The government is planning to cut child benefit payments by up to 20% in order to save €300m in Budget 2010, but social welfare recipients and low-income earners will get top-up payments to keep them on the present rate.

Senior officials in the Department of Social Welfare and Revenue are also finalising plans to identify the country’s “highest earners”, likely to be defined as those above €100,000 a year, for a third, lower rate of child benefit payment. This group could be paid as little as half the existing monthly rate of €166 per child, senior government sources have indicated. Payments rise to €203 per month for a third or subsequent child.

The Green party is pressing for up to €1 billion to be raised in extra taxation, despite the insistence of Brian Lenihan, the finance minister, that he will make most of the necessary €4 billion in savings from spending cuts.

Dan Boyle, the Green’s finance spokesman, said his party was pushing for up to €600m to be raised through a combination of cutting tax relief and personal credits, and a widening of the tax bands; €400m would be raised from the carbon tax.

No decisions have been taken yet and ministers will use a full-day cabinet meeting today to consider their options. Senior government sources say that cuts to core public sector pay rates seem unavoidable, despite the trade unions’ campaign against them. As 200,000 public sector union members prepare for a one-day strike on Tuesday, government officials are examining plans for a three-tiered pay cut.

One source said this could become a 2% cut for those earning less than €50,000-€60,000 a year, a 4% cut for those up to €100,000 a year, and a cut of 6% or more for those above that amount.

Plans to implement a flat-rate cut in child benefit for all but low earners have advanced significantly after the government concluded it was too expensive, complex and potentially unfair either to means-test or tax the existing payments to 600,000 mothers. Roughly one third of payments are made to families on social welfare or low income.

Mary Hanafin, the social affairs minister, has made it clear she is opposed to the complete withdrawal of the payment from any recipient. “It [has been] a universal payment since 1944 and I am not sure I would take it completely from any mother,” she said on RTE’s Frontline show.

It will be possible for the social welfare department to identify high earners because Revenue officials routinely exchange information with it. Revenue, in its role as collection agent of PRSI, provides details of gross income and PRSI paid by PAYE taxpayers. This is used by the department to determine individuals’ benefit entitlements.

Boyle said while his party accepted that most of the savings would have to be made from cuts in public spending, he believed a considerable portion should be raised through extra taxation. “We would be looking for somewhere between €800m and €1 billion of the savings to be made from taxation,” he said.

“We think there is room for other systematic changes which could raise a considerable amount of revenue, for example cutting tax reliefs, reducing personal credits and widening the tax bands.”

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