Paddy Burke (Fine Gael)
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I welcome the Minister for Social Protection, Deputy Joan Burton, to the House.

Joan Burton (Dublin West, Labour)
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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.

Paschal Mooney (Fianna Fail)
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Cuirim fáilte roimh an Aire and welcome her to the House yet again. It is interesting that the Minister concluded her presentation by referring to a quote from the European Commissioner for Employment, Social Affairs and Inclusion in which he stated that investing in early childhood education and care must be a shared commitment. The Minister noted it is a firm commitment of the present Administration. However, I suggest to the Minister, with respect, that while this may be a firm commitment of the Minister, I am not so sure the evidence indicates it is a firm commitment of the present Government because all that has happened under the present Government and its predecessor has been a slash-and-burn approach in terms of child benefit reductions. I am grateful to one of those who served on the Minister's committee, Mary Murphy, who wrote a critique on this issue that was published in The Irish Times. I also watched her appearance on the "Tonight with Vincent Browne" television programme with great interest on the day the Magdalen report was published. When pressed by Vincent Browne, she was highly consistent regarding the savings that were being made. I understand that were these proposals to be implemented, the figure being mentioned at the time of the report's publication was approximately ¤200 million. She used a very interesting term - I am sorry I did not think of it myself - when she stated the Department of Public Expenditure and Reform was hovering like a vulture over the Department of Social Protection. Moreover, she is correct because that is what it is doing.

Joan Burton (Dublin West, Labour)
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That is the reason I am fast on my feet.

Fidelma Healy Eames (Fine Gael)
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This vulture will not catch the Minister.

Paschal Mooney (Fianna Fail)
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As for the ¤200 million, which as a reforming Minister she undoubtedly would wish to use much along the lines she has outlined in her presentation, it simply would be taken in and absorbed by the Exchequer, as has happened since 2009. Expenditure on child benefit under the previous Administration decreased from ¤2.5 billion to ¤2.1 billion, which is a decrease of half a billion euro, from 2009 to 2011. During the period in which the advisory group was pursuing its work, child benefit was cut by a further ¤70 million in the 2012 budget and ¤140 million in the most recent budget. This comprises a further ¤210 million or another words, more than ¤700 million has been cut from child benefit since 2009 with absolutely no reform of any sort. However, I compliment the Minister on at least setting up this committee because as I stated earlier, I have deep respect for the Minister's reforming views, at least it is a start. As has been observed, these cuts were just that, namely, cuts and not reforms. There were no compensation measures to soften the blow and this has been the reason there has been so much anger over these particular proposals arising from the Mangan report. Speaking personally and perhaps not necessarily for a position taken by my party, I have thought for a long time that there is an urgent need to reform the entire area of child benefit.

It looks like a cycle that commenced in the boom years, which increased child benefit year-on-year, to the extent that at some point it became astronomical yet no distinction was made between those who could afford not to take child benefit and those who needed it. Although successive Governments from 2002 to 2007 and beyond did implement a capital programme of enhancement of child care provision, which was the envy of all and much good money was spent from 1997 onwards of which we have seen the benefit, there does not seem to have been an appetite for reform of the child benefit system. The view seemed to be that we should just keep shovelling out more money in child benefit in order to ensure that everyone would be happy. However, the cost of living increased ? it went through the roof ? and in many cases child care costs became even more expensive than mortgage repayments.

The latest survey on living and income conditions shows that from 2009 to 2011, consistent child poverty increased from 8.7% to 9.3% and child deprivation rates rose from 25% to 32%. More than 100,000 children now experience consistent poverty. Ireland is the only OECD country with above average child cash transfers but only average child poverty rates. The Minister referred to that in terms of the Scandinavian model. I know where she is coming from in that regard. I agree with her. One thing that could be done almost immediately would be to introduce a second year of the early childhood care and education scheme.

I accept the Minister for Children and Youth Affairs, Deputy Fitzgerald, has already spoken on the record on the matter. She also set off a timebomb when she suggested that child benefit money should be redirected into a different area such as support services rather than having universal payment. The Minister for Social Protection, Deputy Burton, shares the view. Such an approach could be implemented on a staggered basis but it is not something that could be done with the current fiscal problems that face the Government. That is the main reason most of the commentary on the report has been negative. All one can see is not reform but more cuts and the money disappearing into the black hole of the Exchequer in order to shore up the deficit. Surely the Minister will be faced in the coming months with yet more demands from her Department, which is a big-spending Department, to address the removal of another ¤2.5 billion to ¤3 billion from the economy in the next budget. The Minister has said on record that the promissory note money should be used, but as we all know, even if it could be used, the money will not come on-stream until next year. The budget must be framed for 2014 in the coming months under the Estimates. I have no doubt that the hovering vultures of the Department of Public Expenditure and Reform will come to her Department to demand more money on the basis that it has not given enough.

