Ministers considered abolishing child benefit for higher income earners

The government examined the abolition of child benefit for those on higher incomes in advance of the 2010 budget, documents reveal.

Cabinet records newly released to The Irish Times show that the then minister for finance, Brian Lenihan, argued that continued payment of child benefit to those who could afford to meet their own needs was "not appropriate in the current circumstances".

“The minister believes that a significant cut in child benefit must be contemplated, especially for those on higher incomes,” the records state.

Ultimately, the cabinet agreed to cut child benefit by €16 a month – reducing it to 2006 levels – but maintained its status as a universal payment to all income groups.

Detailed consideration, however, was given to making child benefit a two-tier payment, for higher and lower incomes. Under discussion was cutting the lower rate by €30 a month and the higher rate by €67 a month, which would have produced savings of more than €500 million.

Fourfold gap in benefits

A memo to cabinet from Mr Lenihan also shows he argued that a fourfold gap in unemployment benefits between

Ireland

and the UK was “completely unsustainable”.

“It would seem wise, therefore, to concentrate on containing these costs by appropriate measures to reduce rates of unemployment payment and eligibility to these,” he stated.

He said that the annual welfare benefits available to a single person were more than €16,000, while a couple with three children stood to receive up to €35,000.

The argument in favour of cutting jobless benefits was also made on the basis that high rates of social welfare for those out of work were making it very hard to promote new jobs in the domestic economy.

“Such rates of payment, while not excessive in one context, are unaffordable when it comes to attracting persons back to work at market rates of pay,” the memo states.

Budget cuts

In the end, the 2010 budget resulted in cuts ranging from 3.5 per cent to 4.2 per cent in basic rates, equivalent to reductions of up to €8.50 a week. This reduced the standard weekly dole payment to €196.

The wider payment of social welfare rates also came under detailed scrutiny. Mr Lenihan’s memo stated that payments had increased considerably over the previous decade.

The memo said that a cut of 5 per cent in social welfare rates could be justified as a result of the falling cost of living. It stated that drops in the price of food, clothing and energy meant that all income groups were benefiting.