WELFARE SPENDING:THE GOVERNMENT has been urged to cut social welfare rates by 5 per cent and reduce child benefit by 20 per cent to save up to €1.8 billion on welfare spending.
They are among the main recommendations in the McCarthy report proposed for the Department of Social and Family Affairs.
Overall, the report says welfare payments this year will amount to about €21 billion, or 37 per cent of overall expenditure, making it the biggest spending department of all.
On the issue of a 5 per cent reduction in social welfare payments – saving an estimated €850 million a year – the group says there is a “clear case” for rates to be lowered in line with pay and price adjustments across the wider economy.
General social welfare rates have increased by between 90 per cent and 110 per cent since 2000, benefiting from the greater availability of resources during the Celtic Tiger period.
The report says a 5 per cent cut would effectively preserve living standards at 2008 levels for those in receipt of welfare.
Alternatively, a 3 per cent reduction, reversing the increase of last October’s budget, would save in the region of €510 million a year.
“More will be known about pay and price developments closer to the budget of December next.
“The Government will be in a better position then to make a judgment on the matter in the light of those data,” the report says.
Further savings of €513 million should be achieved by introducing a 20 per cent reduction in child benefit payments. It suggests introducing a standard rate of €136 a month for all children. The group says it noted that further options, such as taxing or means-testing the payment, were being considered.
The group supports the Government’s decision not to introduce a Christmas bonus welfare payment this year and says it should not be paid over the coming years either.
It added: “Care will need to be taken to avoid the inadvertent accumulation of measures in individual cases.”
The axing of second welfare payments is also recommended, so claimants already in receipt of a primary weekly social welfare payment should not qualify for a payment under another scheme.
Schemes where “double payments” are involved include the carer’s allowance, illness benefit, jobseeker’s benefit, family income supplement scheme and community employment schemes.
In addition, it recommends taxing the household benefits package, which include the electricity allowance, gas allowance and free TV licence.
It says reducing the rent supplement and exceptional needs payments would generate further savings.
The group says it understands that the department is undertaking a review of payments to those of working age, and recommends that the role of the widow/widower’s pension be “included explicitly in this context”.
Outside of welfare payments, the group recommends that the Family Support Agency and most of its programmes be discontinued. However, it says a proportion of community and voluntary funding should be retained and combined with other State-funded programmes to allow more effective targeting of resources.
New administrative penalties to deter fraud, increased use of profiling to better target intervention, as well as changes to the PRSI system, would help save significant amounts of money.
Social & Family Affairs : Key cuts
General rate cut of 5%€850m
Child benefit €513m