Two-tier child benefit proposed
Minister for Social Protection Joan Burton brought the expert report before Cabinet yesterday.
Better-off people will lose and some lower-income families will gain if an expert group’s report on child benefit is implemented, according to the group's chairwoman Ita Mangan.
The first report of the advisory group on tax and social welfare was brought to Cabinet by Minister for Social Protection Joan Burton yesterday.
Ms Mangan gave a detailed technical briefing on the report to journalists and lobby groups this morning. “There is no point in suggesting there won’t be losses for some people in this change. There will. Better off people will lose. Some lower income families will gain…Some lower income families will also lose,” Ms Mangan said.
The report outlines a possible new two-tier system of child benefit, under which families will only qualify for the maximum payment if they earn less than €25,000.
A reduced standard rate of about €110 a month would be paid for each child, down €20 from the current €130. The largest possible weekly “top-up” is €38, but the supplement would be cut as income increases beyond €25,000.
Parents would have to apply for the “top-up” online where they would be required to make a full declaration of household income.
The payment would replace the current Qualified Child Increases (QCI) to social welfare recipients and Family Income Supplements (FIS) for those with low earnings.
The report acknowledged that some families in receipt of FIS would face reduced income. Ms Mangan said the group recognised something had to be done for FIS recipients and said the group was currently looking at working age payments to “ensure better poverty outcomes”. That matter will be the subject of another report.
Ms Mangan stressed it was up to Government to decide whether or not to implement the report. “I don’t know whether they will or not,” she said.
She said the report would not be implemented “in one go”. She estimated it would take 18 months to implement if accepted.
The payment would continue to go to the mother, she added. Asked about a previously suggested proposal to tax child benefit for families earning more than €100,000, Ms Mangan said that would yield a very low figure. She said 20 per cent of children were living in “taxation units” earning €80,000 and the figures for those earning €100,000 were not available.
Families with one child would lose their portion of the “top-up” and receive only the basic rate once income hit €34,935; those with two children when income reached €44,870, and those with three children when income was €54,805.
Savings of €200 million could be achieved if this method of targeting child income supports is adopted, the advisory group on tax and social welfare’s report claims, although this figure was calculated before the last budgetary cut.
The report examined six reform options and concluded the two-tier system and the taxation of child benefit were the two most feasible, with the former described as the “preferable” method. “Some members of the group consider that taxation of child benefit remains an attractive option,” the report states.
The Government does not have to adopt the report’s favoured option or agree to set the threshold at €25,000.
Child benefit would remain a universal welfare payment made to all families with children, regardless of income.
Before last December’s budget, the monthly payment was €140 for each of the first two children, €148 for the third child and €160 for each subsequent child. The rate was cut to €130 for the first two children and by €18 a month for the third child in the budget, yielding a saving of €140 million.
Minister for Transport Leo Varadkar said no decisions had been mae and what was published today "was just a report". A phased in "two tier system would probably be fairer" than taxation, he said.