Joan Burton (Dublin West, Labour) | Oireachtas source

I thank the Cathaoirleach and Senators for the opportunity to meet them today to discuss this report. Last December, I promised when the report of the advisory group on tax and social welfare on child and family income supports was published that we would have a productive discussion on the issues involved. The report is a major contribution in a difficult policy area which has been examined on many occasions over the past 30 years. I thank the chair of the group, Ms Ita Mangan, and the members for their excellent work. The report maps out the various alternatives and provides an impact assessment of what reform might bring. Crucially, it sets out the practical requirements of any reforms for families and the public administration system. The Government will have to consider in depth these issues, and others which the report was not tasked with addressing, before arriving at any decisions.

I will begin with some context. The Department of Social Protection provides a very wide range of income supports to families and their children through the social protection system. Their importance is underlined by the fact that the Department will spend well over ¤2.8 billion this year on various child-related payments. This accounts for approximately 14% of the total ¤20 billion social protection budget. In turn, child benefit accounts for two-thirds of expenditure on child and family income supports, being paid to 609,000 families in respect of 1.16 million children.

In the budget I maintained child benefit as a universal payment at high rates despite pressure to cut it by much larger amounts. As Senators know, child benefit is not the only payment the Department of Social Protection makes in respect of children. The Department also provides child income support payments to low-income families through additions to the main social welfare payments. Qualified child increases, or the amounts paid to dependent children, are paid in respect of 516,000 children. The family income supplement, for which people at work on low incomes qualify, is paid in respect of 57,000 children. The back to school clothing and footwear allowance is paid in respect of 377,000 children.

One of the very important contributions of the report is that it considers these payments in the round, rather than separately. While people refer to it as a report on child benefit it is actually a report on child income supports of which child benefit is obviously an extremely important and most costly element. As I said, one of the important contributions of the report is that it considers these payments in the round. It sets out two primary objectives of these important supports to family and children. First, they assist all families with the costs of raising children. Second, they play a role in reducing poverty in households with children. These objectives are particularly significant during a time of recession and high unemployment.

The effectiveness of these payments in addressing these objectives has been called into question by various reports. Although Ireland spends significantly more on cash benefits than other OECD countries, better outcomes are obtained elsewhere for similar or even lower levels of spending. Put another way, we have very high levels of direct payments such as child benefit yet our system is less effective at reducing child poverty. Cash support payments for children are only one part of the jigsaw in addressing the issue of child poverty. We have discussed the issue of cash income versus family supports, such as pre-school support, on a number of occasions in this House. Equally important issues include how we design income supports for adults; how we support parents in taking up employment; and what services we should provide. I will return to these issues in a minute.

With regard to cash supports, a key challenge is how to achieve a greater degree of targeting while improving poverty outcomes and employment incentives. That was why, in line with commitments in the programme for Government, I established the advisory group on tax and social welfare. It was requested to examine a number of specific issues and make cost-effective proposals for improving employment incentives and achieving better poverty outcomes, particularly child poverty outcomes. The group prioritised the area of family and child income supports. I was pleased to publish this report last week after having reflected on its content with my colleagues in Government. The group's report makes important recommendations as to how child benefit could be maintained as a universal payment while at the same time reforming the system to better target those who most need these supports.

First and foremost, I welcome the group's firm recommendation that the universal nature of child benefit be maintained. Since becoming Minister for Social Protection I have strongly defended the universality of child benefit because the State must value every child and support families. The fact that every family receives child benefit, regardless of their employment status, also ensures that there is not a disincentive for parents to work. One receives child benefit whether one is in work or not. There is also what the report terms the "intra household distribution of resources". It is a fact that children's and women's rights groups have frequently called for the universal element of child benefit to be maintained. One of the reasons is that payments are usually made to mothers - 96% of child benefit payments are made to mothers currently - and in households where income is not shared this can be an absolutely vital financial resource for the caring parent, usually the mother. It is my absolute conviction, for those and other reasons, that we should maintain child benefit as a universal payment and I am very glad that the group found likewise.

With regard to its other findings, it should be noted that the group concluded that there is no one perfect method to target child and family income supports. It is true that some members of the group found that taxation of child benefit is an attractive reform option. It was recognised that the approach, being limited to just child benefit alone, does not contribute to a better overall design of the child and family income support system. For this and other reasons there was a strong preference expressed by the group, in its report, for another approach based on a two-tier payment system. That proposal has been discussed on many previous occasions.

