Big families face brunt of cuts to child benefit
Larger reduction in higher payment 'being considered'
Published 20/10/2010 | 05:00
BIGGER families are in the firing line for deeper cuts to their child benefit in the Budget, the Irish Independent has learned.
A dramatic reduction in the extra money paid to families with more than two children is "under active consideration" by ministers, government sources have revealed. Such a cut would affect one in four families.
Under one plan being considered, benefit for the first and second child would be cut by 7.5pc -- but the benefit for third and subsequent children would be slashed by a massive 12.5pc.
Currently, families receive €150 a month for each of the first and second children and €187 for third and subsequent children.
A reduction such as the one currently under consideration would result in the benefit for a family of four being reduced from €674 per month to €606 -- a drop of roughly 10pc. The Government would save up to €246m under this proposal.
Both Taoiseach Brian Cowen and Social Welfare Minister Eamon O Cuiv have already indicated that there will be welfare cuts in the Budget.
The higher rate of child benefit paid to larger families is coming under particular scrutiny as it is paid to far fewer families.
Another option on the table would involve standardising all rates at €150 per child, meaning that the benefit for a family of four would be reduced from €674 to €600 per month.
This particular option would immediately save €82m a year from the €2.15bn child benefit budget, without affecting three out of four families.
The Government avoided deeper cuts to the higher benefit last year when it reduced both rates by the same amount.
However, there is a concern within the Cabinet that large families are more likely to suffer from poverty.
Reductions to child benefit will form just one part of a draconian Budget that will contain spending cuts and tax hikes of at least €4.5bn, after newly revised figures revealed that the hole in the public finances could be as high as €15bn.
Mr Cowen is to meet Fine Gael leader Enda Kenny, Labour leader Eamon Gilmore and Green Party leader John Gormley today to see if a consensus can be reached on the four-year 'super-Budget' plan.
Health Minister Mary Harney admitted yesterday that she expected that up to €1bn would be removed from the health service budget next year.
The Government has again ruled out the means-testing or taxing of child benefit as these are considered too cumbersome and would require the installation of a new computer system.
"If somebody could find an easy way of means-testing, that would be helpful -- but that's not going to happen," a government source said.
It is understood that the child benefit issue was discussed in cabinet meetings at the end of last week.
The monthly payment goes to the parents or guardians of children aged under 16 and up to 18 if the child is in school, college, training or has a disability.
It is paid to more than 1.1 million children from 583,000 families, according to figures from the Department of Social Welfare.
The higher rate is paid to 134,000 families -- just over one in four of the total number of recipients.
These families are paid the lower rate of child benefit for the first two children and the higher rate for the rest.
The lower rate is paid to 449,000 families, meaning that three out of every four families in the country have only one or two children.
Of the 1,108,148 children in the country, the lower rate of €150 is paid for 923,175 children, or just over five out of six.
The higher rate of €187 is paid for 184,973 children, or almost one in six.
Colm McCarthy's Bord Snip Nua report recommended that the Government should "reduce and standardise the child benefit rate" in order to save more than €500m.
The rates were subsequently reduced from €166 to €150 and from €203 to €187 in last year's Budget -- the same cut of €16 in both rates.
But if Mr McCarthy's advice was to be followed in the forthcoming Budget, it would mean reducing the higher rate by €51 a month, which would represent a huge hit for many low-income families who are already struggling.
Fine Gael is not ruling out a reduction in social welfare spending, but the party has yet to provide the detail of where it would find at least €3bn in day-to-day spending.
The Labour Party says it will not cut child benefit -- but it has yet to explain where it will wield the axe.