High earners won't face child benefit means test
Minister refuses to rule out flat-rate cut
Published 05/10/2010 | 05:00
HIGHER earners will not be targeted for cuts to their child benefit payments in the Budget -- because the Government has still not worked out a way of doing it.
Children's Minister Barry Andrews suggested yesterday that he would like to see moves towards means testing the payment, saying it was difficult to justify paying child benefit to people on high incomes at a time of financial crisis.
But he confirmed that the Government would not introduce a means test or tax child benefit to differentiate between children in high and low-income families because of legal and administrative issues.
"It hasn't progressed, as far as I know. The same problems are there as were there before," he added.
In the last Budget, the Government avoided the means testing and taxation difficulties by imposing a flat-rate cut on the monthly child benefit payment, bringing it down from €166 to €150 for the first two children.
The payment of child benefit is estimated to cost €2.26bn this year, down from €2.5bn last year.
Mr Andrews refused to rule out a further flat-rate cut this year but said the Government had to be conscious of the dangers associated with slashing the value of child benefit across the board.
He said many middle-class families had been hit badly by job losses and heavy mortgage repayments in the recession -- and that child benefit was helping some of them "keep their heads above water".
"The middle classes are as badly affected or worse affected than some people might think and reductions in what basically amounts to income is almost penalising people and it's a real worry for them. That's something we can't ignore at this stage," he said.
The problems for the Government in means testing or taxing child benefit payments to exclude higher-earning families include:
- The Department of Social Protection's IT system would have to be upgraded to cope with the vast amount of data from the means testing of child benefit payments to 1.1 million children.
- The means-testing process would take up even more time for department staff, who are still struggling to cope with the level of claims for Jobseeker's Allowance.
- The Revenue Commissioners has the data to means test or tax married couples -- but not cohabiting couples.
The department said it was unable to provide further details of specific problems relating to taxing or means testing child benefit.
The Government has previously signalled the payment has been legally regarded as the income of the child and therefore may be difficult to tax.
But last night senior legal sources said there was no constitutional right to child benefit.
A number of family law experts said there was no constitutional impediment to child benefit being means tested or taxed unless any proposed system undermined the family based on marriage or represented an irrational discrimination against certain categories of children.
The courts are also loath to interfere in the Government's tax policies unless they are excessively discriminatory.
Mr Andrews was responding to the revelation that the British government is planning to axe child benefit payments to parents by 2013 if one of them earns stg£44,000 (€50,950) or more.
The Chancellor of the Exchequer George Osborne also said he would cap the total state benefits paid to any family at £26,000 (€30,097) to ensure they would not be better off than working families.
The cutting of child benefit payments is a political hot potato, with Fine Gael, Labour and Sinn Fein all opposing any reduction in payments.
Fine Gael has also warned that any proposals to introduce a means test would lead to "huge administrative problems".
Labour's social protection spokeswoman, Roisin Shorthall, said child benefit could be untouched as a "universal payment" to all children if a third rate of tax for those earning over €100,000 was introduced instead.
"That's how you deal with families that are very well off. They should be paying their fair share of tax," she added.