It is a sad reflection on society in general, not on the Minister personally or the Government, that in 2010 one quarter of children lived in jobless households. The total of 56% of Irish adults in jobless households with children compares with the EU average of 24%, which is a scandal. The central proposal in the Mangan report was to retain universal child benefit and to develop a new second-tier payment to replace child dependant additions. A flexible model was proposed on which the Minister has gone into detail in her presentation. Unfortunately, I do not have time to go into detail on the proposal. According to Mary Murphy, the illustrative figures in the Mangan report of ¤25 per week for child benefit and ¤38 per week for the second-tier payment have been "roundly and justifiably critiqued" as too low.

I wish the Minister well in terms of what she is attempting to do but I do not believe that what will happen in the short term is what she is setting out to achieve. I do not expect the proposals to be implemented, but if they are, I urge the Minister to fight to maintain the ¤200 million rather than let it disappear into the budget on the basis of having ¤200 million less to pay back to whoever it is we are supposed to pay it back to. I wish the Minister well in that regard. I hope she will be back in this House to tell us more about her reforming initiatives in that regard because such changes can only be implemented on a piecemeal basis. That underlies the problem of the recommendations in the Mangan report.

Fidelma Healy Eames (Fine Gael)
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The Minister is very welcome to the House. I thank her for bringing the report before us as we have been awaiting it for some time. The debate about child benefit is an important one. For a long time the payment has gone specifically to the mother for the benefit of children.

The question we face is if we should continue with it as it is, where everyone gets the same amount, or should we target it to people according to need. In principle, I support a universal payment because it sends a strong message to society that we value children and we must never lose that. We have seen that we have a history of shame in this country where we have not valued children. Let us not forget that. The report states that clearly as well.

Child benefit might be a universal payment but that does not mean all children or families should get the same amount. There are two major proposals: the two tier system or the tax system. Initially, I favoured a two tier system but I have since studied the topic and I am now coming down on the side of taxation. There are 90 people in the Letterkenny office that delivers child benefit and that is a lot of people. The Minister is working with limited resources and trying to do the loaves and fishes every year. When setting up this new system, we must ensure the system is fair so those who deserve child benefit get it. The Revenue Commissioners should be able to take care of this because once it is set up, it should be easily processed through the taxation system. I agree it will be difficult to set up - look at what happened with SUSI.

Joan Burton (Dublin West, Labour)
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I did not mention that once.

Fidelma Healy Eames (Fine Gael)
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I am mentioning it now. We must learn from that and do it correctly. By leaving child benefit as a stand-alone office in Letterkenny, is this transactional service not a waste of time that could be moved through the taxation system? I am not saying these people in Letterkenny should not have jobs or be in the system, but they would be better deployed in places like MABS and community welfare. I spent some time with MABS yesterday and it is so squeezed it is on the verge of disaster. I know 15 more people have been appointed nationally but the Galway office alone could use 15 people there is such demand.

The two tier system would provide for anyone earning under ¤25,000 to get a top-up and I support that in principle because people need a certain amount of cash to be able to live. The cost of living here is very high. It is clear, however, as the Minister acknowledged, that the middle class is being screwed for working hard. The middle class pays all the bills and any system that is set up, be it two tier or taxation, must have allowable essential deductions. We must decide if a mortgage of ¤200,000 is allowable. A family with an income of less than ¤25,000 might live in local authority housing so the family who went out and paid for their home must be given credit for it. There must also be essential deductions for ESB and food. In a way, a person on ¤50,000 or ¤60,000 may have less net income after mortgage and expenses while a person on social welfare automatically gets benefits such as the medical card, which is worth a fortune. I meet families in the squeezed middle who are skipping doctors and, in particular, dental appointments. A teenager in a family could need dental work costing ¤2,000. The mother would be on to MABS wondering how to take care of that, and trying to deal with the bank through the MARPS process, which I am on record as saying is not working.

Ulster Bank has advised the family, through the mortgage arrears resolution process, to travel to Ballymena to have their teeth done. A family of five has been told it is excessive to spend ¤200 per week on food. Another person I know was told to sell the car and buy a bicycle to travel to work, even though it is not possible for the person in question to travel to work by bike.

