independent

Thursday 17 April 2014

Martina Devlin: Wealthy don't have to feel guilty about child benefit, they can just hand it back

THE Michael O'Leary school of How To Run A Country, which pillories automatic child benefit for high earners, is a compelling argument. But here's another thought: why do people who don't need the money continue to accept it?

It couldn't be easier to opt out of child benefit. Either a mother can decide against submitting the paperwork to claim it after a baby is born, or she can fill out a simple form at any stage saying she no longer wishes to receive the allowance.

I was curious about whether any parent has refused this universal payment since the economic collapse, citing the national interest, and made inquiries at the department.

It seems two women have declined it. One surrendered her right just last month, saying the State needed the funds more than she did. Another woman turned it down last year -- but reconsidered shortly afterwards, and asked for it to be reinstated.

So, a grand total of one person currently is waiving their entitlement, at a time of exceptional pressure on the public finances.

Still, one is better than none. And perhaps some other parents are in the business of reallocation -- the Michael McDowell doctrine of financial management -- whereby they accept an allowance (a government pension in his case) and pass it on to charity. Philanthropic, perhaps, but hardly patriotic since it doesn't save the beleaguered Exchequer a single cent.

Social Protection Minister Joan Burton is under instructions to make €540m in savings from her 2013 budget, so further cutbacks in her department are inevitable. We can call them reforms, but they won't hurt any less.

Child benefit is one of the targets. There is no doubt that families all over Ireland, in various income bands, rely on it to keep the wolf from the door. Some more than others, inevitably. But rates have remained relatively high, and continue to be paid across the board rather than aimed at those who are disadvantaged.

A flat payment of €140 per child was introduced in last year's Budget, to be phased in over two years. Now the suggestion of reducing it to €100 has been aired: a terrifying prospect in many homes.

But let's have some context here. Between 2000 and 2009, that free-spending-to-heck-with-the-consequences era known as the Bertie Years, child benefit began to ratchet up. And then some. Rates increased from €53.96 each a month for the first and second child, and €71.11 for the third and subsequent children, to €166 and €203 respectively. In the same period, expenditure on child benefit ballooned from €638m to €2.5bn a year.

Obviously, the troika is wagging its finger at the Government about the principle of universal benefits. When resources are stretched, it's not rocket science to suggest prioritising according to need.

Either taxing or means-testing child benefit has been discarded as options on the basis that they raise constitutional and legal issues. The problem hinges on the tax treatment of cohabiting versus married parents -- only the latter group can be assessed on their joint income. This would result in discrimination, whereas the tax system has to remain neutral.

The preferred method before government appears to be a two-tier system: a flat-rate universal payment, with top-ups for low-income families. Incidentally, Mary Hanafin proposed something along similar lines in a 2009 policy review.

But the coping class is flatlining with fear about the size of the cut floated ahead of the Budget: slashing it from €140 to €100. While the axe is now slicing closer to the bone, this appears to be tactical scaremongering, with a less draconian reduction-- perhaps €10 or €15 -- in the pipeline.

There is a case to be made for some level of universal child benefit because it acknowledges that raising a family is expensive, and childcare support (subsidised creches, for example) is poorly resourced in Ireland. Certainly, in the early years of parenting, children gobble up a family's income.

In addition, benefits paid tend to wing their way straight into the economy. And there is no doubt that middle Ireland has taken the brunt of austerity and is floundering.

The current proposal seeks to save money, an economic necessity, but also to reassign some of those savings towards the most vulnerable. However, the threshold at which redistribution begins is the key issue: at what point are people entitled to a top-up?

Nobody likes to lose benefits they may have factored into their weekly or monthly budgets. But one way to sweeten the pill might be to offer tax relief on childcare costs, which are considerable.

To return to the question of why people who don't need benefits continue to accept them, the answer may lie partly in inertia. The Government might find it useful to run an advertising campaign urging citizens to make the sacrifice.

That mother who listened to her conscience can't be the only reasonably affluent citizen with scruples. Even if comfortably situated people only parted with the money for a year, it's a gesture that matters.

Finally, politicians must understand they cannot put pressure on households without setting their own luxuriously appointed house in order.

That's another tip from the How To Run A Country management school: it's called leadership.

www.martinadevlin.com

Irish Independent

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