We are happy to have this opportunity to appear before the committee and thank the committee for its invitation. We will make our presentation and if there are any other issues that Members wish to raise we are happy to address those also. We have circulated the document in advance.
Social Justice Ireland is an organisation of individuals and of organisations working to build a just society. It is open to any individual or organisation to join so long as they are committed to building a society where human rights are respected, human dignity is protected, human development is facilitated and the environment is respected and protected. Those are the four basic requirements of our organisation.
I will not batter the committee with numbers but there are a few things that need to be noted. The most recent figures for the number of children at risk of poverty show that there are 218,000 such children in Ireland. That figure has increased by 35,000 in two years. We will see if that number expands further when the latest survey on income and living conditions, SILC, is published by the Central Statistics Office in the coming weeks.
The second number I wish to put on record relates to households. For example, for a household of four, two adults and two children, the social welfare payments they receive, including child benefit, amount to €80 per week below the poverty line. It is in that context that we address this issue. A number of serious issues follow from that.
When we speak about poverty, we use the Government's definition or description of poverty contained in the anti-poverty strategy. It states that people are living in poverty if they do not have the income and the resources required to live life with dignity. It is a longer definition than that but it is a very good one and we work from that definition. In the paper we presented to the committee, we indicated where the poverty line is and how much it is in 2011. The amount for two adults and two children is €515.46 per week but when the child benefit payment is added they receive €80 per week less than the poverty line.
How many have incomes below the poverty line? What percentage of the population is below the income poverty line? Given the overall population, the number at risk of poverty is 14.1%, that is, one in seven. There was an improvement from 2001 to 2009 but it has dropped a third. Seven years earlier, in 1994, there was very little change, 15.6% of the population was at risk of poverty. Some 17 years later the percentage at risk of poverty has gone down only to 14.1% from 15.6%, which is not a huge achievement. That masks something else: the number of people on the poverty line has increased because the population has been growing.
In 1994 there were 559,000 people in Ireland at risk of poverty, by 2009 the number had risen to 628,000. The percentage at risk of poverty has increased as the population grew so that the numbers are higher. Therefore, the number of people at risk of poverty in Ireland has been increasing, despite the Celtic tiger, the various developments and all the good things that have happened since 1994. Many good things are happening, despite the recent crash. It is important to state that.
When we look at children in the same base we find some 18.6% at risk of poverty. The percentage was 19% in 2006, reduced to 17.4% but has risen to 18.6%. There are serious issues here. There is a higher proportion of children at risk of poverty in terms of numbers and as a group than any other group. In 2007, there were 183,00 plus children at risk of poverty - as per page 7 of the document we sent to the committee - and the number had increased to 218,000 by 2009. That is the point we were making when we said there was an increase of 35,000 children at risk of poverty over those two years. Given that our children are our future and the country's future, it is critically important this issue is addressed.
Various things have been done in the past and Governments take initiatives of different types and put in large amounts of money. We shall look at a few of those initiatives in the next few minutes. Child benefit has always been the key variable within the various approaches that Government has used. Our position on child poverty is that one cannot take a child out of poverty without taking the household out of poverty. It is impossible to have a child within a household out of poverty but the household in poverty - that is nonsense. If children are to be taken out of poverty, the households with children must be taken out of poverty. It is important to understand that.
Various changes have been proposed to child benefit. We shall look at four and give our views on them. Should child benefit be reduced? This argument has been made and child benefit has been reduced in recent budgets. We strongly argue against any reduction in child benefit. There are many arguments that could be made. The major one, in the context of what we are saying today, is that any reduction in child benefit would have a significant impact on child poverty figures in Ireland when combined with the ongoing lack of investment in other services. We are very aware that this is not just an income issue, but that many required service issues are also involved. This is serious and we would say that under no circumstances should child benefit be reduced.
The second often mentioned option is to reduce child benefit or to leave it at the current level but combine it with the introduction of a second tier payment. We acknowledge that this could see some households maintain or slightly increase their income, depending on the levels at which the payments are set. However, we would also point out that it would create a new unemployment trap at the point where the second tier payment is withdrawn. The idea is to reduce or leave child benefit as it is and to create a second tier payment with whatever money is available. The problem is that at some point this payment must be withdrawn. Once withdrawn, it creates a serious problem in terms of an unemployment trap, because of the loss to the household.
One of our concerns in this regard is that the household would lose employment, but there are other concerns. There would, for example, be a huge incentive for a couple not to become a family because of the danger that the two incomes would be counted and they would lose the second tier payment. Also, there would be a huge temptation to break up, notionally at least, so that they would remain entitled to the payment because then only the income of one parent would come into play. Therefore, if the second tier payment is implemented there is a danger that not alone will it create a new unemployment trap, it will also lead to a situation where policy either provides a disincentive to family formation or incentivises family break up. We would have serious reservations about any policy that did this.
The third proposal on child benefit is to tax it. This is not a good approach because it creates a form of horizontal inequity. What we mean by this is demonstrated in the examples on page 11 of our presentation of two households living side by side. Both households earn €100,000 under similar circumstances and pay the same level of tax. One of the households has two children and the other none. The proposal to tax child benefit means that the payment that goes to the family with the children, which is already far from adequate in terms of supporting the children, will be reduced, but there will be no impact on the household with no children.
