Married couples on a single-income are set to be penalised under Government plans to tax child benefit of simply cutting the amount of payment.

December’s Budget is set to impose some form of cut to child benefit will definitely as part of the Government’s overall plan to slash the social welfare bill.

However, the Government faces a choice of whether to reduce the monthly payment, to tax the payment or to means test the payment or to means test the payment.

Social Welfare Minister Mary Hanafin confirmed yesterday that the €21bn welfare bill will be cut and there will be changes to child benefit.

Bord Snip recommended a direct cut to child benefit to a flat rate of €136 a month for all children. The measure would mean reducing the payment for the first two children from €166 and the payment for the third child from €203.

Government sources say a direct cut is the “easiest thing to do but it is not the fairest”.

Finance Minister Brian Lenihan has signalled his wish to tax or means test the payment, thereby ensuring those on high incomes will lose out.

However there is an issue with married couples with two incomes who are not jointly assessed under the tax system. This is often the case with those on higher incomes who do not derive any benefit from being evaluated together.

The only parents guaranteed to be caught by a taxing of child benefit are single-income married couples or married couples on lower incomes.

Such couples are jointly assessed by Revenue as they benefit from transferring the standard rate band tax-free allowance or tax credits to a spouse.

“The means testing and taxing is linking the mothers’ income to the income of the high earner in the house,” a source said.

The Commission on Taxation was asked by the Government to come up with a tax or means testing system and ministers are currently examining its report.

Meanwhile, government sources say thousands of people getting double social welfare payments are also expected to lose one of the benefits.

The cuts would hit those, for example, who currently get the half-rate carers allowances or are allowed to work a number of hours a week on a community employment scheme, as well as keeping social welfare payment.

Bord Snip recommended changes to the eligibility conditions of social welfare schemes to eliminate second welfare payments, so that claimants already in receipt of a primary weekly social welfare payment should not qualify for payment under another scheme.