My Department provides financial assistance to families with children in a number of ways. Most recipients of primary payments receive child dependant allowance increases, CDIs, if they have dependent children. My Department also provides a family income support, FIS, payment to families where earnings from employment are low and the payment increases with the number of children in the family. Furthermore, my Department also provides child benefit in respect of all children irrespective of family income or the employment status of the children.
Support to families with children seeks to make a positive contribution to the cost of raising children and to a reduction in child poverty levels. Each of the three instruments identified above has a number of features which can determine its effectiveness in reaching these objectives. While CDIs target resources on families who for the most part rely on social welfare incomes, it is withdrawn where employment is taken up or where earnings rise. In this way, persons can be dissuaded from taking up employment even though this is one of the best avenues out of child poverty. In particular, the loss of CDIs can represent a barrier to employment for a person with a large family.
Family income supplement is designed to provide cash support for employees on low earnings who have families. It preserves the incentive to remain in employment in circumstances where the employee might only be marginally better off than if s/he were claiming other social welfare payments. Family income supplement can allow parents to effectively combine earnings from parental employment with support for children and, over the years, a number of measures have been taken to make it more attractive to families.
Child benefit, CB, delivers a standard rate of payment in respect of all children in a family regardless of income levels or employment status. It supports all children but delivers proportionately more assistance to those on low incomes and with larger families. It does not distort parental choice in respect of labour force participation and contributes towards alleviating child poverty. Child benefit is not intended primarily to meet child care costs. However, the substantial increases in CB in recent years can make a substantial contribution to meeting those costs.
Budget 2004 provided for a €6 per month increase, or 4.8%, in the rate of child benefit payable in respect of each of the first two children and €8 per month, or 5.1%, increase in the rate payable in respect of the third and subsequent children. Over the period since 1997, the monthly rates of child benefit have increased by €93.51 at the lower rate and €115.78 at the higher rate, increases of 246% and 234% respectively, compared with inflation of 26.9%. This level of increase is unprecedented and delivers on the Government's objective of providing support for children generally while offering real choice to all parents.
The concentration of additional resources in child benefit has underpinned the policy of successive Governments since 1994. Nonetheless, as with all aspects of social welfare spending, it is kept under review to ensure that its objectives continue to be met. Under the partnership agreement, Sustaining Progress, a special initiative on ending child poverty includes a commitment to examine the importance of child income support arrangements, including the question of merging the child dependant allowance with the family income supplement. The outcome of that initiative will be taken on board in the context of future policy development in this area.