Second tier child income support: the case for innovation

Abstract

Total and per child spending on child income supports are at high levels, and so are child poverty and the proportion of children being reared in jobless households. While the role of child income supports in alleviating child poverty should not be exaggerated, it can be improved. Most of the per child support received by low income families now takes the form of universal payments. These create no employment disincentive but, by giving almost one euro to families in the top half of the income distribution for each euro going to the bottom half, effectively accord child poverty a low priority. There has been a long interest in a new form of targeting that would enable priority be given families on the basis of low income alone, create no employment disincentive and be slowly withdrawn as family income rises. The principal difficulties in paying what would, in effect, be a supplement to Child Benefit but received only by low income families are administrative. Identifying 'family income` and delivering support to parents in work and those reliant on social welfare smoothly and equitably will entail significant innovations in the public administrative system. The requisite steps are identified in this paper. It should also be appreciated that achieving the necessary retooling of data and delivery systems would allow the new form of targeting to be applied to other supports as well (e.g., childcare subventions).