Child poverty best attacked by services not payments

Opinion:The Mangan report on child income support recently published by the advisory group on tax and social welfare has been described as a potential smokescreen for further cuts in child benefit.

After a half-decade of cuts, many are justifiably cynical about the possibility that proposals for reform could really be . . . proposals for reform.

It might be worth remembering that proposals for reform of child income support predate this fiscal crisis. In 2007, the National Economic and Social Council published a well-considered report calling for reform of Irish child income supports along the lines of what is proposed in the Mangan report.

It has long been understood that Ireland has not only generated a very poor rate of return on relatively high child income cash transfers but has also underinvested in child services which generate far better outcomes for reducing child poverty and increasing child wellbeing.

Vultures of reform

That said, any contemporary proposal to reform child income support has to be treated with caution. The Department of Public Expenditure and Reform is hovering like a vulture over the Department of Social Protection.

Expenditure on child benefit decreased from €2.5 billion to €2.1 billion from 2009 to 2011. In the period during which the advisory group pursued its work, child benefit was cut by a further €70 million in Budget 2012 and by €140 million in Budget 2013.

These cuts were cuts, not reforms. They were implemented in the absence of compensation measures to soften the blow for the poorest families. These families have thus contributed significantly and disproportionately to Ireland’s deficit reduction targets. Why would one entice the vultures back for more?

Those crude cuts in child benefits with no compensation for poorer children have led to greater child poverty.

The latest Survey on Income and Living Conditions shows that from 2009 to 2011 consistent child poverty increased from 8.7 per cent to 9.3 per cent, and child deprivation rates rose from 25 to 32 per cent.

Deprivation levels for lone parents with children reach the staggering level of 56 per cent. Over 100,000 children now experience consistent poverty, a number creeping back up to the dismal experience of the 1990s. Doing nothing leaves those children and their families on their own to cope with such poverty, and they are vulnerable to more crude cuts.

The analysis in the Mangan report is informed by some key observations. We spend a lot on our children but generate little in outcomes from that expenditure.

Child poverty

Ireland is the only OECD country with above-average child cash transfers but only average child poverty rates. On the other hand, Denmark, Iceland, France and Spain spend twice as much on services as on income supports and their child poverty rates are between one-third and two-thirds of the OECD average.

Realignment from expenditure on cash payments to investing in services is a crucial step towards realising better child poverty outcomes.

Ireland has an abysmal record for services for children. The 2011 OECD report Doing Better for Families shows Ireland remains second only to Switzerland among OECD countries for the cost of childcare. All parents and children benefit from investment in universal services and poorer children benefit most.

There is no shortage of services to invest in. A second year of the Early Childhood Care and Education scheme is urgently required. Universal primary healthcare for children is already a feature of most OECD nations. Much could be done to address the costs of free Irish education.

In 2010, one-quarter of Irish children lived in jobless households. The 56 per cent of Irish adults in jobless households with children compares to the EU average of 24 per cent of adults in jobless households with children. Parental employment is key in tackling child poverty. A well-designed child income support system and adequate childcare services are both needed to enable parents access jobs that pay.

Realigning structures

With a twin focus on child poverty and enabling employment, the Mangan report focused on how to realign the structure of three child income support cash payments – child dependant additions to adult social welfare payments, family income supplement and child benefit.

Its central proposal was to retain universal child benefit and to develop a new second-tier payment to replace child dependant additions and family income supplement.

It proposed a flexible model where government can chose the precise rates of the universal child benefit – and the second-tier payment and the wage thresholds at which the second-tier payment is withdrawn and the taper or method of withdrawal.

The illustrative figures in the Mangan report (€25per week for child benefit and €38 per week for the second-tier payment) have been roundly and justifiably critiqued as too low.

However, even this low baseline illustration brings 61 per cent of children into the second-tier payment with some low-income working families including self-employed with children benefiting hugely from the reform.

The illustrative figures also show many low-income families losing income they simply cannot afford to lose. These losses are caused by the structural loss of family income supplement in the second-tier payment.

In-work support

Acknowledging these losses, the report argues they should be managed through an in-work support for low-income workers. Internationally, in-work income support is often administered though the tax system and mechanisms like refundable tax credits. This issue is currently a focus of the fourth and final report of the advisory group. Without this crucial piece of the jigsaw, the reform proposed is incomplete and unsatisfactory in outcome.

Response to the report has been mixed but largely negative and cautious.

People are clearly mistrustful of both the Government’s intentions and capacity for reform. Like most Irish reform proposals, it is already being long-fingered. There are a number of ways to keep the reform alive.

A political guarantee of no child income support cuts would enable progress on a coherent reform package that includes in-work income support and a programme of investment in services including a second year of the Early Childhood Care and Education scheme and other services.

Any reform needs a gradual timetable for implementation that recognises the hardship many families are experiencing. Public debate would also be facilitated by publication of existing research work on the technical feasibility of a second-tier payment.

* Mary Murphy lectures in Irish politics and society in the department of sociology at NUI Maynooth. She is a member of the advisory committee on tax and social welfare and writes here in a personal capacity