Children’s allowance, once considered a pillar of the welfare state created by Labour government in the 1970s, was dying a slow natural death before Monday’s budget.
But by giving a yearly supplement of Lm107 per child to 25,000 families previously deprived of this benefit, the government effectively reversed its own 1996 decision to restrict what was once a universal benefit to families where both spouses together earn more than Lm10,270.
Back then it decreased beneficiaries by 5,231 in one fell swoop. And over the past 11 years, they decreased further, by 19,106 from 52,712 in 1996 to just 33,606 in 2006. Expenditure also declined from Lm20 million in 1997 to just Lm13 million in 2006. Now it’s set to rise by Lm5 million as the number of beneficiaries rises by 25,000.
The decline is mainly attributable to a drop in families declaring less than a joint income of Lm10,000, as well as the falling birth rate and a clampdown on benefit fraud.
Introduced in 1971 by Dom Mintoff as an allowance for the first three children of every Maltese family, the newly elected Nationalist government extended the allowance to cover any number of children in a family when elected in 1987.
But in July 1996, a household income ceiling for eligibility for Children’s Allowance was set at Lm10,270. A ceiling of Lm13,270 applied to families with more than three children. The amount was calculated after deducting National Insurance contributions.
Prior to yesterday’s budget, the children’s allowance was calculated on a percentage (ranging from 6% for one child, 9% for two-child families to 15% for four-child families) on the difference between Lm10,270 and the income declared of the previous year.
The mechanism is retained in this year’s budget; with one important difference: all children will receive the same allowance as the first child. Therefore a two-child family will receive 12% instead of 9% on the difference between Lm10,270 and the income declared of the previous year.
Although the budget still discriminates in favour of lower income groups by increasing the benefit for 13,000 children born in low-income families, the budget gives a breath of fresh air to middle-income families.
Now, a working class family with two children earning Lm5,000 will be eligible for an annual allowance of Lm632 while a similar family earning Lm7,000 will earn Lm392. A two-child family earning Lm10,000 will now earn Lm214.
By reversing this state of affairs and catching the middle classes in the welfare net, the government is clearly attempting to address middle class discontentment. In so doing, Prime Minister Lawrence Gonzi has also appropriated one of the most cherished symbols of Old Labour, on the eve of an electoral clash with its new incarnation.

jdebono@mediatoday.com.mt