Debate over possible Government cuts to child benefit has been continuing today as experts weighed in on whether the benefit be removed or reduced for higher income earners.
In an article in the Irish Times, financial expert Jim Power, of Friends First, argued that the benefit ought to be cut for those on higher incomes.
He said that universal child benefit was “a structure that we simply cannot afford”. He pointed out that “the cost of child benefit this year is estimated at €2.26 billion”.
He referred to figures in last year’s Commission on Taxation report showed that “65 per cent of families who benefit (from child benefit) have an income between € 40,000 and € 100,000 and 15 per cent have an income in excess of € 100,000”.
He added: “On grounds of equity and efficiency, universal child benefit does not score very highly.”
Mr Power said that expenditure cuts should not be focused on people on the lower end of the income scale, since they were more likely to spend, and thus help grow the economy.
He said: “On the other hand if cuts are focused on those with a lower marginal propensity to consume, the economic impact of such cuts are less severe.
“The marginal propensity to consume is lower on average for recipients of child benefit than for most other forms of social welfare, so it would be a less damaging way to proceed.”
He suggested that savings of at least €800 million could be achieved by cutting the child benefit payment.
In response to Mr Power’s argument, Sinéad Pentony, also writing in the Irish Times, said that any moves to limit child benefit would reduce what are already minimal supports available to children and families.
Echoing sentiments by senior Government ministers Eamon O’Cuiv and Micheal Martin, she said that administrative difficulties meant that it was “unlikely that moves will be made in Ireland to either means-test or tax child benefit”.
This meant that child benefit would likely be facing another flat-rate cut in child benefit, following last year’s cut that saw the rate for the first two children fall from €166 to €150 – a cut that disproportionately affected lower income groups.
She said that universal benefits, like child benefit, might seem like a luxury in of economic crisis, were important in creating both a sense of social solidarity and in giving “middle- and higher-income groups a sense of real benefit from the taxes they pay – spurring them on to defend public services when they come under threat”.
She said: “For all these reasons, universal provision – whether of public services or of other benefits – is fundamental to bridging Ireland’s equality divide.”
Ms Pentony also pointed out that children in Ireland couldn’t avail of supports, such as free healthcare and schoolbooks, available to children in many European countries.
“Therefore, any moves to limit child benefit, through whatever means, would reduce what are already minimal supports available to children and families.
“Cutting, or directly taxing child benefit would be regressive and would disproportionately affect low and middle-income earners, who are already bearing the brunt of the recession,” Ms Pentony said.
