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How will the State support families in the budget?
How will the Government support families through
child benefit
and similar payments in the
budget?
It is a tricky and politically charged question. The Taoiseach has said consideration is being given to a second tier of child benefit for less well-off households, but will this happen, who would get it and what does it mean for the universal child benefit payments?
There is a lot still to decide, but here are the key questions?
Are the days of double payments over?
With a general election in the offing, the last
budget
gave parents two double child benefit months in late 2024, one in early November and one in early December.
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This meant a payment of €280 per child, twice the usual monthly €140 payment. This was a substantial cash boost – particularly for bigger families. For example, a family with three children got an additional €840 over the two months.
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Child benefit is paid to parents of children up to 16 years of age in all cases and up to 18 in they are in full-time education or have a disability. It is paid to approximately 678,000 families with more than 1.2 million children.
The two double payments came at a hefty cost of €371.4 million. A 'new baby grant' of €280 was introduced paid to families of babies born after December 1st 2024 in addition to child benefit.
While the new baby payment is permanent, the issue for the Government is whether to repeat any double child benefit weeks this year. Up to now, Ministers have suggested that these once-off payments will not continue, because inflation has come down sharply.
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However, Sinn Féin continues to push for a so-called cost-of-living package and the Government will know that not giving one will leave some families feeling worse off later in the year.
For now, senior Ministers continue to indicate that once-off universal payments – which also included the energy credits, will not be repeated this year. But we will see what happens.
What about the proposed new second tier of child benefit payment?
The idea of a second tier of payment to give more cash to lower income households goes back nearly 20 years and was first raised in papers from the National Economic and Social Council and later government officials. It featured as a recommendation in the 2022 report of the
Commission on Tax and Welfare
.
The Programme for Government said the Coalition would 'explore a targeted child benefit payment and examine the interaction this would have with existing targeted supports to reduce child poverty such as the working family payment and child support payment.' So it is on the agenda, but the word " explore' left no hostages to fortune.
The aim of the second tier of payment would be to tackle child poverty and disadvantage by giving more cash to lower income households.
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In additional to child benefit, families reliant on social welfare get additional child support payments (formerly called qualified child payments). Meanwhile, lower income families with a parent in work can qualify for the working family payment – and also increased amounts based on family size.
The idea of the second tier of child benefit would be to merge these two into one, additional income-based payment. This would be paid in addition to the existing child benefit payment.
The biggest beneficiaries would be many families on social welfare who would get significantly more cash than they currently do.
How would it work?
The most detailed work
has been done by economists Barra Roantree – now assistant professor in TCD - and Karina Doorley in
Economic and Social Research Institute
(ESRI) publications looking at child-related benefits.
They modelled a system where the second tier of payment would be structured similarly to the working family payment, providing families 60 per cent of the difference between what a measure of what a family earns and a set income level based on their circumstances including the size of the family.
This would be of most benefit to those on welfare but would also support lower income working families – similar to the working family payment.
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A 2023 paper estimated that a lone parent in receipt of only Jobseeker's Allowance would get another €170 per week. The measure, it said, would lift 40,000 children out of poverty.
The analysis suggested that this was a much more efficient route to tackle child poverty than other methods – such as increasing existing child benefit payments or working family payments.
Some work would be needed to examine exactly what rules would be put in place – and the researchers warned that decisions would also be needed to ensure that nobody lost out. The complexity of the welfare system and how people qualify for benefits comes into play here.
What would it mean for the existing child benefit payments?
In the short term, nothing. In the sense that there is no suggestion that resources would be transferred from the existing payment to fund the new one.
That said, the second tier of child benefit would be costly.
The latest ESRI research
costed its proposal at €772 million in a full year.
Directing this level of resources could have an impact on the affordability of increases in the main child benefit rate in the years ahead. It has fallen in cash and real terms since before the financial crash – in 2008 at its peak it was €166 per child, Adjusted for inflation that would be about €200 per month in today's terms.
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Could money be saved by taxing or means testing child benefit? The answer is yes but this is not likely to happen. The universality of the payment is generally seen as an important sign of the State's support for families with children.
Previous suggestions that it be taxed or means tested have met a decidedly frosty response from the public and the Commission on Tax and Welfare did not recommend going down this route. And
the Programme for Government
said it will continue to support families via this route.
Are other changes to child benefit possible?
Yes. For example, the idea has been floated of having a higher level of child benefit for larger families, perhaps those with three children or more. This would be designed to encourage larger families at a time when the average age of the population is ageing.
Families with more children can also be vulnerable to financial pressures for obvious reasons – though directing support to these households via child benefit would fall back on the issue of giving cash to better-off families as well as those in need.
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A pointer to what options are under consideration will come this month when the Department of Finance publishes what are called the tax strategy papers, which look at the tax and welfare options for budget day. Pervious experience shows, however, that just because something is featured in these papers it does not necessarily mean that it will happen.
What about other supports to parents?
The general supports for parents have been increased in recent years, for example via additional childcare supports, medical and GP visits cards, the free schoolbooks and school meals scheme and the back-to-school clothing and footwear allowance.
The Programme for Government promises to expand some of these schemes – finishing the roll-out of the school meals scheme to all secondary schools in its term, looking at the income limits for the back to school schemes and extending support for people taking parental leave.
The supports for parents and families thus come via a combination of cash and social services. While money into parent's pockets is a vital part of this, the wider cost of and access to services in key areas like health and education are obviously central, too.
The question for the Government, in a budgetary era where resources may start to tighten, are where its priorities lie. The first indication of this will come in the October budget. Will the second tier of child benefit get the go-ahead? Given its significant cost and other priorities, you would not bet your house on it. We will just have to wait and see.