Under this approach the advisory group suggests rebalancing and integrating child and family income support payments as follows. First, a universal first-tier payment in respect of all children, which would replace the current child benefit payment but will be a child benefit payment as we now know it. Second, a child income support supplement or second-tier payment for low-income families, which would replace the current qualified child increases as well as family income supplement. The group felt this would allow for a rationalisation of the overall child income support system while minimising work disincentives and allowing for better flexibility in the targeting of support for different household types.

As I have indicated, the Government has made no decision at this time on the core recommendations of the report, given the complexities of the issues involved. These include fiscal, operational and legal considerations and the implications for reforms in terms of child poverty and employment incentive outcomes.

The advisory group's report was primarily concerned with the issue of income supports for children and their families. The role that services might play in improving outcomes for children is another crucial consideration, although this aspect was not considered in detail by the group given that its focus was primarily on the tax and social welfare systems.

In this regard, I am conscious that countries - particularly in Scandinavia - that spend significantly more on child-related services and supports, tend to have better child poverty outcomes than other OECD countries, including ourselves.

The Government's response, therefore, cannot be limited to child benefit or the child income support system alone. We must also consider the crucial issue of services. In the budget, for example, the Minister for Children and Youth Affairs, Deputy Fitzgerald, and I, announced another 6,000 after-school child care places. We also announced a series of other initiatives concerning children from less economically advantaged households, which we discussed at the time of the budget. They are being funded out of the child benefit reductions in the budget.

This was a highly progressive step towards better services for children and I am anxious that we should continue this progress as a society. That is why I would like to see the debate on this report include a discussion on how income supports and services might be balanced to achieve better child poverty outcomes. In the same vein, the Government response to the issue will have to be multi-faceted, addressing more than just the cash payments issue. It will also have to consider the fact that significant savings have already been made to the child benefit budget in particular.

The response will have to consider the other pressures on families right now. I am acutely aware, for instance, that many families on what we would term middle-incomes - that is, good incomes and good salaries - are struggling, particularly because of crippling mortgages. There is a whole group of such people in the 35 to 50 age group, many of whom have three children. They may have bought a family residence at the height of the boom. Child benefit is a very important source of cash income for such households. In some of those households one parent may have had a good business, perhaps in construction, but that is now gone.

In some cases, people are relying on child benefit to pay or contribute to the mortgages they took out during the boom time of high prices. That is why I say it is not a case of framing a stand-alone response to this report. Importantly, as the report itself notes, any changes would not necessarily have to be implemented over a single budget or in a single year.

I have also asked the senior assistant secretary in charge of operations in my Department to commission an outline of how reforms will be implemented and the time-lines involved. I have said elsewhere, and wish to reiterate it now, that the minimum implementation time for this is 18 months, if all goes smoothly. This support is for 600,000 families whereas recent ones were only for 60,000 third-level applicants, and they ran into difficulties.

One must allow a little headroom for perhaps taking a little longer. Consequently, what is now needed is an extensive debate on the issues both in the report and related to the report. To this end and in addition to this evening's debate in the Seanad, the advisory group's report will be considered in a few weeks' time by the Oireachtas Joint Committee on Education and Social Protection. I look forward to hearing the views of Oireachtas Members and indeed the views of other stakeholders as part of a broader public debate.

Last week, the European Commissioner for Employment, Social Affairs and Inclusion, László Andor, unveiled the social investment package, which is an array of measures to build growth and social cohesion. The package includes a recommendation on fighting child poverty. Speaking on that issue, the Commissioner stated, "Reducing inequality at a young age by investing in early childhood education and care must be a shared commitment of all our national governments". It is a firm commitment of the present Government, which is the reason it is worthwhile spending a considerable amount of time in debating this issue to get it right. One study the advisory group also is undertaking specifically relates to the use of tax credits. I do not have that report as yet and it obviously is particularly important in the context of family income supplement, which is a very valuable payment to those families which seek and receive it. Again, however, down through the years, there have been many critiques of its effectiveness and the strength of its take-up, because one must avail of it via one's employer and some people may not wish their employer to be aware they are in receipt of family income supplement. Consequently, I look forward to the debate.