INTERVIEW:Burton against any proposals for taxation of child benefit
Minister for Social Protection Joan Burton has raised concerns about the high numbers of Irish people on disability and other benefits compared to in other countries.
In an interview with The Irish Times she said research produced by her department, showed 16 per cent of working-age adults were getting some form of disability, illness or sickness payment. She said this was very high compared to other countries in the OECD.
Signalling this would be addressed, she pointed to the Netherlands, which she said was once the “sick man of Europe”. She said her department was focusing on getting as many people as possible in this category back to work.
She has also indicated a preference for retaining universal payment of child benefit rather than taxing it.
Further reductions in child benefit are likely in next year’s budget following the cuts announced earlier this month, which caused difficulties for many of Ms Burton’s colleagues in the Labour Party and led to party chairman Colm Keaveny voting against the Government.
However, the approach for next year will be guided by a report by the Tax and Social Welfare Advisory Group chaired by Ita Mangan, which will be published in the new year.
The group’s two main recommendations are understood to be: a significant lowering of the universal payment to €100 with ongoing compensatory payments available for low-income families; or alternatively for child benefit to be taxed at the level which people pay on their income tax, which is 41 per cent for higher earners.
Ms Burton said that grappling with the issue of child benefit would involve some very difficult decisions.
Universal payments
Outlining her own views she said she agreed with universal payments in principle and pointed out that taxing child benefit would result in cuts to payments way in excess of those already made. Benefit was cut by €10 per month for the first two children, and €18 a month for the third child in the budget, yielding a saving of €140 million.
Excercising either choice of reducing the benefit to €100 or taxing at full rates would be extraordinarily risky and controversial politically, even though the savings to the exchequer would be enormous: close to €500 million per annum.
Ms Burton pointed to recent changes announced by British chancellor of the exchequer George Osborne where families earning over £60,000 (€73,500) can opt to relinquish child benefit or pay full marginal tax on it if they choose to retain it.
“That debate and those policy changes have made people in Ireland appreciate it’s a complex debate where there are difficult decisions and hard choices to be made.”
She said the Mangan report would be published at the end of January and that all parties should study it and then state where they stand on child benefit. Accusing Opposition parties of kicking to touch and speaking in generalities, she said: “If we are really going to have a debate, we need people to come off the fence, look at facts and figures in the Mangan report and look where balance lies.”
Ms Burton said a flat taxation at marginal rates would be far in excess of any reduction made to date, suggesting if it is taxed it will be at lower rates than income tax.
On the two-tier payment, she said she agreed with the principle of a core universal payment but said it would be difficult coming up with the structure for a second-tier payment. That would involve some form of means testing.
She also said she was aware of the impact such cuts would have on families with average or decent incomes but with high levels of debt.
“I am concerned that there are a lot of parents in their 30s and 40s, with two or three children, who are heavily indebted.
“[It was fine] doing this reform at a period when the economy was not in difficulties. We have to be mindful that this age group is relying very strongly on universal payments.” If there are changes next year, she said, she would be “very anxious to maintain a high level of universal payment despite the need to find savings”.
Ms Burton also emphasised what she said were two sets of statistics uncovered in recent research, both of which she described as “outliers”.
The first was the high numbers of working-age adults who were getting some form of disability, illness or sickness payment. The other troubling statisic, said Ms Burton, was that over one in five households in the country, or 22 per cent, were now classed as having no adult in the family in the workforce. This, she said, was markedly higher than the EU average.
Wasted opportunity
“Even in the boom years, between 2004 and 2007, the number of jobless households increased to double-digit figures, to 15 per cent. People will remember the labour shortage was not filled from people on the Live Register but from skilled immigrants coming in . . . The failure of Irish politics [at that time] was that the [government] did not go in to disadvantaged communities to help people on the long-term register,” she said.
Generally, she said the scale of unemployment remained the key challenge for her department and the Government.
She said the budget for employment supports had increased dramatically, up from €95 million per annum to just over €1.05 billion for 2013. That would help create an extra 2,500 places in Jobsbridge, an extra 2,500 places in community-based Tús programmes, 3,000 social employment places through county councils, and 2,000 further places in community employment schemes.
Many of these, she said, would be directed at longer-term unemployed.
The full development of “Pathways to Work”, she said, would be a significant advance. A full profile and background information for people on the Live Register is created, to allow better assessment for job and training matching. In addition, some 400,000 of the new personal services cards will be issued in 2013, as well as a big acceleration in the opening of “one-stop shops”, where all the services including payments are available in the one office.
“The key thing there is if we can create enough opportunites to activate people, and allow them return to education or training, we can make a serious impact on unemployement, especially long-term unemployment”.She said if the Government succeeded in getting people back to work it would reduce enormously the need for unpopular cuts.