We need joined up thinking on this issue. The system must be fair and cost as little as possible. The Minister should use departmental staff in the child benefit section in Letterkenny to establish a fair system. I do not understand the reason 90 staff are required in that section given that it will be possible, under the proposed new system, to operate child benefit through the taxation system. I propose that the Minister eliminate the administrative side of the section by adding child benefit payments to existing social welfare benefits or, in the case of families on low to middle incomes, by making the payment through the taxation system. The savings achieved should be used to provide a small top-up to low income families, that is, those who qualify on the basis of allowable essential deductions, and the remainder - approximately ¤200 million - invested in better child care and after-school services, specialist services for children with ADHD and dyslexia and creative centres for those children whom the education system does not reach.

Two years ago, I did a study of early school leaving for the Oireachtas, which showed that in some cases money spent early in a child's life delivers a return at a ratio of 9:1, in other words, every euro spent delivers a ¤9 return in later life. A 2006 report from the UCD Geary Institute attests to the importance of early investment to society as a whole, while a 2011 OECD report, Doing Better for Families, shows Ireland is second only to Switzerland among OECD countries in respect of the cost of child care. Poor children benefit from universal services. Let us stand together on this issue and ensure we get it right as to do so will change society for the better. We need to eliminate wasteful administration and make better use of staff across the public service.

Jillian van Turnhout (Independent)
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I welcome the Minister and thank her for keeping her promise to bring the report before the House. This is a welcome report as it provides us with a strong evidence base, thus allowing us to move from an anecdotal discussion to one based on evidence. I understand this debate will be the first in a series of discussions in the Seanad on this report. I note also that other Senators in my group, including Senator Zappone, would like to speak on the report.

We are all too aware of the serious impact that six successive budgets have had in reducing social welfare payments. These cuts have created a greater risk of poverty and deprivation and increased consistent poverty rates, especially child poverty. Time does not allow me to address in detail the issue of child poverty. My colleague, Senator Mooney, spoke about the European Union statistics on income and living conditions, the SILC figures, which show that between 2009 and 2011, consistent child poverty rates in Ireland increased from 8.7% to 9.3%, while child deprivation rates rose from 25% to 32%. The recent Children Rights Alliance report card gave the Government an "F" grade for child poverty, stating there had been "retrograde steps in targeting children and families." For the second time in a row, the budget cut the back to school clothing and footwear allowance and four consecutive budgets have reduced child benefit.

All Members are concerned about child poverty and I do not claim any of us has ownership of the issue. However, when we speak of child benefit the focus is often on children's early years, an area of which I am strongly supportive, whereas we also have figures to indicate what is known as inter-generational transmission. This means that when a child experiences poverty in the teenage years, the problem tends to persist into adulthood. We need to be cognisant, in addressing the issue of child and family income support, of the need to take account of the entire age spectrum of children.

The Mangan report examined six options, generally involving either taxation of child benefit or a two tier system. I welcome the Minister's statement that she will examine outcomes for children and the use of tax credits, which is an issue the Seanad can debate at a later date.

We need to address the stigma associated with the family income supplement. We have all agreed that employment is good but we need to ensure we have a system that encourages people to enter the workplace, as appropriate.

I very much welcome the unanimous agreement on universality. There should be some form of universality in our approach.

I was very surprised to see Appendix 3, the pre-budget progress report that warned against making across the board cuts in November 2011. By way of clear warning, the group said that if the Government is to decide to reduce child benefit rates, any such reduction should ensure that there are sufficient resources available within the child income support budget for the future implementation of an integrated universal supplementary payment. It also states the consequences of an uncompensated reduction in the child benefit rate would be significant in terms of child poverty. We have seen that in the EU-SILC figures. We have not seen how the changes could have influenced child poverty in the past year and a half.

I really welcome what the Minister said today and I listened very carefully. I noted her focus on outcomes for children and her questioning of what we are about. While we can examine the original intention of the child benefit payment, the fundamental question we need to ask, before asking whether there should be taxation or means testing, concerns the function of child and family income supports. What does our policy require them to deliver? Is it to invest in and contribute towards healthy, well-educated and secure children, which in turn is an investment in healthy, well-educated and secure adults who are less likely to be dependent on social welfare? We have some really tough decisions to make but I believe child poverty can best be tackled by investment in services, not just investment in payments.

We need to ensure there are wrap-around services to ensure healthy and secure childhoods. There is no shortage of services requiring investment. Many colleagues will mention affordable and accessible quality childhood services. I refer to the second year of the early childhood education programme, after-school services, universal health care and schoolbooks campaigns, such as those advocated by the Society of St. Vincent de Paul or the youth work sector.

