Dáil Éireann díospóireacht -
Wednesday, 27 Nov 1996

Vol. 472 No. 2

Written Answers. - Tax and Welfare Integration.

Eoin Ryan

Ceist:

60 Mr. E. Ryan asked the Minister for Social Welfare if he intends to prioritise any particular aspects of the report of the expert working group on the integration of the tax and social welfare systems recently published listing various suggestions which should be addressed over the next two to three years. [22171/96]

Minister for Social Welfare (Proinsias De Rossa)

I received the final report of the expert working group on the integration of the tax and social welfare systems early this summer. The report sets out comprehensively the poverty traps and work disincentives in the current tax and social welfare systems, reviews a number of possible approaches to reform and sets out priorities for future development of the system. I welcome the group's report. In charting options for future reforms, the report provides a significant and unique contribution to public debate in the area of poverty traps and work disincentives.

The two key priorities identified by the group are reform of child income support and tax reform. I fully accept that these are priorities for action over the next few years. In relation to income support 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. Reform of this is essential. As the working group's report points out, as well as the incentives arguments, there are strong social reasons for giving priority to tackling unemployment among families with children, in order to break the cycle of unemployment and poverty being passed down from one generation to the next.

The Government programme already commits us to reform in this area, and we have already taken steps to reduce the disincentive effects associated with the current structure of child income support. We have gradually improved child benefit while reducing the relative importance of child dependant allowances. Child benefit has been increased by 45 per cent since the Government took office.

The report makes it clear that reform of child income support must continue. The group did not reach agreement on what form this should take, but puts forward a number of different ways in which the overall system of child income support could be improved from the point of view of incentives. The Government will look at these options very carefully in order to develop the best strategy for continuing reform in this area.

The second priority identified by the group is the need to pay particular attention to the taxation of people on low incomes. The expert group's report recommends that policies for taxation of the low paid should be directed towards limiting and eventually abolishing the exemption limits, by increasing personal allowances at a faster rate than the exemption limits. The Government has already made considerable progress on reducing the tax burden. Over the last two budgets, the personal tax allowance for a married couple has increased by £600; the general exemption limit for a married couple has also been increased by £600 over the last two years. Progress has also been made on widening the tax bands.