Department may reduce basic rate of child benefit

Wed, Nov 11, 2009, 00:00

LOWER LEVELS of child benefit would be paid to higher-income earners under proposals being considered by the Department of Social and Family Affairs in advance of the budget on December 9th.

Although no plan has been presented to the Government yet, it would be likely to involve an across the board cut in the basic rate of child benefit but with a “top up” for those on social welfare and recipients of the Family Income Supplement.

Although no final decisions have been taken, the department is looking at a procedure whereby recipients would declare whether or not their income was above a certain level. The precise income level has not been identified so far.

The basic principle guiding any decision in the matter will be that lower-income mothers should continue to receive the largest amount. The option of taxing child benefit is seen as a less likely option.

The current level of payment is €166 a month for each of the first two children and €203 for the third and subsequent children. The total cost of child benefit is approximately €2.5 billion per annum or about 12 per cent of all social welfare spending in 2009.

The McCarthy report on public spending, published last July, recommended a new standard rate for all children of €136 per month which would bring savings of €513 million to the exchequer.

However, senior political sources said no specific figure had been identified as yet in the current deliberations. The scheme has been in operation since 1944 with the money paid directly to the 600,000 mothers in the State.

Taxing child benefit is seen as posing serious administrative difficulties, not least in assessing the incomes of cohabiting, as distinct from married, couples. In addition, simply taxing household incomes would be seen as having an unwarranted impact on middle-income earners.

Interviewed by Pat Kenny on RTÉ’s The Frontlineon Monday night, Minister for Social and Family Affairs Mary Hanafin said the introduction of three different levels of payment was under consideration.

However, she acknowledged there were difficulties in assessing parental incomes: “You could have a cohabiting couple who are not assessed jointly and we have no way of knowing what their income is. So that’s one of the basic difficulties you would have.”

For that reason, it would not be possible to carry out means-testing on the entire population: “However, if you took a high-income group you would be dealing with a very limited number of people, so you probably could do it for them.”

Setting out the three bands for payment, she said: “We know the social welfare people; we know the people on low income because they are getting Family Income Supplement. We would be turning to Revenue to say ‘can you identify the very highest income-earners?’”

The report of the Commission on Taxation last September said child benefit should be taxable income but that, if taxation were applied, there should be a “child tax credit” for those in the lower half of the income scale.

A spokeswoman for the department told The Irish Timesyesterday: “Our officials and the Department of Finance and the Revenue Commissioners have been looking at the options. No decisions have been made.

“There is a need to make savings but they have to be conscious of the need to protect the most vulnerable and that has been uppermost in the Government’s considerations.”

Speaking in the Dáil yesterday, Taoiseach Brian Cowen said that, as the Minister had pointed out on RTÉ, “no decisions are yet taken but every area of public expenditure, including social welfare, has to be looked at”.