€30 a week per child for parents returning to work

The Government is planning to introduce a “return- to-work dividend” in next month’s budget, aimed at improving incomes for families who move from welfare to work.

The social welfare system has long been criticised for so-called poverty traps, which result in families losing out if a parent takes up work.

Under changes being drawn up by Tánaiste Joan Burton and officials, a parent who takes a low-paid job would be able to keep welfare payments – known as qualified child increases – worth up to €30 per child a week.

Those who qualify would be entitled to hold on to the payment for up to three years, although it would reduce gradually over this time.

"In order to make work pay, we know that the biggest difficulties are experienced by those with children," Ms Burton told The Irish Times. "This will provide a significant additional financial incentive for these families, particularly if a parent is heading into an entry-level job."

Ms Burton said details were still being worked on, but had the support of Fine Gael.

“We haven’t signed off completely on this, but it’s a proposal that we’re very confident about.”

Under the proposals – likely to cost about €20 million – families would still qualify for certain welfare support targeted at working families on low incomes, such as the Family Income Supplement.

The new support would also be available to single parents and many unemployed parents who were previously self-employed or working in the construction sector.

Policy-makers estimate that about 80,000 people who worked in construction remain on the live register and many are now classified as long-term unemployed.

Details of the proposed payment come as budget preparations intensify this week with the Minister for Public Expenditure due to conduct talks with line Ministers on their spending plans.

Leaving aside demands for increased spending from Minister for Health Leo Varadkar, a Government source said the total increase in the expenditure "bid" from all other Ministers stands at some €2 billion.

Given the determination to start modest income-tax cuts in the budget, Ministers are under pressure to curtail plans for new spending.

There is concern in some Government quarters that moves to meet Mr Varadkar’s spending demands would severely limit their scope to introduce income tax cuts.

Ms Burton's Department of Social Protection has been asked to reduce spending next year by about €260 million.

Officials hope much of this can be achieved by a rise in people returning to work and a drop in unemployment benefits.

The “return-to-work” dividend would cost the Exchequer in the short-term but policy makers say it should begin to pay for itself in time as people return to work.

The move to target jobless families follows research which shows outcomes for children from families where a parent is at work are significantly better than those in families dependent on welfare.

A number of disincentives to work still remain such as rent supplement, paid to those who cannot afford private rented accommodation.

Officials say plans to replace the rent supplement with a new “housing assistance payment” are well advanced. This payment will taper off as a person returns to paid employment.

The new payment is currently being piloted in the Limerick area.