Assessment of Hierarchical Needs Under the Government’s Proposed Reforms

On 5 June 2026, the Government published its consultation on reforming financial remedies on divorce and strengthening protections for cohabitants at the end of their relationships. In summary, the Government has proposed: (1) a ‘codification plus’ model, under which the current law regarding financial provision on divorce would be codified, with additional reform in specific areas where the case law is unsettled or reform is otherwise justified; (2) the introduction of binding Qualifying Nuptial Agreements (‘QNAs’), which would allow parties to organise their own affairs with certainty, subject to protections; and (3) the introduction of bespoke protections for cohabiting couples on separation.

One of the areas which the Government believes is currently too uncertain, and therefore requires clarification, is the principle of ‘needs’. In an effort to introduce greater certainty, the Government has proposed a new hierarchical approach to be undertaken by the court when considering needs. The Government has proposed that the court should be able to consider up to three categories of need, depending on the circumstances. Those three potential categories, or stages, of need are as follows:

• Stage One: The court should consider the welfare of a child of the family and consider their needs first.
• Stage Two: After considering the needs of any child of the family, the court should then, as far as resources allow, consider the couple’s essential needs for matters such as housing, income and pension provision.
• Stage Three: After considering essential needs, the court would, where resources permit, consider discretionary needs. The Government considers that these needs would include lifestyle luxuries such as expensive cars and designer clothing and accessories.

The Government has proposed that Stages One to Three should apply to divorcing couples unless they have entered into a QNA, in which case needs would be limited to Stages One and Two. The Government has stated that divorcing couples would benefit from understanding that discretionary needs are secondary to essential requirements such as housing, income and pension provision. The Government also aims to prevent couples from contracting out of basic needs, while respecting the autonomy of those who choose to enter into such agreements.

In addition, the Government has proposed that cohabiting couples who have chosen not to marry should be limited to needs falling within Stages One and Two. The Government’s rationale for limiting the needs available to cohabitants is to maintain a distinction between those who have chosen to enter into a legal union and those who have chosen not to do so. The Government says that excluding discretionary needs for cohabitants would create a clear and principled distinction from divorce, reflecting the different levels of legal commitment and obligation.

The Government has stated that, as part of the reform, the distinction between Stages Two and Three would be clearly defined, although little detail has been provided as to how that distinction would operate in practice. The limited information available indicates that ‘necessities’ would fall within Stage Two and ‘comforts’ within Stage Three. Examples given of Stage Three needs include high-value cars, non-essential home improvements and private club memberships.

While we can understand, although not necessarily agree with, the Government’s wish to distinguish between essential needs and discretionary needs, we question whether, in practice, it will be easy to police such a distinction. Family lawyers are nothing if not creative. It is inevitable that, when acting for clients who are limited to Stage One and Stage Two needs, attempts will be made to present, dress up or hide some Stage Three discretionary needs, which should be excluded, as basic needs capable of being claimed.

To test how the proposed hierarchy may impact the assessment of needs in practice, we applied it to a familiar schedule of outgoings using publicly available data, representative market prices and monthly averages for a household with two school-aged children. A simple traffic-light system was used: green for core needs, amber for expenditure in the evaluative middle ground and red for expenditure treated as discretionary. The question was whether the apparent clarity of the hierarchy would survive contact with the ordinary realities of family life and the low cunning of forensic budget preparation.

Putting the hierarchy to work

Against that background, and the Government’s stated aims of greater transparency, accessibility and certainty of outcome, we road-tested the proposed hierarchy of needs to see what difference it might make to the bottom line. (See the attached pdf.) The left-hand column attempts to present a typical current forensic budget. The right-hand column shows how the same household budget might look once the hierarchy has been applied and whether, in practice, expenditure placed lower in the hierarchy (Stage Three) might simply be recast under a higher-priority heading (Stages One and Two).

At the edges, the distinction is straightforward. Mortgage payments, utilities and buildings insurance survive; theatre trips and obvious luxuries do not. The real difficulty lies in the ordinary expenses that resist neat classification.

Deleting a line from the schedule does not necessarily remove the underlying cost. Meat from the butcher and fish from the fishmonger may be absorbed into the supermarket budget. A car-valeting allowance may disappear while the provision for necessary servicing and repairs is reassessed. Handbags may disappear as a separate category, while ordinary clothing expenditure is considered in the round. The schedule looks different. The bottom line may not.

A premium television package may likewise be chased down rather than abolished. Once separate cinema and theatre expenditure is removed, a competitively priced broadband and telephone package may already include basic television and bundled streaming services. The family retains a modest form of entertainment at home, at a lower cost and without a separate leisure allowance. The line disappears; its function is absorbed.

Children bring the difficulty into sharper focus because their needs change as they grow. A separate cinema or theatre allowance may disappear, yet some expenditure may reappear through modest pocket money, swimming, music, sport, school trips or after-school enrichment. What appears discretionary in one context may form an ordinary part of another child’s education, health or social development. The label changes, but family life carries on much as before.

The worked example therefore suggests that the hierarchy may change the structure and nature of the debate without eliminating disagreement. Yet the dispute may simply move from the overall reasonableness of the budget to the evaluation, classification and valuation of individual items. The recent case of P v M (Appeal: Unfair Hearing: Variation of Periodical Payments: Global Orders) [2026] EWHC 1330 (Fam) illustrates the difficulties which can arise with budgets and the wide range of options as to how they can be challenged.

The central question remains: where, for this family, do ordinary needs end and lifestyle begin?

The hierarchy may change the currency of the dispute, but not end it. Family lawyers are creative thinkers, and family expenditure is no less adaptable. Both have a habit of finding their way into a different box. Our competing schedules produce broadly similar overall figures; the right-hand schedule suggests that some expenditure initially classified as discretionary has not disappeared, but has been absorbed and thereby hidden within broader budget headings.

We suggest that the hierarchy of needs approach, as played out here, may generate as many problems as it seeks to resolve. If the proposal is carried forward, it will be interesting to see how the Government intends to guard against the kind of forensic reclassification illustrated by this exercise.

An interesting, although imperfect, parallel may be drawn with the Retirement Living Standards, which publish illustrative annual expenditure figures for Minimum, Moderate and Comfortable retirement living standards for one-person and two-person households.^[1] The approach is necessarily more standardised than the bespoke evaluation of living costs undertaken in financial remedy proceedings. The Standards also publish separate London figures, recognising that even a standardised framework may require adjustment to reflect differing circumstances.

It will be interesting to see how the Government squares the circle between seeking greater certainty of outcome, limiting the needs recoverable in certain circumstances and preserving the overarching objective of fairness.