Mary Hanafin (Dún Laoghaire, Fianna Fail)

Between 2000 and 2009, overall expenditure on child benefit grew from just €638 million to approximately €2.5 billion per annum. The Government is proud to have been able to deliver such significant increases in payments to families when the resources were available. However, with tax revenues having fallen dramatically, we cannot afford to maintain spending at this level.

The Government is conscious that the payment can be an important source of income for all families. For this reason, we decided against withdrawing child benefit completely from any family. We also decided against taxing the benefit. Apart from the significant administrative complexities that taxation would have involved, it would be unfair to take up to 20% of child benefit from families on the lower tax rate and up to 41% from those on the higher rate who do not have very large incomes. It was fairer to reduce the child benefit rates across the board, while fully protecting up to 420,000 children in families who are dependent on social welfare or in low income employment.

Families with children who are dependent on social welfare will be fully compensated for the reduction by receiving an extra €3.80 per child per week in the value of the qualified child increase paid with the principal payment. Families who currently receive a half-rate qualified child increase because they have other household income and are not, therefore, totally dependent on welfare will receive an extra €1.90 per child per week. The family income supplement income thresholds have also been increased to compensate low income working families for the cuts in child benefit.

I am fully satisfied that these improvements to the qualified child increase and family income supplement will effectively target the needs of low income families. I am also satisfied that measures are in place to address potential poverty traps. For example, to ease the transition from welfare into work people who have been in receipt of a jobseeker's payment, with a full-rate qualified child increase, for at least 12 months can generally keep the qualified child increase for 13 weeks if they take up work that is expected to last at least four weeks.

The family income supplement is also arranged in such a way as to enable people to increase their earnings while maintaining some support. For example, a family with four children can have a net income from employment of up to €820 a week and still receive a family income supplement.

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