Child Benefit and our values

Tom McDonnell: As Peadar Kirby said in the blog earlier today:
"Budgets should be seen as opportunities to debate national choices for expenditure and taxation, choices that ultimately involve values about the sort of society we want in the future."

So what do we value in this society? Deeds not words inform us about a person's values. On Monday and Tuesday we will learn the values of Fine Gael and the Labour Party.

The children's allowance was introduced in 1944 by Sean Lemass during the Emergency. It is a valuable tool for dealing with child poverty. The payment is for the child and is intended to deal with the cost of caring for the child.

However it seems that child benefit and the other child related social transfers are now in the firing line. Evidently these are luxuries for the good times. Despite having one of the lowest tax takes in the entire Western world when measured as a proportion of GDP we are told we cannot afford such luxuries. The special interests and their mouthpieces will say that you cannot tax wealth creators (such as themselves). They will bleat that if you put a further 2% tax on those earning over two or three times the average industrial wage the poor gossoons will simply lose the incentive to work. Heaven forbid we would cut back on pension related tax breaks, 80% of which goes to the top 20%.

Child benefit payments are not a luxury. For many people they are simply about keeping above water. Carol Hunt presents an excellent argument here. As Carol puts it:
"I really wish that we lived in a world where child benefit wasn't needed. A country where so many mothers didn't wait for the first Tuesday of the month -- the pain if it falls on the 4th or 5th -- with nothing left in the fridge. Where they wait for the one and only payment that they know they can spend on their child, on groceries, on childcare and other necessities.

I wish we lived in a world where couples split their income equitably, where women's contribution within the home was financially appreciated, where women weren't taking mainly low- paid part-time jobs, where working mothers were supported with subsidised childcare.

But we don't. Instead, we have the blunt one-payment-fits-all child benefit which is meant to give a much-valued nod to the sacrifice and cost of being a parent -- specifically a mother."

Means testing of course has its own difficulties as the Guardian points out here.
- Means-tested benefits are costly to administer and prone to high levels of error. Complexity and stigma reduces take-up. Given the hostility displayed by political parties and the media towards benefit claimants, it's hardly surprising that families are loath to apply for them.One parent told the Child Poverty Action Group: "You're made to feel like you're sponging off the system."

Taxing or means testing child benefit would impact on women's labour force participation decisions. Ireland ranks 74th in the world for female-to-male labour force participation (see page 452 of the World Competitiveness Report here). This places us on a par with Botswana, Mauritania and Peru. We do not have the type of structures in place to encourage women into work that are commonplace in most Western economies, for example free child care facilities. This is a consequence of our low tax regime.

As I said. We will soon find out the values of this Government.

Posted in: Economics • Economics

Tagged with: child benefit • budget

Dr Tom McDonnell

Tom McDonnell is senior economist at the NERI and is responsible for among other things, NERI's analysis of the Republic of Ireland economy including risks, trends and forecasts. He specialises in economic growth theory, the economics of innovation, the Irish and European economies, and fiscal policy. He previously worked as an economist at TASC and before that was a lecturer in economics at NUI Galway and at DCU. He has also taught at Maynooth University.

Tom obtained his PhD in economics from NUI Galway.