Yes, according to the End Child Poverty Coalition who appeared yesterday before the Joint Oireachtas Committee on Social and Family Affairs. They claim that despite the booming economy and the unprecedented wealth enjoyed by many families, as many as one in nine children in Ireland live in poverty and go to school hungry or cannot afford warm clothes or school uniforms. According to the brief report in this morning's Irish Independent the groups wants child benefit to "be means-tested or clawed back from the wealthy through tax to give the payment to those who need it the most".
I'm a bit puzzled by this. Barnardos, who are part of this coalition, have advocated, in their most recent pre-budget submission and in their "Seven steps to Ending Child Poverty" document, a revised targeted child income support. They say that Government strategy has been to increase the universal Child Benefit payment significantly to the detriment of the targeted Child Dependent Allowance (CDA) payment. Barnardos supports the merger of the CDA with the Family Income Supplement (FIS) payment and "believes the advantage of this merger is that it would benefit two sets of children, those whose parents are on social welfare and those whose parents are in low paid employment".
There is no mention in their policy documents about changing the existing universal Child Benefit payment. Is the new weekly targeted payment meant to exist alongside the universal monthly child benefit payment? Or does the child poverty lobby believe that the only way the new targeted payment can be sold is to have some kind of "clawback" on the universal monthly payment? Maybe it's the rather abbreviated nature of the newspaper report but their position is unclear.
What are the merits of removing the universal nature of child benefit payments? The main consideration is that the redistribution is horizontal - from people without children to people with children - rather than vertical, from rich to poor. Child Benefit may redistribute from a poor single person to a better-off family. The arguments for retaining universality are that the payments are simpler to administer, they avoid the potential stigma of means-testing and that they avoid potential poverty and employment traps. Personally, I believe that the best way preserve the elements of universality is to have some kind of basic or "citizens income" which would be unconditional, tax-financed and ultimately far more progressive as a redistributive measure.
Update - Ah crap! I should have looked at Notes on the Front before I started this where Michael Taft has a very comprehensive treatment of the child poverty issue.
Taxing Child Benefit would not necessarily undermine universality or the horizontal principle. Neither would it create poverty traps - unlike means-tested programmes. The full flat-rate payment would still be made regardless of income. With taxation, a portion would be clawed back but not at the point of payment. The issue is whether it is administratively worth it and politically possible. The Revenue Commissioners estimated that taxing Child Benefit would bring in €320 million in 2003. In that year, that money could have been re-invested in Child Benefit with a benefit of an extra €5 per week - an increase to those on lower incomes but not much.
Or it could finance a doubling of Child Dependency Allowances, which would mean an extra €20 per week for each child for those on social welfare. The problem here is that when people enter work, that money would be eventually withdrawn. This sets up either a disincentive or a trap whereby the net income from work - especially low-paid work - is not a whole lot more than income from social welfare which is set below the poverty line.
Another issue is whether there are a lot of 'wealthy people' with children to claw back from. Though 30% of taxpayers are in the top rate of tax this is mostly single earners. Thus, proportionately fewer children.
THere are no short-cuts in these matters. 'Targetting' creates traps and disincentives and can be administratively cumbersome and arbitrary. Universal payments are expensive and unfocussed (at least in regards to combating poverty. We should view it as a mix: participation in the workforce at meaningful wages, combined with universal benefits and services (e.g. medical cards) and a socia welfare system that ensures that all households (for children live in households) are above the poverty line. Child income payments are just one of a plethora of instruments that can be used. But it is arguable that we are not getting the ol' value-for-money in the current system of child-income payments.
In that context, a Basic or Citizens' Income is certainly worth serious consideration.
Posted by: Michael | February 01, 2007 at 10:50 AM