Dáil Éireann debate -
Wednesday, 29 Jan 1997

Vol. 474 No. 1

Written Answers. - Family Income Supplement.

Seán Doherty

Question:

30 Mr. Doherty asked the Minister for Social Welfare if he has considered the introduction of a system of child care deductions in relation to the family income supplement scheme in view of the fact that such a provision has operated in relation to the United Kingdom family credit scheme since 1994. [2363/97]

Robert Molloy

Question:

42 Mr. Molloy asked the Minister for Social Welfare the estimated cost for the year in relation to the increase in the income limit for the FIS. [2385/97]

Minister for Social Welfare (Proinsias De Rossa)

I propose to take Question Nos. 30 and 42 together.

The family income supplement (FIS) scheme, which provides assistance for low income families, differs in many respects from the family credit scheme which operates in the United Kingdom. For instance, the family credit scheme is based on net earnings and also applies to self-employed people. In addition, the formulae for calculating benefit differ substantially, as do the various disregards provided for under each scheme. For example, a young two child family with net weekly earnings of £150 would receive approximately £28 per week under the family credit scheme. The same family would qualify for a FIS payment of £47 under the changes to FIS announced in this year's budget.

The Expert Group on the Integration of Tax and Social Welfare identified significant unemployment and poverty traps associated with the various child income support schemes. In the context of reducing disincentives to work, Partnership 2000 contains a commitment that priority will be given to FIS as a means of increasing the net return from work to families with children. Accordingly, FIS will be reformed so as to be calculated on a net income basis, rather than on gross wages, as at present. This will significantly increase the supplements payable under the scheme, thereby increasing the rewards from work.

As a first step towards meeting the commitment in Partnership 2000, this year's budget provides that FIS will be calculated on the basis of gross earnings less any PRSI contributions and levies payable, with effect from June. Pension contributions will also be deductible. In addition, I have provided for an increase in the income thresholds governing entitlement to FIS by £10 at each point.

These two measures will mean that virtually all current FIS recipients will get an increase of at least £6 in their weekly payment. People in receipt of FIS who pay PRSI — those earning over £80 per week — and the levies — those on earnings over £198 per week — will receive extra increases.

As my priority now is to complete the move to calculating FIS on a net income basis, i.e. net of tax, I have no plans at this stage to provide for the exemption of child care costs in the calculation of FIS.

The overall cost of the two measures provided for in this year's budget is £4.38 million in 1997 and £7.85 million in a full year, of which £3.12 million in 1997 and £5.6 million in a full year represents the costs of the increased income thresholds.