Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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Question 302: To ask the Minister for Social Protection her views on the IBEC proposal to use a smart card for the payment of child benefit; if she will detail the pros and cons of same; and if she will make a statement on the matter. [36264/11]

Joan Burton (Dublin West, Labour)
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According to a document submitted to my Department, IBEC propose to reform the administration of the child benefit scheme by offering a card payment option to customers and incentivising households to opt for this approach by reducing the value of child benefit payment by 25% if households do not opt to receive their payment in this way.

The ultimate test for any proposal of this nature is whether it makes the social protection system work better and provides tangible benefits to customers and taxpayers in excess of costs. In considering this proposal, therefore, I have to be mindful of the primary objectives of the child benefit payment in assisting parents and others in meeting the cost associated with raising children and in contributing towards alleviating child poverty. While the Government appreciates any proposals to reform the social protection system and has established an advisory group on tax and social welfare in order to advise it in the area of child and family income supports, it would need to be satisfied on two fronts before it could give further consideration to the IBEC proposal.

Firstly, it would have to have the potential to improve how the child benefit system meets it stated objectives and serves best the interest of families with children. Secondly, it would have to ensure that there is no risk to the proposal being undermined for legal reasons, particularly in relation to Ireland's obligations under the EU treaties. On the basis of the case made by IBEC to date far, I am not convinced that either of these conditions have been satisfied.

On the first point, I note that IBEC claim that it is likely that a high proportion of payments are put into savings accounts by middle and upper income families. In addition, IBEC state that child benefit payments for children resident elsewhere in the EU paid to EU nationals working in Ireland are largely repatriated. However, IBEC have not advanced evidence as to why it believes that this represents a serious threat to the objectives of the scheme or that the benefit is being spent or saved other than for the benefit of households with children. In fact, on the basis of the consultations that I and my officials have had to date with representative organisations, the opposite appears to be the case with child benefit playing an important part in the ability of households with children to meet their ongoing needs.

More specifically, the introduction of a payment card could distort parental choice in meeting costs associated with chid raising and have the undesirable effect of inflating prices for child related goods and services if they were specifically targeted on particular products or outlets. While many transactions are currently effected by way of electronic/smart card technology, there would be further costs involved in setting up and maintaining such a payment card system without obvious benefits. There may also be security issues relating to the card that would need to be addressed.

Previous evidence, albeit from some time ago, suggests that child benefit is spent for the benefit of children. In the absence of fresh evidence, there is no reason to believe that channelling the support provided through a payment card - thereby pre-empting how and when those caring for children spent it - would improve the position of families with children.

Secondly, there may be legal issues around how such a proposal would comply with Ireland's legal obligations under the EU treaties. The Irish child benefit payment is classified as a family benefit for the purposes of the EU's social security systems' coordination rules and the payment of these benefits are governed by specific rules set out in EU Regulations 883/2004 and 987/2009. EU nationals who come to work in Ireland, and who pay Irish social insurance contributions, are entitled to receive child benefit in respect of their children, even if the children reside in another EU Member State. The equality provisions of the regulations require that these payments are made at the same rate and under the same conditions as apply to a person whose family is resident in Ireland. As in many areas of EU legislation, national legislation must be implemented in a manner that is compatible with EU legislation.

It is most likely that changing the payment method to confine the use of the card to goods and services in Ireland would not be compatible with the current co-ordination rules. Neither would it seem feasible or practical to introduce a smart card that could be used throughout the EU.

In relation to the claim that benefits paid in respect of non-resident children are largely repatriated, some statistics may put this into perspective. Child benefit is at present being paid to an average of around 5,000 customers in respect of around 7,800 children resident abroad. This carries a full year cost at around €13 million compared with the estimated total spending on child benefit of around €2 billion per year. This suggests a relatively small impact on domestic spending of this requirement under EU legislation. For these reasons, I do not propose, therefore, to proceed further with consideration of this proposal at this time.