Second tier child benefit could leave up to 100,000 worse off, tax strategy paper suggests
According to TSG, based on some estimates, up to 100,000 children could end up being worse off.
The TSG, which prepares a range of papers for the Government in advance of the budget being framed, paper on social protection notes that it has been suggested that to address deprivation experienced by children most effectively would require putting in place a second tier, means-tested, child benefit payment.
However, t argues that public discourse on this suggestion does not generally recognise that it involves the replacement of the second tier of child payments that already exists in the form of the Child Support Payment (a means-tested payment to families in receipt of weekly social welfare payments) and the Working Family Payment (aweekly tax-free payment for employees on low pay with children).
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'Most recently the ESRI has proposed the replacement of these payments with a single second tier payment and modelled an option costing over €700 million annually over and above the existing payments,' the paper notes. 'In doing this, it acknowledges that its proposal is in outline form would require substantial work to refine and cost fully.
'It also acknowledges that some lower income households would lose income – with payments reducing in respect of approximately 100,000 children. This is a complex issue that would need to be fully understood before any new second tier payment is introduced.'
The paper notes that the programme for government contained a commitment to developing a proposal for a Working Age Payment, which would be given to low-income households based on their pay levels rather than their employment status and involve a child-related element.
'Accordingly, any new second tier payment would have to be considered in the context of how it would interact with this payment – a consultation on which is due to issue later this year,' the paper added.
The paper said that pending these developments, 'it remains clear that it is important to target welfare increases to the households with children where the risk of poverty is greatest and that such an approach favours investment in targeted rather than universal benefits'.
The paper says that Child Support Payment (CSP), currently paid at €50 for children under 12 years and at €62 for children 12 years and over, is one such targeted measure. It estimates that a €1 increase in the payment for both age cohorts would cost about €15.45 million in a year.
'Annual increases in the Child Support Payment mitigate the risk of poverty for families with children. There was a proportionately larger increase in the rate in respect of children 12 years and over in Budget 2025.
'One advantage to adjusting the rate of the Child Support Payment rather than the personal rate is that it equally benefits lone parents and couples with children, without an adjustment to the personal rate of each scheme.
'Other targeted measures that would directly reduce child poverty, include increasing the weekly income thresholds for the Working Family Payment and increasing the Back-to-School Clothing and Footwear Allowance. Households with children that receive other supplementary welfare supports such as Fuel Allowance would also benefit from increases in this payment.
'The support of the Public Employment Service delivered by the Department's Intreo Centres is also important in assisting parents, particularly lone parents in transitioning from welfare to employment and will have a material impact on the income levels of these households.'
The paper also highlights that when one-off payments in recent budgets are excluded, increases in core social welfare payment rates between 2019 and 2025 lagged behind price inflation by between 2.5 to 5.5 per cent and lagged wage growth by between 9 and 13 per cent.
'Accordingly, as the use of 'one-off' payments is ceased, it will be important to ensure that other rate measures are effective in targeting the reduction in poverty among those most at risk of poverty,' it stated.
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