The Minister mentioned taking some of the savings and putting them into the Children Plus initiative. Only 11% of the savings from the budget went into the initiative, from which children benefited. Some 89% went to the general Exchequer, with no benefit for children. The European Commission's recommendation of last week on child poverty and well-being, "Investing in children: breaking the cycle of disadvantage", states the required strategy should be an integrated one based on a three pillar approach. The first is access to adequate resources, the second is access to affordable quality services, and the third is a child's right to participate. These are the pillars we should be discussing when examining child and family income supports. We need to ensure we have the three pillar approach.

I acknowledge there are tough decisions to be made. Having listened to the Minister's speech, my question is on the scope of our discussions. Are we looking purely within the remit of the Department of Social Protection? If so, we must get into means testing, taxing and examining tax credits. Can we really look at the outcomes for children, the delivery of services and redirecting, as the Minister stated? We need to ensure we do not take away the safety net. We need to ensure the required services are in place before any further reductions are made.

Marie Moloney (Labour)
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I thank the Minister for coming to the House today with the report, as she promised. As she stated, it requires extensive debate. I am very disappointed over the time allocated for this debate, that is, an hour. Only 20 minutes remain of that hour. However, the report is to be before the Oireachtas committee where I will have time to discuss it in more detail. I hope it will return to the House for other Senators to make suggestions and proposals that might be taken on board.

The advisory group on tax and social welfare was established in June 2011 in line with commitments contained in the programme for Government. I commend the Minister on honouring that commitment. The review was long overdue. I know the public wanted this review because it is generally felt there are many people in receipt of child benefit who do not really need it.

The terms of reference of the advisory group required that all its work be carried out in the context of ensuring that the income support and tax systems incentivise people to take up work and contribute to a reduction in poverty, particularly child poverty. The report deals in detail with child benefit. It is some time since it was published. Perhaps the Minister will clarify if the group has concluded its work. I had expected the report to include recommendations on the family income supplement, qualified child allowance and so on. However, as the Minister mentioned in her speech that the group had examined social welfare benefits in the round, I presume what we are dealing with is a final report.

Joan Burton (Dublin West, Labour)
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It had the scope to look at the tax credits on family income supplement.

Marie Moloney (Labour)
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I raise that issue because I believe to debate it properly we need to see the overall picture, including the group's overall recommendations and how changes to the family income supplement, qualified child dependant and in respect of child care will impact on families and households. While I welcome the additional 6,000 child care places provided following the reduction last year in child benefit, I believe more needs to be done in respect of child care, in particular after-school child care. As I have stated previously - I do not apologise to anyone for saying this - I come from and live in rural Ireland and know how hard it is for parents in rural Ireland to access child care, much of which is based in urban areas. We need to move to the provision of after-school child care in the school setting as often working parents cannot take time off work to take children from schools to child care facilities in towns five or six miles away. This issue needs to be addressed. I have discussed this matter with some local schools and they are willing to consider the provision of after-school care in the school setting.

We are all agreed that child benefit should be paid universally. The Minister mentioned in her speech that 96% of child benefit payments are made to mothers in the home. I have come across mothers in the home whose income on paper looks good but who are not getting the benefit of this payment. In some cases, it is being left over the bar of local establishments. Child benefit is important income for mothers. Traditionally, mothers remained in the home caring for their children and viewed this payment as a payment to them.

The group concluded that the two most feasible options are the taxation of child benefit and a two-tier child and family income support payment approach, its preference being the two-tier option. I am aware that Fianna Fáil proposed a two-tier option to the troika and as such assume it will support the two-tier system approach.

Paschal Mooney (Fianna Fail)
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Not without reform.

Paddy Burke (Fine Gael)
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Senator Moloney without interruption.

Marie Moloney (Labour)
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I have previously expressed my doubts about the taxation approach. I believe it would be hard to implement and could, in some cases, be grossly unfair. For example, a couple with three children and a gross household income of ¤50,000 per annum might appear to most people to be fairly well off. However, following tax, PRSI and USC deductions and mortgage payments this might not appear as attractive. As stated by the Minister in her speech, many, if not most, middle-income earners are putting their child benefit payments towards meeting mortgage repayments. A taxing of child benefit could in some cases result in a person being liable for higher taxation. Child benefit in respect of a person in the higher tax bracket would be taxed at 41%. Could a person in a household who is not earning but in whose name the child benefit is paid be liable for tax under the individualisation scheme? How will separated persons be dealt with? To my mind, the taxation approach would be messy and complicated.

