Child benefit to be taxed or means tested in January

by CARL O’BRIEN and MARIE O’HALLORAN

CHILD BENEFIT is likely to be either taxed or means-tested from the beginning of next year, creating savings of up to EUR400 million, Minister for Social Affairs Mary Hanafin has said.

As it emerged that An Bdrd Snip Nua is reported to have recommended around EUR1.5 billion in social welfare cuts from a EUR21 billion budget, Ms Hanafin said she could not rule out cuts in basic welfare rates.

She told The Irish Times that the cost of living was down and benefits had increased in recent times, so cutting basic welfare rates was one approach.

But she added: “We’re running a country of real people, and we have to look at things from a social policy and a political perspective … We can’t rule anything in or out at this stage.”

On the issue of cuts to the child benefit, she said officials were still in discussions over whether to tax or means-test the payment which costs the State around EUR2.5 billion.

She said both routes were difficult and posed a number of administrative problems.

“If you means-test it that involves testing 600,000 people, and the department is already processing around two million claims. It you tax it, on the other hand, you could end up bringing people into the tax net who aren’t there at the moment.

“We’re working very closely with Revenue. The Commission on Taxation is also due to report on this to see which is the one which is the most balanced . .. The end result will be determined by what is the fairest for mothers and children.”

The pressure for savings means the cuts to child benefit are likely to come into force from January, Ms Hanafin indicated.

“To get the level of savings we need it will have to be at the beginning of the year. If not it means we’ll be making more severe cuts later in the year.”

She said the level of cuts to child benefit would depend on other cost-saving measures or cuts being considered by the Government, such as the introduction of thirdlevel fees.

Ms Hanafin also indicated further changes in rent supplements currently costing EUR530 million and benefiting 80,000 recipients.

The Minister said rents had reduced very significantly and “what we’re doing with taxpayers’ money is to ensure that we’re not giving it to landlords who wouldn’t ordinarily be able to get it from a private client”.

During the boom one of the areas of significant progress was in payments “to pensioners, to child benefit and all the other social welfare payments”.

“But unfortunately now we are caught in a situation where the amount of money we are spending is just, unfortunately, too much.”

Her department would also be targeting control measures and fraud – people “working and who are claiming, people who arc coming across the Border claiming … or people who are flying back from eastern Europe”, she told RTE’s This Week programme.

Asked about rent supplement, she said “there was no way that we as the State want to be the ones dictating high rents, so we reduced in the last budget the amount of money that would be payable to landlords and we also increased the amount that each recipient had to pay themselves”.

She also insisted that the department has been proactive in cutting expenditure on social welfare schemes in a way which minimises hardship to recipients.

For example, she said the early childcare supplement was being replaced with a year’s free preschool, which will play an important role in tackling social exclusion.