Child Benefit should not be reduced or targeted in Budget 2013

Child Benefit should not be reduced. There are other choices Government could make that would be fairer and more equitable. Government should stop protecting the rich at the expense of the rest of us e.g. protecting gambling banks and bondholders at the expense of the Irish tax-payer. 

In our Policy Briefing on ‘Budget Choices’ Social Justice Ireland has clearly identified different choices that Government could make that would reduce Ireland’s borrowing in 2013 by €3.5bn as required by the ‘troika’ but would do this without targeting children.   In our Policy Briefing on ‘Child Benefit and Child Poverty’ we spell out the reasons why Child Benefit should remain as it is.

Child Benefit is currently the only universal payment or benefit made by Government to children and families and it is a contribution by Government to the cost of raising children in families in line with its stated commitments as articulated inTowards 2016 and the National Children’s Strategy. As such Child Benefit is a family friendly payment.

By introducing a means test the universality of the Child Benefit is lost. The introduction of a two-tier Child Benefit system could have a distorting effect in two ways:

(a) On the functioning of the labour market

(b) On family formation.

New Unemployment Trap

(a) The introduction of a two-tier payment would also create a new unemployment trap for low income households and many of those already at risk of poverty. This would happen because of the loss of income that would occur when the second-tier payment is withdrawn. Such a potential loss of income could result in a parent withdrawing from the labour market. If taking up a job or working longer hours were to lead to a loss of the second-tier payment then there would be a disincentive for such households to move in this direction.

Negative impact on family formation

 (b) As a household’s income approached the cut-off point for the top-up payment there would be an incentive for couples to make the adjustments required to continue receiving the full payment e.g. break up as a couple. On the other hand if two parents who were not living together faced the likelihood of losing this payment if they became part of the same household then there would be an incentive not to establish one household. Consequently, this development could incentivise family break-up and/or disincentivise family formation.

Budget Choices Document can be downloaded here

Policy Briefing on Poverty and Child Benifit can be downloaded here