To tax or to cut: it's just a mess for families

A Minister who accepts that the only priority is to make savings is not fit for office

IT MUST be really tempting for the Government to cut and run right now. To take just one possible example from dozens, attempting to cut child benefit further will make tap-dancing on a minefield look like a benign hobby.

One can see the attraction of a straightforward cut to someone charged only with finding savings. It is the easiest to administer, and will probably result in the greatest savings. However, a Minister who accepts that the only priority is to make savings is not fit for office. A straight cut will disproportionately harm those already disadvantaged – the same children who will be affected by cuts in social welfare, by the loss of the book grant, and by larger class sizes.

Child benefit has always attempted to fulfil multiple purposes, and as a result, fulfilled few of them well. At one stage married people with children received a tax allowance for children, in recognition not only of the costs of raising children, but the fact that children constitute the country’s future.

It then became a universal payment, and increased dramatically before the current recession, but for often conflicting reasons. For example, it is seen as a valuable tool in reducing child poverty, but to be truly effective, it would have had to be more targeted.

Certain lobbies saw it as a way of encouraging women into the workforce by supplementing childcare costs outside the home. To their shock, they realised that many women also saw it as a help in staying home to rear children.

Others saw child benefit as a kind of basic income for children. No single payment could manage to meet all the expectations. If the present system had not evolved as it has, many of the lobbies would have chosen a more targeted approach. Resistance to cutting it will be fierce.

Means-testing is a nightmarish option. Other means-tested benefits are riddled with injustice. According to the Society of Vincent de Paul, less than 50 per cent of the people who applied for the back-to-school footwear and uniform allowance have yet received it, although schools are in full swing.

Means-testing is so difficult to administer that it might even cost as much as it saves to run. Not to mention the fact that we have a delightfully amoral tradition of some self-employed qualifying for everything due to creative accounting, while the unfortunate salaried worker on an average income is caught for everything.

Speaking of a lack of a moral compass, is it not mind-boggling that a fraud inquiry found that €38 million of child benefit had been falsely claimed? Not that this negates the fact that most families are more dependent on child benefit than ever.

Vincent de Paul states that despite claims that prices are dropping, childcare costs have risen by 6 per cent, doctors’ fees by 2 per cent, dental fees by 2 per cent, hospital services by 9 per cent and bus fares by 11 per cent.

If taxation is the option chosen, at least it will not affect those on social welfare, and the Government should ensure that it does not affect those on the average industrial wage either.

Apparently, the Commission on Taxation is due to recommend taxation, with a tax credit for those on lower incomes. The Government should also undertake to ring-fence savings to increase the Qualified Child Allowance, which goes directly to children in poverty. It should also be used to increase the Family Income Supplement for those in work but on low incomes.

No matter what way you go about it, it is a mess. It is particularly difficult, given that we did not exactly receive a glowing report card from the Organisation for Economic Co-operation and Development in their recent research on child wellbeing, Doing Better.

There are oddities in the OECD report, too, particularly its relentless emphasis on economic indicators. It decided to exclude one of the criteria for child wellbeing used by Unicef, that is, family and peer relationships, on the grounds that it was not an area on which government policy could have a clear causal impact.

Virtually every decision made by government has an impact on families. Allowing the property bubble to swell monstrously condemned many young couples to hellish commutes. Now, they are in negative equity. All of this puts family life under huge strain.

In another example, successive governments’ policies on social welfare militated against mothers marrying the father of their child, despite the overwhelming research (as acknowledged by Unicef in 2007) that shows the best environment for a child is a stable, low conflict marriage with biological parents. There are now belated attempts to reverse that unintended consequence.

As the OECD report shows, investment in early childhood is vital. Our so-so report card used data from 2002. It is desperately sad that a report card based on 2010 data will be even worse.