We believe this proposal is being made for the simple reason that there is a need to find some source of finance to ensure we can move towards balancing the budget. We strongly believe balancing the budget must be a priority and our proposals are made within that context. However, the proposal to tax child benefit would have the effect of taking money away from children. The more sensible approach is to come up with a proposal that hits all households in the same way rather than only hitting the households with children. Taxing child benefit introduces a horizontal inequity into the system.
What should be done instead? The money must be found another way, even if that involves increasing taxation on high income earners. This was the reason we took a household income of €100,000 as the base for our example. Committee members will be aware we have made other proposals as we have circulated them to Deputies and Senators. These demonstrate how the tax take of the Government can be increased without increasing income tax rates and how the Government can go far further down the road of balancing the books without touching child benefit. This is what we recommend.
The fourth approach on child benefit that has been discussed and considered from time to time by Government is one we support. This is the proposal to turn the child benefit into a refundable tax credit that would be payable for all children irrespective of the labour force status of the parent. This element is critical. It is not about ensuring the money only goes for children whose parents are employed but of ensuring that it would be a refundable tax credit payable for all children. The net cost to the Government of this is the same as paying child benefit without taxing it. There is no change in the amount, but there would be issues to be addressed in the context of the distribution of the moneys, particularly with regard to who gets access to the money and how the scheme would work. However, this is a proposal we are prepared to consider.
On whether Ireland can afford a universal child benefit, yes it can. Our presentation gives one example on page 14 of a change that could be introduced. If the Government eliminated only the tax expenditure relating to pensions, it would generate €2.9 billion in income. Given that 80% of the tax benefits on pensions go to the top 20% of the population, this seems the obvious approach to take. It would save the Government in one stroke the levels of money it talks about and would be a fairer approach than taxing child benefit or than any of the other proposals on the table currently.
With regard to the issue of child dependent additions, it is clear that an increase in these payments would target the people most at risk and that this would be an effective way to go. However, there is a problem, namely that when the parent takes up a job, the child dependent addition is lost. These payments were not increased over many years because they had become a serious unemployment trap. Unemployed people were unable to get out of the unemployment trap because of the scale of the payment they would need to receive from the job to make up for the loss of the child dependent addition. We would be very hesitant to support a move back in that direction, particularly when there are other ways of doing this.
Family income supplement is a very good idea in theory, but the problem is that in practice it does not work. Despite the fact that for well over a decade huge amounts of public money have been put into trying to get the take-up for FIS up to the level it should be at, this effort has failed and only a little over one third of the people entitled to FIS take it up. This is a huge loss. Therefore, FIS is not an effective means of relieving poverty and Social Justice Ireland is not in favour of expanding the scheme.
On the issue of services, there is a range of services across a range of areas to be dealt with. We do not go into these in detail but list some of those on which we have produced policy proposals which have formed part of the documentation we have already sent to Members of the Oireachtas on various occasions in the past six months. For example, we have put forward proposals on the need for integrating services for children through a whole-system approach, including services such as primary care teams, mental health and disability services, the national drugs strategy, suicide prevention, foster care, the national action plan for social inclusion, youth homelessness, youth justice and the strategic taskforce on alcohol. We do not have the time to go into detail on each of these issues now. However, in terms of child poverty, the services issue must be dealt with seriously.
Various other issues could also be added. Child care is a critical issue if parents want to take up employment. If reasonably funded child care services are not available or if people do not have the funds to access them, there is a huge problem. Ireland has a very poor record on child care services in that context. There are also all sorts of issues around education and health generally. In that context, we welcomed the early childhood care and education programme. We would certainly welcome any strengthening of that by the Government and we have certainly advocated it. It is an approach that goes very much in the right direction. It is starting at the earlier end of the education process. Within all that we would try to improve the resources for first-level education and preschool education initiatives like the ECCE scheme. We have already tabled proposals in that context.
We are talking about a whole system approach to meeting the needs of children, with a focus on better outcomes for children and families. That would ensure that these services would actually respond to the needs of the children and ensure they continue to be effective in the long run.
What is the long-term solution to child poverty? Our view has been for quite some time that the current welfare system is long past its sell-by date. It is not fit for purpose and it needs massive revision and reform. For quite some time, we have been promoting the idea that we need a much more work-friendly, person-friendly and less bureaucratic approach. The way to do that would be to introduce a basic income system. This is a system where everybody in society would receive a payment - less for children and more for older people. They would receive it on an unconditional basis without any means test or work requirement. They would get that payment throughout their lives, although it would change with age. If they took up employment, they would pay tax from the first penny. In other words, the tax credit would be devolved into this basic income, as would the welfare payment. It offers an alternative paradigm whose understanding of work recognises a wide range of work that is not paid employment, which I think is very important. Basic income also offers a simple, equitable, fair and transparent income distribution system, which would make real progress towards eliminating income poverty. By setting rates at the right level, we could eliminate all child poverty with that particular approach. We would also eliminate all poverty traps and unemployment traps.
If members are looking for a big idea for the 20th century, then the basic income guarantee is a big idea that we think would be very appropriate for the changed world in which we live.