Report proposes cutting child benefit by €20 to flat monthly rate of €110 per child

Child benefit could be cut by €20 to a flat rate of €110 per child per month with top-ups for low-income families under a two-tier system proposed in a report going to Cabinet this week.

Minister for Social Protection Joan Burton commissioned the expert group report which described the two-tier system as “preferable”, although it does not rule out the option of taxing the benefit.

A range of options on where to set the threshold of income that disqualifies families for top-ups is set out in the report, along with the associated potential savings.

Middle-income families

The Government is unlikely to opt for the lowest threshold because it would hit large numbers of middle-income families.

The advisory group on tax and social welfare’s report on child and family income supports is expected to be published later this week, shortly after it is discussed at Cabinet tomorrow. The group is chaired by Ita Mangan.

Child benefit is a universal welfare payment made to all families with children, regardless of their financial circumstances.

The report strongly recommends retaining the universal nature of the support, but is understood to suggest a basic reduced weekly payment of €25, which would work out at just over €108 a month in a full year.

Costs €2 billion

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.

It was paid to 600,000 households and costs the State €2 billion a year.

The rate was cut by €10 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.

The move caused difficulties for many of Ms Burton’s colleagues in the Labour Party and led to party chairman Colm Keaveney voting against the Government.

Six options were looked at by the expert group and direct means-testing was one of the four that were ruled out on the grounds that it meant the universal nature of the payment would not be retained.

The report looked in depth at both the two-tier system and the taxation option, using evidence from numerous case studies. It strongly favours retaining the universal nature of the payment.

Support services

Ms Burton said that while Ireland had high levels of child benefit by international standards, the system was less effective in reducing child poverty than those used in Nordic countries which “emphasise support services like pre-school and after-school childcare just as much as direct payments”.

She stressed that she wanted to see the retention of the universal nature of the payment, “namely that every family receives a payment set at a high level, but that we do everything we can to offer extra assistance to those most in need”.

She added: “In that regard, it’s important to note that a key focus of the report is the need for better child poverty and parental outcomes, not just to make savings, and the report’s recommendations focus heavily on how child benefit and family income supports could be reformed in a way to better target those who need it most.”