A reformed child benefit regime which targets middle and higher-income families is the lesser of two evils, the architect of the scheme has said.
Ita Mangan, chair of the expert group which advised the Government to bring in two-tier payments, said it was inevitable that some average families would lose out in a “cost-neutral structure”.
“The biggest losers from the proposal we have made would be middle and higher income earners, because they would not get any part of the second tier payment,” Ms Mangan said.
The proposed child benefit reform opted for two payment types rather than taxing wealthier families.
Ms Mangan said that some families in lower income groups also stood to see a drop in their benefits depending on whether they receive the state’s family income supplement (Fis) – a payment made to those in work who earn below a certain amount.
The group recommended a two-tier system aimed at capping payments for the better off.
This would entail a universal child benefit for all, with automatic top-ups to those on social welfare or for families with incomes below €25,000.
Every family would get €110 a month per child – down €20 on current rates – with top-ups for poorer families as high as €38 per week.
The second tier would taper according to how much a family earns over the €25,000 threshold.
Ms Mangan told an Oireachtas committee on education and social protection that opting for a two-tier system over taxing child benefit would ultimately benefit more people.
She said that taxation would create too many problems, such as legal issues regarding differences between parents who are married and those who co-habit.
Explaining the advantages of a two-tier system, which is expected to take around 18 months to implement if the Government decides to, she said it would incentivise people to work.
“If somebody is on jobseeker’s allowance and gets a job, they lose not just their jobseeker’s allowance but also the benefit that goes with it,” Ms Mangan said.
“Whereas if this was in place, a person would be able to move into that job and if their pay was low, that payment would still be made.”
Payments in the new regime would run in brackets with basic rates kicking in when incomes hit €34,935 for a one-child family; €44,870 for a two-child household; and €54,805 for three.
The reforms would also see Social Protection Minister Joan Burton abolishing qualified child increases paid to social welfare recipients and Fis for those with low earnings.
Ms Mangan confirmed her group, known as the Advisory Group on Tax and Welfare, was currently examining different ways to replace Fis.
“Fis has had a chequered history,” she said.
“It still is the case that most commentators would say that not everybody who has qualified for Fis has applied for it. It’s not a satisfactory in-work payment. Some form of in-work payment is required and that is something the group is working on at present.”
The child benefit proposals, unveiled in the group’s report in February, are aimed at saving the state €200m a year.
At present, it spends €2.8bn on support to families and children through payments such as child benefit, the family income supplement, qualified child increases on weekly social welfare payments, and the back to school clothing and footwear allowance.