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Key reasons Child Benefit should be neither reduced nor taxed in Budget 2012
There is no justification for reducing Child Benefit. Below Social Justice Ireland outlines why Child Benefit should neither be reduced nor taxed in Budget 2012.
1. Child Benefit should not be reduced
Both the National Children's Strategy in 2000 and the Policy and Value for Money Review of Child Income Supports in 2010 recognised and acknowledged that Child Benefit has a significant impact on reducing child poverty, supporting the welfare of children and raising families above the poverty line (Department of Social Protection (2010), A Policy and Value for Money Review of Child Income Support and Associated Spending Programmes p.155; Government of Ireland (2000) National Children's Strategy 2000-2010 p.63). The universality of Child Benefit is in keeping with the principle that all children should be entitled to basic rights without discrimination, a principle which Government signed up to in 1992 when it ratified the UN Convention on the Rights of the Child.
Social Justice Ireland opposes any reduction in the level of Child Benefit payment or in its universal availability. Child Benefit is currently the only universal means by which children in Ireland are given financial support to protect them against poverty. Government has committed to providing children with the financial supports necessary to eliminate child poverty, yet poverty persists at a high level. It has also committed to prioritising policies and services by their contribution to that quality of each child's daily life (Government of Ireland (2000) National Children's Strategy 2000-2010 p.23).
The National Agreement Towards 2016 contains a very relevant high-level goal concerning children, a goal we believe everyone in Ireland would support; it states: "Every child should grow up in a family with access to sufficient resources, supports and services, to nurture and care for the child, and foster the child's development and full and equal participation in society”(Government of Ireland (2006), Towards 2016 Ten-Year Framework Social Partnership Agreement 2006-2015 p.41).
If this outcome is to be achieved it should be noted that:
- 18.6% of children in Ireland aged 0-17 years are at risk of poverty, whereas the OECD average for this age group is 12.7% (OECD (2011), Doing Better for Families p. 176).
- Despite spending 2.6% of GDP on direct child income support (Department of Social Protection (2010), A Policy and Value for Money Review of Child Income Support and Associated Spending Programmes p.226). Ireland has a worryingly high rate of child poverty. This is related to a lack of investment in family benefit services (0.3% GDP) and poor access to child related services in Ireland.
- Any reduction in Child Benefit would have a significant impact on child poverty figures in Ireland when combined with the on-going lack of investment in other services.
- Without taxes and social transfers Ireland's child poverty rate would stand at 34% (Adamson, P (2010), 'The Children Left Behind-A Table of Inequality in Child Well-being in the World's Rich Countries' UNICEF: New York).
Since 2009 it has been observed that Child Benefit has already fallen as a percentage of the weekly disposable income in the bottom decile (Department of Social Protection (2010), A Policy and Value for Money Review of Child Income Support and Associated Spending Programmes p.148); any further reduction in Child Benefit has the potential to move more children into poverty and significantly increase these unacceptable child poverty figures.
2. Child Benefit should not be taxed
The OECD states that one of the key areas of family policy and support should be helping parents to provide for their children and reduce the risk of family poverty by reducing barriers to parental employment (OECD 2011, Doing Better for Families p. 3). Taxing Child Benefit would have possible negative effects on employment incentives for both those within the tax system and those within the welfare system. The Value for Money Review of Child Income Support explicitly stated that it did not recommend taxation of Child Benefit (Department of Social Protection 2010, A Policy and Value for Money Review of Child Income Support and Associated Spending Programmes p.264).
- Child Benefit is the most effective and equitable means for Government to support children and families while continuing to encourage and support parents to enter the labour force. It assists families with the cost of child-raising.
- It reduces poverty, particularly the poverty gaps for households with children.
- It does not have a negative effect on maintaining work incentives as payment is made irrespective of whether claimant is in employment or not.
- This makes Child Benefit unique as it has portability across the work welfare divide.
Taxation of Child Benefit is a form of horizontal inequity. If the government introduced a proposal to raise revenue by taxing Child Benefit it could have the following effect:
- Consider two households, each earning €100,000 with the same earning patterns; one household has 2 adults and 2 children and the other household has 2 adults and no children.
- The taxation of Child Benefit reduces the income of the first household but has no effect on the second household.
- So the 2-person household maintains its income but the 4-person household sees their income reduced.
- This is a form of horizontal inequity and is both unfair and unjust.
If the Government needed to increase revenue through the income tax system then it would be fairer to increase income tax on both households equally. Taxing Child Benefit penalises households with children.
The number of children at risk of poverty rose by more than 35,000 in two years between 2007 and 2009, the most recent year for which statistics are available. The income of a household of four on social welfare is currently €80 a week below the poverty line. However, it is crucial to realise that child poverty cannot be addressed in isolation; it needs to be considered within the wider issue of household poverty.