News Martina Devlin

Friday 29 August 2014

Martina Devlin: UK found way to cut child benefit for high earners – why can't we?

Published 10/01/2013 | 05:00

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There we were, gossiping over coffee at the kitchen table, a news review programme murmuring in the background. The weekend was unfolding in a leisurely fashion – until all at once my sister leapt up and increased the volume on the radio.

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The BBC presenter was announcing the impending deadline for opting out of child benefit for those with one household salary above £60,000.

Panicked, my sister – a mother-of-two who lives in the northwest of England – sprinted to the staircase and called to her husband to get out of bed. Minutes later, still in his pyjamas, he was logging on to the HM Revenue and Customs website.

The reason for their hurry was because if they didn't voluntarily remove themselves from the child benefit net, they faced penalties.

Such a swarm of people across Britain last Saturday rushed to comply, ahead of new regulations on Monday, that the website crashed. An avalanche of truthful people left the system temporarily unable to cope.

They persevered, however, and twice as many people as expected by David Cameron's government began 2013 by declaring themselves no longer entitled to child benefit.

Welcome to British-style efficiency and honesty.

The initiative was transparent and well-publicised: a rate was set above which child benefit would no longer be paid, with the onus on recipients to opt out – and clear warnings about consequences if they failed to comply. There was a grad-uated withdrawal of the payment from those where one half of a couple earned £50,000 upwards, with a cessation at £60,000.

So what's to stop a similar arrangement being implemented in Ireland? Set our own rates, by all means, but let's follow the template.

Dumbfounded, I watched as my relatives calmly withdrew themselves entirely from receipt of child benefit. Why weren't they weeping, wailing and gnashing their teeth? Why weren't they picketing the home of their local member of parliament, who lives a short walk away?

Quite simply, they agreed with the argument that citizens earning a good salary shouldn't receive automatic child benefit; furthermore they accepted that as soon as new benefit rules were introduced, the onus was on citizens who were no longer eligible to pull out.

The first half of that position is acknowledged in principle in Ireland, and from time to time we hear from high earners – such as Michael O'Leary – who express amazement at continuing to receive universal child benefit.

However, the reform path adopted here has led to across-the-board cuts to child benefit rather than the fairer approach implemented in Britain: targeting those for whom the allowance tops up an already adequate income.

Of course, people can take themselves out of the system voluntarily in Ireland by writing to the Department of Social Protection. But, as I noted in this column last October, only two people have done so in recent times – and one of them changed her mind later and asked to be reinstated.

Child benefit in Britain is paid at a rate of £20.30 a week for the first child and £13.40 for each subsequent child, so a family with two children receives £1,752 (about (€2,190) a year.

Compare this with Irish arrangements, where a family with two children receives €3,120 a year following cuts. It's worked out at €130 a month each for the first, second and third child and €140 for the fourth and subsequent children.

While the gap between Britain and Ireland isn't as large as it was during the boom-time bonanza, it remains significant. But in Britain, the middle classes are taking child benefit loss or reduction on the chin – some 1.2 million families are affected. And this is the nation which set the welfare state standard and is proud of its achievement, as we witnessed with Danny Boyle's opening ceremony for the 2012 Olympic Games.

Granted, an element of unfairness exists – two people in a household earning £49,000 each are unaffected, for example – and complaints have resulted.

Still, many people are in compliance, with immediate Exchequer savings.

We keep hearing how the Irish system can't manage a more focused approach. It's all too complex, we're told. I don't buy it.

Either taxing or means-testing child benefit seems to be impossible because of constitutional and legal issues: the problem hinges on the tax treatment of cohabiting versus married parents, whereby only the latter can be assessed on joint income.

But Britain solved that conundrum by basing the case on just one salary, the highest in a household, which pays no attention to whether or not a couple is married and makes no attempt to combine two incomes.

Look, everyone knows universal payments make no sense: not for child benefit, not for any kind of benefit. At any stage in an economic cycle, welfare benefits should be directed towards the disadvantaged – and never more so than at a time of exceptional pressure on the public finances.

The British system has managed to find a solution and it's not nuclear fusion. All they did was tell recipients they had to be honest or they'd be penalised, and a considerable number of people instantly complied.

We may not have the honesty gene to the same extent as our nearest neighbours, but we don't like being penalised.

www.martinadevlin.com

Irish Independent

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