cost of the project would have ballooned out to $210m.
The figures represent the cost of Inland Revenue developing the software to implement the child support changes and the costs it will incur managing the new system for a period of 10 years.
The complexity of the new child support regime would result in more and longer calls to Inland Revenue from parents, officials said.
The documents show the Treasury was concerned as early as September 2011 that the cost of the reforms might rise from Inland Revenue’s original estimate of $34m and warned it would ‘‘not necessary support additional funding’’.
The following year, when the forecast cost of the changes jumped by $87m to $121m, the Treasury queried whether the benefits were worth the costs and warned there was not then enough assurance the new estimate was in the ‘‘correct ball-park’’.
In a document dated August 2012, Treasury noted that although Inland Revenue had a ‘‘generally strong track record’’ delivering complex changes on time and on budget, in some more recent cases it had ‘‘struggled to do this’’.
The forecast cost of implementing the child support reforms, as they had originally been envisaged, jumped for the second time, to $210m, about 18 months later.
Asked whether the Government should have paid more attention to the Treasury’s concerns, Revenue Minister Todd McClay said costs were not the only consideration.
‘‘In deciding to implement the policy, many things were considered by the Government,’’ McClay said.
The changes were the first to the child support system since 1992 and were designed to make the system fairer, more balanced, and focused on the child, he said.
Child support payments worth $5 billion would be made over the next 10 years, he said.
‘‘Good social policy is not without cost. It is the price we pay for a fair society.’’