The government has begun negotiations to reduce the amount of child allowance paid to high-income households from fiscal 2021.
The government plans to revise the current system, which is based on the highest income earner in a household, and shift the evaluation criteria to that of a household's total income. This revision aims to determine if the allowance should be halted or reduced in a household whose total income exceeds a certain level.
The government seeks to secure a maximum of 50 billion yen from this review and have the savings allocated to the establishment and improvement of child care services and reduce the number of children on nursery school waiting lists.
An allowance of between 10,000 yen and 15,000 yen a month has been paid in principle to each child until the age of graduation from junior high school, provided the income of the household's highest earner is below a certain level. The amount paid to a household that comprises a couple and two children with a total income of 9.6 million yen or more annually is reduced to 5,000 yen a month, a stipend paid under the name of a special allowance for high-income households, under the current system.
The government will make a decision on this revision by the end of this year as it compiles the fiscal 2021 budget.
The government earmarked about 1.15 trillion yen for child allowances in the initial fiscal 2020 budget. It is considering revising the income limit criteria and reducing or halting benefits for higher income earners due to concerns of a shortage of financial resources needed to reduce nursery school waiting lists to zero, a policy supported by Prime Minister Yoshihide Suga. The government has estimated that about 160 billion yen will be needed to amend a shortfall of 140,000 children projected to be on a waiting list by 2025.
Under the current system, a working couple with two children can receive a full allowance if the husband and wife earn 8 million yen each.
However, a household with the same family makeup and total household income does not benefit in the same way if, for instance, the husband earns 12 million yen a year and the wife earns 4 million yen. Instead, the latter household receives a special allowance of monthly 5,000 yen for each child -- a condition that has been criticized as unfair.
After the revision, if the government decides to not provide an allowance to households with a total annual income of 15 million yen or more, then a family comprising two children and parents who earn 8 million yen each will not be eligible to receive the annual allowance of up to 360,000, yen which they are currently eligible for. Therefore, detailed rules will be necessary.
Meanwhile, the government wants to ask companies to shoulder the remaining 110 billion yen in funds that would not be generated from the revision in order to achieve the zero-waiting list. But the negotiations are expected to become tangled with the business community, which wants to avoid an increase in the financial burden.
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