News Martina Devlin

Wednesday 27 August 2014

Another callous shakedown of semi-d Ireland is not the solution

Published 21/02/2013 | 17:00

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Anyone else remember the days when, if people went to work, paid their dues and didn't break the law, they were left in peace by the State to get on with their lives? Free to make plans, manage their finances and maybe even put something by for a rainy day?

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It seems a lifetime ago. What a difference five years can make. Now, both the income of citizens and the property they live in are under bombardment. Continuous, relentless bombardment.

And it's legal. Most of it may even be necessary. But such a sustained barrage of direct hits becomes impossible to take, and remain standing.

Stealth charges, new levies, property and water taxes: income stripping measures continue to blitzkrieg our dazed population. Just when citizens imagine they've retrenched enough to live within their ambushed means, along comes another torpedo.

That's the reality of living in a bailed-out, borrowed-up state.

But straitened times call for inventive thinking and creative solutions as opposed to soft options. Especially since some of those deceptively attractive soft options may have repercussions.

Take the latest offensive against incomes, outlined in a government-commissioned report published yesterday. It considers child benefit, and suggests a number of reform measures. Makes sense in principle. Getting bang for our buck should always be a priority, in good times as in bad.

Two money-saving options were advanced in the report and both impact disproportionately on the squeezed middle-class. Implement either, and Mauled Middles will take it in the solar plexus yet again.

And I'm perplexed by how this fulfils the State's policy aim of protecting children, since every set of statistics points to the fact that most of the 1.13 million children for whom benefit is paid live in middle-income families.

The report, from the Advisory Group on Tax and Social Welfare, says €300m could be cropped from the child benefit bill by taxing the allowance. Alternatively, €200m could be saved by introducing a two-tier system bolstered by top-ups for those on low incomes.

Fortunately, Social Protection Minister Joan Burton isn't rushing to implement either recommendation. But it raises questions about the approach taken to achieving savings.

Savings need to be made. But in such a crude way? The reality is that policies that inexorably carve away middle incomes risk adding to child deprivation.

If these proposed child benefit cuts were an isolated reduction they wouldn't matter. Universal benefits are hard to justify, and I've never been convinced by arguments for retaining them.

Nevertheless, poverty creation by 1,000 cuts is also hard to justify. Consider recent years. Higher mortgage repayments for anyone on a standard variable; hikes to food, gas, oil, electricity, petrol and insurance prices; a 2pc VAT increase; and child benefit was chipped away by €10 in the last Budget.

On paper, Mauled Middles have reasonable earnings – but they are paying out, paying out, paying out.

Child benefit is spent in various ways. Some pay their mortgages or utilities with it. Some feed and clothe their family. Some put it towards Ireland's high childcare and medical bills. And some of the more fortunate can afford to buy add-ons with it, such as holidays and after-school activities. One way or another, child benefit is used to give children a decent chance in life.

All parents, irrespective of income group, experience costs associated with child-rearing far above the State's subsidy. That's inevitable, and the Exchequer can't cover all of the expense.

As it stands, more than €2bn annually is shared out among those entitled to child benefit: where does this money come from in an entity living beyond its means? Everything can't continue as before: we can't keep classroom sizes small and local hospitals open, retain every garda station and leave every benefit untouched. Something has to give.

But just taxing or cutting child benefit is an unsophisticated approach compared with alternatives. By all means, reform it, but let's provide better value rather than simply wield an axe. Achieving savings doesn't always have to mean taking money away from recipients – economies can be generated in other ways by applying some ingenuity.

Why not allocate part in non-monetary form? Irrespective of parental means, give children free books, school meals, travel, some clothes, home computers and access to after-school activities.

Some of the Budget could be retained to finance creches and after-school clubs, easing pressure on parents with earnings eroded by childcare costs. In addition, employment would be created.

While the State's requirement to economise remains pressing, some breathing space was created by renegotiating the promissory notes. Presumably, each special interest group will make its case before Budget 2014.

Ms Burton will be asked to bat at Cabinet for child benefit recipients. More than most politicians, she has her finger on the pulse, and I suspect she sees how many families are being funnelled dangerously close to the poverty trap.

Child benefit reforms should be considered in the context of every universal benefit, also from the perspective of augmenting contributions to the national finances from high earners. But giving Mauled Middles another shakedown can't be the Government's default solution to every hole in its arithmetic.

www.martinadevlin.com

Irish Independent

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