Children's allowance saved in victory for the squeezed middle
PLANS to means-test child benefit have been shelved indefinitely in a major boost for middle-income families.
Government figures believe the need to make substantial savings from the child benefit budget has now passed and is not worth the political hassle.
Instead, the €10-a-month cut in the benefit last year and reductions in the rates for the third child and twins is expected to be the last time the Coalition will touch the payment.
An expert report had recommended a two-tier, income-related system of child benefit, which would have involved means-testing and measuring family incomes.
But Social Protection Minister Joan Burton's tactic of leaving the report to gather dust for a year has worked.
While the minister has come under fire for the slow pace of developing methods to means-test payments, Fine Gael ministers have now gone off the idea.
The technology needed to carry out large-scale means-testing has recently become available to the Department of Social Protection. But it won't be used on the universal child benefits system.
The Coalition is putting a greater emphasis on supporting middle-income families, the ones that would be hit by means-testing.
"They would now see the benefit of a universal payment. You are looking at middle-income families if you cut or test. Look at the Budget just passed. There wasn't a call to cut child benefit," said a source.
"In Government, if you have a system that works really well – it's effective, it's generally seen as fair – then why go at it?"
Although the bailout exit does not mean austerity has ended, as the Government will have to continue to bridge the gap between income and expenditure, the spotlight on child benefit has shifted. It will look more to cuts in dole queues as the way to reduce social welfare spending.
Senior government sources say the window for means-testing child benefit has now passed and the focus is on reducing the dole queues.
"I can't see it happening. She (Ms Burton) has taken a lot of flak on the cuts side," said a senior government source.
The Labour Party, which had promised to protect child benefit, was severely criticised when the payment was reduced by €10 across the board – from €140 a month per child to €130 – in Budget 2013.
The source continued: "Of course, unless there's another major downturn, then it changes.
"It's about activation now. Getting people into jobs, bringing the numbers on the live register down generates significant savings."
Another government source said that both parties "are a bit out of the cycle of doom. There is a feeling within Government now that that ship (means-testing) has sailed".
The report of the expert group on child-payment supports, known as the Mangan Report, said child benefit should remain a universal payment and it left the Government with two options – taxation of the benefit or a two-tier payment with a top-up for families on low incomes.
Either version would have involved an element of means-testing and measuring family incomes. After sitting on the report for 12 months, the period where the child benefit budget was under most scrutiny, Ms Burton then kicked the recommendations down the road.
More than 600,000 families receive child benefit, but only about half are getting another social welfare payment.
This means the department would have to start a massive operation of collecting the income details of another 300,000 families.
Beside logistics, there are policy and legal issues around whose income to measure.
But the Department of Social Protection has built a database of all benefits received by every recipient in the country and all means-testing information.
The sophisticated new system for logging and storing information, called Means Assessment Object or MAO, creates a single file for every social welfare recipient.
The development opens the door in the future to large-scale means-testing of benefits, such as child benefit.
Substantial work would still need to be done to means-test child benefit, taking up to 18 months.
And a decision would have to be taken on whose income to measure, as payment is usually made to the mother.