The Economic and Social Research Institute (ESRI) has suggested that a means-tested second tier of child benefit could help to reduce child poverty in the State.
Analysts at the think tank wrote in a report this week that such a payment “would reduce child poverty more effectively, per euro spent, than increasing existing supports”.
An extra tier of child benefit has been mooted several times, with the National Economic and Social Council proposing it in 2007.
Almost 20 years on, are we any closer to it becoming a reality?
What is the current rate of child poverty?
There is no consensus on the best way to measure child poverty.
The number of children in households below the poverty line – defined as having less than 60 per cent of median household income – rose to about 200,000 (17.4 per cent) in 2024; an increase of almost 30,000, according to the ESRI.
The increase was larger after housing costs were accounted for, rising to 260,000 children (22.7 per cent).
The Government has set a goal of reducing “consistent” child poverty to 3 per cent or less by the end of 2030. This target is defined as the share of children who are both below the poverty line and experiencing material deprivation, defined as an inability to afford two or more essential goods or services. Using this metric, the rate of child poverty (based on 2024 figures) stands at 8 per cent.
However, the ESRI said this measure fails to capture more than 100,000 children who experience material deprivation but live in households with incomes just above the poverty line. Regardless of how child poverty is measured, the ESRI said the Coalition was “very far” from meeting its 3 per cent goal in the next four years.
What has the ESRI proposed?
It has recommended a second tier of means-tested child benefit that would be given to eligible families on top of the universal child benefit payment.
The institute said such a measure would be more effective than increases to existing payments such as the Child Support Payment (CSP, a means-tested weekly payment) and the Working Family Payment (WFP, a weekly tax-free payment for employees on low pay with children). It last year estimated that bringing in a second-tier payment would cost about €773 million per year.
Child poverty fell by less than 1% last year, Government progress report shows
Under this proposal, eligible families would receive an average of €145 per month on top of the €140 monthly universal child benefit payment. This measure could lift an estimated 157,000 children out of income poverty and 94,000 out of consistent poverty, the ESRI said.
In last year’s report, the think tank explored a model that would abolish the CSP and amend WFP requirements.
This week’s report examined the impact of introducing a second tier of child benefit that could be paid alongside any WFP or CSP entitlements. Paying families an extra €10 per week for children over 12 and an extra €5 per week for children under 12 would benefit more than one million individuals in almost 300,000 households “with an average gain among beneficiaries of €193 per person (€821 per household) per year”, the think tank said.
This approach would cost an estimated €215 million per year and reduce the poverty rate by 1.6 percentage points (about 18,000 children).
What problems could arise?
The ESRI has acknowledged that introducing a second tier of child benefit “would not be without complications”.
“Means-testing the payment as modelled would require either the Department of Social Protection to apply a new means test to a larger number of claimants who have not previously interacted with the department, or – more feasibly – Revenue to apply an adjustment to tax credits/thresholds for those whose income exceeds the disregard,” the report said.
An alternative approach to means-testing would be to give families a higher child benefit payment and make it subject to income tax. However, the report’s co-author, Barra Roantree, said this could lead to “some additional complications” in relation to which parent receives the payment and if they are jointly or individually taxed.
Such a model would benefit 2.9 million individuals across 744,600 households and cost an estimated €515 million per year, the ESRI said. Despite reaching more people, it would still only reduce the child poverty rate by 1.6 percentage points as it would be less targeted.
Previous analysis by the ESRI found that up to 100,000 children could see losses in household income if a second tier of child benefit was introduced, while about 233,000 would experience gains.
The fact that some children could end up worse off under the proposal is often quoted by the Government in discussions on the matter.
To ensure no family loses money, Roantree said the Coalition could introduce “transitional protection” whereby families whose overall payment was due to be cut would be guaranteed to maintain their current rate. These families would eventually “age out” of the system or their circumstances would change, he said.
Where goes the Government stand on this?
Taoiseach Micheál Martin last week said the goal of reducing the child poverty rate to 3 per cent by 2030 was the Coalition’s “north star” and would “guide every step we take for the duration of this Government”.
Reacting to the ESRI report, Martin acknowledged that the level of child poverty was not acceptable but said the research, based on figures from 2023 and 2024, did not take into account a range of measures introduced by the Government in the last three budgets.
He told RTÉ Radio there had been “record increases in child support payments”, as well as the introduction of free schoolbooks and hot meals in schools.
Roantree said he was “more pessimistic” than the Taoiseach and did not believe the child poverty rate would be better if calculated on current figures (which will not be available for about two years).
The Irish Times view on the ESRI report on child poverty: few signs of real progress
He said there had been “a big jump in inflation” in the last two years and “we know that disproportionately affects households at the bottom”.
To reduce the child poverty rate to 3 per cent, Roantree said “significant measures” needed to be implemented in “the next three budgets”.
“Increasing the child support payments isn’t going to be enough.”