Is Cutting or Means Testing Child Benefit The First Step In
Rebuilding the Irish Economy?
In this day and age, considering our country’s current
economic climate, it is every parents worst nightmare – child benefit payments
being cut or means tested. Unfortunately following numerous reports from the
IMF and the Finance Minister’s advisory groups, this is an action that the
Irish Government are highly considering despite strong
protests from opposition politicians and social justice groups[i].
At present in Ireland, Irish parents receive €35 per week for
their first two children, €37 per week for the third child and €40 per week for
each subsequent child. Many parents will argue that this money is used to keep
food on the table and the bills paid[ii],
so surely the Irish Government can see that cutting or means testing such a
vital family supplement is immoral and unfair.
As well as leaving many Irish families on the verge of
poverty, cutting Child Benefit payments may back fire on the Government in an
economic way. It makes logical sense – if a form of income is taken away from a
family, something has got to suffer and since Irish families are suffering
already, they are now depending on their Government more and more nowadays,
this means the Irish Government will feel the blow also. This becomes easy to
understand when it is looked at in the context of a cost/benefit analysis.
On the upfront, it may seem that altering the child benefit
payment will ‘benefit’ the Government – they will save a reported €2 million
annually[iii],
this makes perfect economic sense right? Wrong. The Government have not
considered the knock on effect that will occur. Once Child Benefit is cut or
means tested, many people will not be able to provide the basic needs for their
children, for example – food, childcare, new clothes, shoes and school books.
This is one of the ‘costs’ of cutting Child Benefit. People will be left with
no other choice only to seek help from the Government. The amount of people
applying for supplements like ‘Family Income Support’ and ‘Back to School
Allowance’ will rise and the Government will be back to square one – giving out
money to a nation of struggling families.
The Government haven’t considered the cost of childcare in
Ireland either, many Irish parents will find that without Child Benefit
payments to fund childcare costs, it may not be worth their while working. This
is another ‘cost’ associated with cutting the payment. If parents give up work
and opt to stay at home with their children because they cannot afford
childcare costs, then the Government is losing out on revenue in the form of
tax from these people’s wages. And that shouldn’t be the governments only worry
– as could be expected the ‘dole queues’ around Ireland will grow that little
bit longer.
Another ‘cost’ of cutting or means testing Child Benefit
which the government haven’t carefully considered from an economic perspective
is the associated administrative cost of cutting or means testing the payment.
The option to cut the payment would require a massive change to the existing
system and in turn, this would create a need for ongoing staffing to maintain
and insure the correct implementation of the new system. For example, if the
Government were to introduce means testing, each family entitled to Child
Benefit would need to submit their household and income data regularly. Since
so many people in Ireland are being left go from work every day and others now
work part time and a day here and there, there would need to be a first class
system introduced so that if household income changed during the year the
system would respond instantly[iv].
If the Government can afford to implement such a top class responsive system
and the staff required, then perhaps they are not as hard up for money as we
all think?
Cutting Child Benefit is not something that will result in
the Governments amount of desire revenue. For example - should the government
use the forecasted saving of €2 million a year from cutting Child Benefit in
order to pay off only €1 billion of Ireland's total debt at the end of 2011,
(€173 billion[v])
it would take almost five hundred years. So, surly saving Irish family from the
stress and devastation of poverty is deemed as a more valid and moral option
then cutting a payment that people depend on so heavily and realistically, a
payment that has no substantial economic return.
This cost benefit analysis shows that ‘costs’ associated with
cutting or means testing Child Benefit are greater than the ‘benefits’ in a 3:1
ratio.
Now, for the million dollar question – how can this situation
be remedied? Suggesting a solution is almost impossible, there is no way to
satisfy both the nation and the Governments need to save money.
Here are two suggestions – Firstly, ending payments for each
family after a certain number of children. For example, after the third child,
stop the child benefits payments for the subsequent children thereafter.
Secondly, perhaps keeping the payment for each child at a constant rate of €140
may be efficient. Combining both these suggestions may enable the Irish
Government to save money while still keeping the people of Ireland at least
partially satisfied and above board.
All in all, looking at the economic cost benefit analysis it
is clear to see that the Governments notion of altering the Child Benefits
payment may not prove to be as efficient as the Government imagined and perhaps
they need to go back to the drawing board should they need a remedy for rebuilding
the economy in Ireland.
[iv] Children’s Rights Alliance: Position Paper on Cutting Child Benefit. July 2009. Page 3.
[v] http://www.irishcentral.com. 18/11/2012.
