The double Child Benefit payment to ease the cost of living for young families has reopened a regular debate on whether we are wasting public money on wealthy parents.
Child Benefit is a cash payment from the State to families with children under age 16, or under 18 if in full-time education or training. It is worth €140 a month tax-free for each child, with a higher rate paid for twins and other multiple births.
Unlike other social welfare payments, Child Benefit is not means tested - you don’t have to show your household income is below a certain level to qualify. Nor is it contributory – you don’t need a history of paying social insurance while in employment to get it.
It is paid for all children regardless of the size or source of their parents’ income, with the exception of asylum seekers and persons seeking leave to remain in the State.
Child Benefit is one of the largest expenditures from the Department of Social Protection annual budget. In 2020 €2.1 billion was paid to 630,000 families for 1.2 million children.
Why and how such a large sum is spent is open to regular criticism.
Some argue that the public purse should not be part-funding people’s choice to have a child. More often, others argue that, rather than scrapping it completely, Child Benefit should be taxed or only paid to low-income families.
These arguments surfaced again when the payment rate was doubled for November, as a once-off measure to assist young families with the surge in the cost of living.
Why not target needy families?
Child Benefit is one of our longest-running social welfare payments. It was first introduced in 1944 and was originally only paid to fathers with three or more children under age 16 as an anti-poverty measure for large families.
This made Ireland unusual among European countries who had also introduced children allowances but with the purpose of encouraging couples to have larger families to replace the population lost in the wars.
Nearly a century on, Child Benefit continues to be used by governments throughout Europe to contribute towards the cost of raising a child and to invest in future generations who will in turn provide the pensions for today’s workers.
Child Benefit is a particularly important policy instrument in Ireland given that our income tax system doesn’t give extra tax relief to parents and the vast majority of working families are not entitled to the other means tested supports from the State to reduce the cost of raising children.
It wasn’t until 1973 that the payment was made payable to Irish mothers. At the time few married women had an independent income. Greater awareness of wives and children being financially neglected by their husbands shifted public attitudes to accepting the long-held European view of Child Benefit as a housewife’s wage.
Along with the huge cost and administrative burden involved in means testing over 600,000 families, within-household poverty remains a key reason for keeping Child Benefit a universal payment. That is, while there may be a high earner in a household we cannot assume that the income is shared.
Where next for Child Benefit?
In 2013 the UK government started to tax and stop paying Child Benefit for the children of high earners. For each £100 a parent earns over £50,000 1% of the amount of Child Benefit received has to be repaid in tax. If a parent earns £60,000 or more the full amount is clawed back. The savings from this reform have not gone to children in poorer families. Child Benefit has increased by a mere £6.50 to £94 a month for the firstborn and to £63 for any additional children, and is now worth less than it was in 1999, when adjusted for rising prices.
The recent Commission on Taxation and Welfare does not recommend Ireland follow the UK example. It recommends that Child Benefits should remain tax-free and paid for every child.
It does however recommend some reform - a top-up to the standard €140 monthly payment for children in low-income families.
This new means-tested second tier Child Benefit would replace the current child increase paid to parents receiving a weekly social welfare payment, such as Jobseeker’s Allowance or One Parent Family Payment, to remove disincentives to work and reduce the poverty risk for low-income working families.
For the few parents who occasionally pop up in the media declaring that they neither want nor need the money, it is worth remembering that Child Benefit is an opt-in payment. You don’t automatically receive it – you have to apply, and you can opt-out at any time by contacting the Department of Social Protection to close your claim.
