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Tuesday 5 December 2023 Dublin: 4°C
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Means-tested extra child benefit payment could lift 40,000 children out of poverty

Research published by the ESRI, found that a means-tested second tier of child benefit could reduce child poverty in Ireland by a quarter.

NEW RESEARCH HAS shown that the introduction of a means-tested extra child benefit payment could potentially take 40,000 children out of poverty. 

The report, published today, is the third from an Economic and Social Research Institute (ESRI) research programme, which seeks to address gaps in our knowledge and understanding of poverty, income inequality and living standards in Ireland.

It estimates that a means-tested second-tier of child benefit could reduce child poverty in Ireland by a quarter and the child poverty gap – how far below the poverty line those at-risk of-poverty are – by half at a cost of around €700 million, which would benefit over 100,000 households.

The reform would provide all households with children with a payment determined by their means and the number of children in the household.

  • Our colleagues at Noteworthy want to investigate if the State is doing its best to stop children going to bed hungry. Support this project here.

It has been recommended by the Commission on Taxation and Welfare, the National Economic and Social Council and the Children’s Rights Alliance among others.

To illustrate the reform’s potential, the report uses a simplified Child Income Support Payment (CISP) which would integrate Increases for a Qualified Child (IQCs) and a modified Working Families Payment (WFP) in place of the current systems.

It would allow all households with children to receive an amount determined by the number of children they have and their means, which would “significantly increase the generosity of the social welfare system” to those who don’t currently qualify for WFP, it states.

“For example, a lone parent with one child aged 13 in receipt of only Jobseeker’s
Allowance would receive €222.60 per week from our simulated CISP in addition to
their Jobseeker’s Allowance payment of €220 per week, compared to €50 in IQCs
under the current system.”

The research also examined the effect increasing universal Child Benefit and means-tested Increases for a Qualified Child (IQCs) would have on reducing child poverty.

Screenshot (345) ESRI ESRI

Universal Child Benefit is currently paid at €140 per month per child. The research found that a second-tier of child benefit would be far more effective at reducing child poverty than an increase in universal Child Benefit, as it would not be targeted and see increased spending go towards those on higher incomes as well as those on the lowest incomes.

IQCs are paid in addition to the personal rate of most social welfare payments for claimants with children. They are currently paid at a rate of €42 per week for each child under 12 and €50 per week for each child over 12.

These payments offer a more targeted alternative to increasing Child Benefit as
most (but not all) of the social welfare payments they are linked to are means-tested.

However, while the research found that increasing IQCs would be more effective at reducing child poverty than increasing universal Child Benefit, it also found that it could “negatively impact financial work incentives”.

“This is as IQCs are primarily paid in addition to a personal rate for welfare payments like Jobseekers’ Allowance, Carer’s Allowance and One Parent Family Payment which are heavily means-tested,” it states.

It goes on to say that raising IQCs in isolation “weakens the financial incentive to be in paid – particularly full-time paid – work, from the current situation where very few individuals would be financially better off out of work”.

It concludes that a second-tier of child benefit would be far more effective at reducing child poverty than similarly costed increases in universal Child Benefit or means-tested IQCs, which would reduce child poverty by less than half as much. 

The report goes on to say that the Government has placed renewed emphasis on reducing child poverty by establishing a Child Poverty and Well-being Programme Office in the Department of the Taoiseach.

However, it says to introduce the reform, the Government will have to “confront some of the implicit choices made by the structure of the current welfare system that are rarely discussed, such as whether the welfare system should incentivise low-income individuals to engage in part-time work”. 

Previous research

Today’s report builds on previous reports, which have found that despite strong income growth in Ireland over the last three decades, levels of income poverty and material deprivation have remained consistently high for certain groups, notably lone parents and those in working-age households where no one is in paid work.

They have also found that children have consistently faced higher rates of material
deprivation than other age groups, as they have higher after-housing costs (AHC)
at-risk-of-poverty rates.

This is defined as those whose income is less than 60% of the national median.

Material deprivation and at-risk-of-poverty rates have also been found to be particularly elevated for children in households where no one is in paid work and renting their accommodation.

In June, a report from the Children’s Rights Alliance showed that over 236,000 children were living in poverty in Ireland. 

Dr Barra Roantree, assistant professor of economics at Trinity College Dublin and an author of the report, said: “A substantial body of evidence finds that poverty has a negative effect on child and later life outcomes, particularly when it starts in early childhood and persists throughout.

Our research provides evidence on the impact of different measures the Government might consider in trying to achieve their stated ambition of ending child poverty.

Denise Charlton, chief executive of Community Foundation Ireland who funded the research, said tht targeting child supports at families most at risk of deprivation and poverty is a proven way to narrowing the inequality gap.

“Here it has been a decade-long debate prompted by child advocates. As a philanthropic hub with 5,000 community partners we believe the potential it offers to lift tens of thousands of children out of poverty is – on the back of this research – worth serious consideration by policymakers in the context of Budget 2024 and future budgets,” she said. 

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