Looking at examples Nos. 4 and 6 in the report, based on three children, it states that someone with an income of ¤27,000 would lose ¤1,012 in a year, while someone on ¤100,000 would lose ¤2,066. There does not seem to be any equity there as the person on ¤100,000 has an income almost four times that of the person on ¤27,000 but loses only twice the amount of child benefit. The two-tier system, if it is to be implemented, must take cognisance of disposable income in the household. It is widely believed that anything below ¤25,000 is on or below the poverty line but I believe that this base line is much too low. As I have already pointed out, gross pay of ¤50,000 may look attractive but, in reality, disposable income is much less. After all deductions, including mortgage payments, household bills and so forth, there is often not much money left in a household with three children. Some households may have a student at third level and must earn ¤42,000 or less, gross, to qualify for a full grant. For such households to lose a large chunk of their child benefit would be a huge financial blow.

I know we will have an opportunity to dissect this report further at meetings of the Joint Committee on Education and Social Protection but I ask the Minister to bear in mind that when a person applies for a medical card, his or her mortgage, medical expenses, travel to work expenses, child care costs and so forth are taken into account. If the Minister is considering the two-tier system, I ask that such expenses be taken into account and that the threshold figure for a top-up would be net of all of them.

Sean Barrett (Independent)
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I welcome the Minister to the House and also welcome the report from Ms Ita Mangan. It is wonderful that we are discussing this today.

I disagree with the principal of universalism and draw attention to page 74 of the report where it records people on a gross salary of ¤250,000 receiving ¤3,360 in child benefit. I cannot think of a less worthy use of ¤3,360 than to give it to somebody who earns a quarter of a million euro. I do not know why that became a principle and it is not for me. I believe that resources should be given to those who need them most.

The Minister is praised, and rightly so, on page 42 of the report as being the most generous dispenser of child benefit of all of the countries studied. When one adds the four payments, the rate in Ireland is ¤360 per month, in Germany it is ¤325, in Canada it is ¤215 and in Italy, to which we are being compared today, the rate is ¤130. In fact, if one looks at the OECD-IMF statistics, one sees that we have a social benefits to GDP ratio of 21.9% compared with an OECD average of 17%. There is a lot of money in here. We must, with income redistribution, have one set of people who pay in and another set who take out. We cannot have a system where everybody is a beneficiary and nobody wants to pay in. That is the basic flaw in universalism.

The second area where the report's authors erred is on the question of the taxation of social welfare. Social welfare is money. It buys things and I cannot see why one would tax work harder than one would tax welfare. In fact, on page 29, the report says that some members of the advisory group considered that the taxation of child benefit remains "an attractive option". The report also notes that "the degree of matching of DSP data from the child benefit file with Revenue data on households (in the order of 87%) indicates that the taxation of child benefit might be less technically difficult than previously thought". We can get the two systems to talk to each other, according to page 29 of the report, which claims that we are 87% of the way there.

The other concern I have is the way the report treats family income supplement. It is quite worrying to read that two thirds of people on family income supplement would be worse off under the two-tier system. That would be a regressive step. I am also worried about the point raised on page 36 regarding the dislike of the family income supplement system among voluntary organisations. It is money that is paid to low-income workers and that is what we are trying to encourage.

When the Minister was last in the House, she referred to the building up during the Celtic tiger boom of a permanent underclass based on doubling the number of people in receipt of disability and invalidity payments. Is the reason for our child benefit payments seemingly having less impact the idea that it is being paid to people who are not working? The Minister was critical of our development during the boom. Mr. Dan O'Brien wrote strongly on the matter in The Irish Timesrecently. We have not addressed the question of why this was allowed to happen in a booming economy or why we have twice as many people in receipt of invalidity and disability payments as any other EU country, something that has led to there being households in which no one works.

I am concerned by the report's attitude to the family income supplement, FIS. As outlined on page 28, two thirds of parents in receipt of FIS would lose between ¤1 and ¤100. Less than 20% would gain ¤1 to ¤50. I do not see the point in proceeding with that type of system. Why are advocates, whose sincerity in tackling poverty I accept, so critical in their submissions, which have a go at the FIS?

We can integrate the two computers. We are 87% of the way there. We must tackle the disability-invalidity sector, which has grown rapidly and is producing households in which no one works, as the Minister mentioned.

On page 46, the report states that 19.5% of children live in taxpayer units with incomes of less than ¤20,000 and 80% live in units of less than ¤80,000. These figures should be more modulated. If we are aiming for a redistributional system, a large gap of 300% is too much.

The report contains many ideas, but I will not infringe on the Cathaoirleach's patience. I thank the Minister for laying the report before the House. I am sure that this is the start of a most interesting debate. My compliments to Ms Ita Mangan, her team, the Minister and her officials on holding this discussion.