Mary Flaherty
Question:269 Miss Flaherty asked the Minister for Social Welfare his views on a basic income for children and a general basic income for all. [22661/96]
Written Answers. - Basic Income.
In relation to basic income for children, it is now widely recognised that some aspects of the State's income support for children contribute to poverty traps and disincentives to work. As stated in the Government programme, this Government is committed to working towards a basic income system for children. We have already been taking the first steps in this regard. We have been gradually improving child benefit, while reducing the relative importance of child dependant allowances. Child benefit has been increased by 45 per cent since this Government took office.
The expert working group on the integration of the tax and social welfare systems, which reported earlier this year, identified reform of child income support as one of the key priorities for future development of the tax and social welfare systems. The expert group rejected a full basic income for children on the basis of its high cost (around £400 million in additional annual expenditure), and because much of the gains would go to families on higher earnings. The expert group put forward three more selective approaches to income support for children. I am currently examining these, with a view to determining the best way of moving towards our overall objective of making income support for children more independent of the labour force status of their parents.
In relation to a general basic income for all, it is important not to confuse basic income with a minimum adequate income, or a minimum wage. Basic income would be a payment, made by the State, to all citizens, regardless of other income, family circumstances or labour force status. A full basic income would be paid at a level high enough to replace all social welfare payments. A partial basic income would be paid a lower level, and would therefore require retention of part of the social welfare system to cater for people with no other source of income.
The question of basic income was examined in some detail by the expert working group on the integration of tax and social welfare systems, which I referred to above. The expert group also examined a number of options for full or partial basic income for all. They looked first at a full basic income, that is, a basic income which would be high enough to replace existing social welfare payments and personal tax allowances. Research commissioned by the group showed that, if this were to be financed through the income tax system, it would require a tax rate of 68 per cent on all other income. The group concluded that such a high tax would be likely to have an adverse effect on employment, and therefore did not recommend full basic income at this point in time.
The group also examined a number of options for partial basic income. That is, a basic income at a lower level of payment; this would require the retention of some elements of the existing social welfare system. The group rejected this approach. The group's view was, essentially, that if the rate of basic income is high enough to have any substantial impact on simplifying the tax/transfer system, it would require very high levels of taxation. It would be possible to fund a partial basic income at a low level (around IR£21 per week) without any tax rate increase. This is just under one-third of the level of the lowest personal rates of social welfare payment. Thus, a considerable part of the social welfare system would need to be retained in order to "top up" the partial basic income, so that partial basic income would not have a significant effect on incentives.
Whether or not basic income becomes feasible in the future will depend on relative movements of a large number of variables, such as the desired level of the basic income, the tax rate that may be imposed, the dependency ratio in the population, the relative level of employment and unemployment, and any changes in social welfare systems and structures in other EU countries.