Treasury Considering Cutting Child Allowances

The cuts would probably focus on payments for second, third and fourth children in a family.

The Finance Ministry is looking for places to cut spending and has child allowances in its sights. The treasury is busy working on a huge plan to cut NIS 14 billion from the 2013 state budget, on top of the cuts approved by the cabinet on Monday.

One of the proposals under consideration is to cut NIS 2 billion from the NIS 7 billion in child allowances paid out annually. The cuts would probably focus on payments for second, third and fourth children in a family.

Allowances for these children are higher than those paid for the first child; it seems the treasury wants to lower the amount to equalize payments for all children at the lowest level. Ministry officials justify such a move with the explanation that expenses for additional children are below those for the first child.

The real reason for the child-allowances move, and the treasury's justification, is an attempt to compensate for the state's huge investment in free preschool from age 3 starting this fall. This includes free afternoon day care for some children, significant subsidies for children up to age 9 and increased numbers of day care centers for children under 3. All this, says the ministry, has reduced family spending on children - and justifies the cuts in child allowances.

Israeli child allowances are already low compared with other OECD nations. Still, the OECD recommends that Israel further cut allowances and use the money for educational services for children, which is what the treasury wants.

The recommendations include using these funds for allowances that encourage employment. This includes a negative income tax that gives money back to low-income working parents, in an attempt to encourage parents of large families to join the workforce.

The Finance Ministry, however, needs to cut billions, and the logical target is defense, but this is unlikely to happen. So the treasury has been forced to search elsewhere; it has tough choices such as health care and other social services.

Even if the treasury passes the NIS 2 billion cut in child allowances, the real question is where the rest of the missing NIS 14 billion for 2013 will come from.