The Facts

Currently Child Benefit rates are €166 a month for the first two children and €203 a month for the third and subsequent children.  This rate did not increase in the 2009 Budget.  This income is not taxed or means tested. It is paid in respect of all children under 16 years of age, or under 19 years of age if the child is in full-time education, in FÁS Youthreach training or has a disability. There were changes to Child Benefit in Budget 2009. The total cost of Child Benefit is €2.5bn (2009). In a footnote the McCarthy Report estimates that €1 a month in Child Benefit cost €14.1m per year.

Following decisions made in Budget 2009, from January 2009 until the end of December 2009, children aged 18 will get half-rate Child Benefit. From January 2010, children aged 18 will not get Child Benefit. 

A compensatory payment of €15 a week is being paid in 2009 and 2010 to certain families with children aged 18 in full time education or with a disability. A compensatory payment is paid if the child aged 18 is getting Disability Allowance or if the parent or guardian of the child is getting either a social welfare payment or Family Income Supplement.

Children are indisputably one of the most vulnerable groups in any society. Child poverty is measured as the proportion of all children aged 17 years or younger who live in households that have an income below the 60% of median income poverty line.

There are approximately 1,050,000 children in Ireland aged less than 18 years. Of these, 19% are at risk of poverty. This amounts to approximately 200,000 children. The fact that such a large proportion of Ireland's children are living below the poverty line has obvious implications for the education system and the success of these children within it.

State of the debate

Child Benefit has been identified as an area in which Government could make substantial savings in a time of economic difficulty. 

The Minister for Finance has proposed either the taxation or means testing of Child Benefit to reduce public expenditure and the Commission of Taxation has been requested to consider the taxation of Child Benefit.

The McCarthy Report (Bord Snip Nua) has proposed saving €513m by introducing a standard rate of Child Benefit for all children, a new rate of €136 a month.  This is a reduction of €30 per month for the first two children and €67 a month for each subsequent child. This would mean a cut of €127 a month for a family with three children.  McCarthy did not consider taxation of Child Benefit as this was outside its remit, nor did it explore the distributive impact of a cut, or of any other form of policy response.

Over the last two decades Child Benefit has been used by the Government to attempt to address a wide range of policy issues, child poverty, equality and childcare.  Equally, different commentators and representative groups evaluate Child Benefit from this variety of objectives. All would agree, however, that it is not nearly an adequate payment if any of these objectives is to be addressed effectively.

Either taxing or means-testing child benefit would involve huge administrative changes that would be costly and many argue are beyond the technical capacity of either the Department of Social and Family Affairs or the Revenue Commissioners. For example, the Revenue Commissioners who collect taxes do not have any information on the children linked to those paying tax.  The Department of Family and Social Affairs does not have any detailed information on the tax status of children for whom they pay Child Benefit. 

The administrative implications potentially push the Government towards a crude across-the-board cut approach without exploring the real implications of this for low-income families.