Olwyn Enright (Laois-Offaly, Fine Gael)
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Question 80: To ask the Minister for Social and Family Affairs if she is satisfied that her Department can adequately target low income families who have had their child benefit cut by increasing the qualified child increase and the family income supplement; her views on whether increasing the qualified child increase and the family income supplement creates poverty traps and fails to target the most vulnerable; and if she will make a statement on the matter. [2058/10]

Mary Hanafin (Dún Laoghaire, Fianna Fail)
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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.

Olwyn Enright (Laois-Offaly, Fine Gael)
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I do not know if the Minister is aware of a number of studies done on poverty traps in the social welfare system in 2005 and 2006. The Government had not introduced any changes which have had a positive impact by reducing these traps. The most recent budget was especially negative in terms of disincentivising people to work. I received a call from a gentleman yesterday who, having been offered a job with a salary of €22,000 per annum, decided it was not worthwhile to accept the offer because he would be better off on social welfare.

On the qualified child increase, Government policy for the past 15 years has been that increasing this benefit creates a poverty trap. What poverty proofing did the Department do to ensure that the decision in the budget to change child benefit did not create a further poverty trap? The changes in the qualified child increase and family income support create a disincentive to return to work as people who enter employment will lose these benefits.

Mary Hanafin (Dún Laoghaire, Fianna Fail)
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A person earning €22,000 per annum would be much better off than an individual on the live register because the latter would only receive slightly more than €11,000 per annum.

Olwyn Enright (Laois-Offaly, Fine Gael)
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One must take all the other factors into account.

Brendan Howlin (Wexford, Labour)
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Please allow the Minister to complete her answer.

Mary Hanafin (Dún Laoghaire, Fianna Fail)
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The Deputy and I probably agree that we do not want a circumstance to arise in which people believe they are better off on social welfare. However, a person earning the figure cited by the Deputy would not be financially better off on social welfare.

In all of our discussions on the budget, especially its social welfare aspects, the Government considered the effects it would have on individuals and families, particularly those on lower incomes who are not dependent on social welfare benefits. This was one of the reasons I was particularly anxious not to proceed with the cuts in child benefit proposed in the McCarthy report. Not only would such cuts have had a severe effect on people on middle incomes, but we would have created a poverty trap by compensating those on lower incomes. The decision to cut child benefit by the lowest amount possible meant that we did not have to substantially increase the qualified child increase. To have done so would have made it difficult for people to extricate themselves from social welfare and enter employment.

At present, child benefit provides half of the support for a child in low income families whereas the figure ten years ago was 34%. The Department continues to target child income support and families in the correct manner. Combined, child benefit and the qualified child increase are higher than ever. In devising difficult cuts in the budget the Government genuinely set out to protect low income families, an objective we achieved in this case.

Olwyn Enright (Laois-Offaly, Fine Gael)
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I disagree. I can give the Minister several further examples of people who find themselves in the same position as the man offered a job earning €22,000. Does the Minister take decisions in isolation? Did she decide to examine the qualified child increase and family income supplement or did she examine all benefits, including rent supplement, the medical card? I accept that medical cards are issued by a separate Department. When people are making the decision to return to work they consider the totality of their income and do not focus solely on the potential loss of the qualified child increase. Considering one's entire income is the sensible way to budget for one's family. Did the Minister consider this?

Mary Hanafin (Dún Laoghaire, Fianna Fail)
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Not only did I do so in my Department but we also did it cross-departmentally in our discussions. We were very conscious that various cuts could impact on the same people. In discussions prior to the budget, organisations representing different groups, particularly the Society of St. Vincent de Paul, made clear that while they did not want any cuts, which can be taken as a given, where there were cuts they wanted one rather than myriad cuts. A general cut was made in child benefit and the rates of payment of social welfare benefit-----

Olwyn Enright (Laois-Offaly, Fine Gael)
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Those are two pretty big cuts.

Mary Hanafin (Dún Laoghaire, Fianna Fail)
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-----but there was no cut in fuel allowance or the other elements that support people. That was one point that the organisations were anxious about at a difficult time for making cuts in the budget.

Olwyn Enright (Laois-Offaly, Fine Gael)
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The Minister put the bottom line ahead of the number of cuts.

Róisín Shortall (Dublin North West, Labour)
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Did the Minister poverty-proof the measures?