Máire Hoctor (Tipperary North, Fianna Fail)

The qualified child increase, previously called the child dependant allowance, is paid to social welfare recipients in addition to a personal and, where appropriate, qualified adult increase. Unlike a wage, the level of qualified child increase varies according to the number of qualified children in a family. The result is an increased disincentive effect on larger families as their social welfare loss would be greater on transferring from welfare to work. Owing to this disincentive effect the policy direction followed by successive Governments from 1995 to 2006 was to dedicate substantial resources to child benefit, which is employment neutral, while maintaining the qualified child increase at 1994 levels.

An additional €1.27 billion was invested in the child benefit scheme during the period 2001 to 2006, making the overall child income support more neutral vis-À-vis the employment status of the parent, thus ensuring more parental choice on working inside or outside the home where the retention of child income supports is concerned. The shift towards child benefit has been substantial, from a position where child benefit represented 27% of the total child benefit or qualified child increase payment to 63%. In other words, following the child benefit increases, a family will now lose only 37% of their child income support when moving into full-time employment.

In the ten years from 1998 to 2007 the lower and higher rates of child benefit increased by 300% and 266%, respectively. This compares with the consumer price index of 43.4%. Having achieved a significant degree of employment neutrality in the provision of child income supports and while continuing to increase child benefit rates, recent budgets have seen the concentration of additional resources on more targeted payments, specifically to families who are dependent on welfare supports, including low earning employees with children. In addition, there has been a significant improvement in the in-work family income supplement scheme in recent years.

In view of the above and factors such as the introduction of the national minimum wage, the disincentive effect of the qualified child increases is less compelling. It was decided also to reduce the number of qualified child income rates from the existing three rates to one uniform amount. Consequently, the 2007 budget provided for all three qualified child increase rates which had remained unchanged since 1994 to be increased to a single rate of €22 per week.

Although any improvement in the qualified child increase can still constitute by definition an increased disincentive, the effect should be set against the situation which pertained in 1994 when, for instance, the qualified child increase element represented 27% of the total jobseeker's allowance for a family with two parents and two children. In contrast, even after the 2007 increases, it represents less than 13%. When the qualified child increase for a two child family is judged against the gross average industrial earnings, it represents 7% compared with 10% in 1994. These changes continue the more selective approach to child income support through targeting children in poorer households while at the same time limiting the extent to which employment incentives are worsened.