Monday, 30 November 2009

Families facing child benefit cut as Budget targets welfare

THE Government is considering slashing child benefit by 10pc across the board in next week's Budget in an effort to drum up over €220m in savings.

Decisions on the politically sensitive issue of how to reduce the €2.5bn child benefit bill will be left until the 11th hour with ministers scrutinising the overall €21bn social welfare budget for savings in the dying days of negotiations.

A proposal to pay child benefit at three different rates is believed by many around the cabinet table to be too complicated and cumbersome. Many ministers, worried at the potential political fallout, are understood to be arguing for a straight cut of 10pc in a bid to save around €220m -- far less than the 20pc cut which had originally been mooted.

In addition, social welfare payments, including the dole, could suffer cuts of between 2pc and 5pc. Bord Snip Nua chairman Colm McCarthy has urged the Government to reduce welfare rates by 5pc -- in line with falling prices.

Following a meeting of ministers on Saturday for four hours, the Cabinet is said to be agreed that the old-age pension must be protected.

The jobseekers allowance could be substantially cut for under-21s in a bid to incentivise them into work and training schemes, while other half rate and full rate welfare allowances also look set for cuts.

However, ministers are still divided between tightening up on the eligibility to certain payments -- wherein it is difficult to calculate the savings -- or imposing straightforward cuts across the payments where savings targets can be set.

As the Budget discussions enter their last seven days, the Greens are arguing for elements of the Commission on Taxation report to be implemented sooner rather than later.

The party's two ministers are seeking commitments on abolishing tax reliefs used by the wealthy to shelter income, changes to the taxation of pensions that will lessen benefits for higher earners and changes to the residency requirements of so-called tax exiles, in an effort to appease the public.


But Finance Minister Brian Lenihan is said to be set against using the taxation system to boost revenue and is adamant that the €4bn cuts can come on the spending side.

The latest round of Exchequer figures, due later this week, are expected to show at least a €2bn shortfall on the April predictions.

The month of November is a vitally important month for tax returns with bumper receipts from VAT, income tax from the self-employed and workers with extra income making up to an estimated 20pc of all tax revenues for the entire year.

The figures will be crucial to the Government's Budget calculations when the Cabinet meets tomorrow and on Thursday to make final decisions.

The Government's tax take is expected to be down around 18pc compared to last year. But with today representing the last day for returns, it was still too early last night to judge the final figures, sources said.

Child benefit will be centre stage in the Dail tomorrow night and Wednesday when Labour tables a motion calling for the rate to be maintained.

Labour's Roisin Shortall said there are 1.15m children and some 593,233 families currently benefiting from child benefit. "This benefit continues to play a vital role in countering child poverty," she said.

"The dismantling of the current system of child benefit would be a serious mistake and we believe that the Dail should have the opportunity to convey this message to the Fianna Fail/ Green Party Government in advance of the Budget."

Meanwhile, figures from the Revenue Commissioners reveal that tax refunds have totalled €1.59bn in 2009 to date, between income tax (€458.6m) and corporation tax (€1,131.7m).

"These figures come before the expected publication of the November Exchequer figures next week which are likely to show a massive tail-off in tax receipts in the year to-date. There will certainly not be a pre-Budget bump to the public purse this year," a Revenue spokeswoman said.

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