Plans to Scrap Income Limit on Child Allowance Among Measures in Government Policy Draft

The Yomiuri Shimbun

18:48 JST, April 1, 2023

The government has unveiled a draft outlining measures to tackle the declining birth rate, including plans to scrap the income limit on child allowance and extend the eligibility of the allowance to families with children through high school.

According to the draft released Friday, the government plans to set a three-year timeline to tackle the issue. Prime minister Fumio Kishida has vowed to implement “measures on an unprecedented scale to deal with the declining birth rate.”

The draft also included measures to promote paternity leave to encourage fathers to take a more active role in child rearing and cooperate with their partners in raising their children.

However, the draft does not mention how the financial resources for these policies will be secured.

At a press conference on Friday, Masanobu Ogura, the state minister in charge of tackling the declining birth rate, said: “The government will strengthen measures for children and child-rearing as an investment in future generations. Society as a whole must help. Efforts will be made to spread awareness about such matters.”

Measures mentioned by Ogura included an income boost for young people; efforts to spread awareness across society; and a system to provide seamless support for child-rearing households.

According to the government draft, benefits for multi-child households will be a pillar of the economic support package for young families.

The government plans to polish the draft until the Basic Policy on Economic and Fiscal Management and Reform is decided at a Cabinet meeting in June this year, before submitting a bill to revise the Child Allowance Law. The measures are expected to begin in June 2024 at the earliest.

The draft also included measures to support education, childbirth and housing costs.

The government plans to expand the eligibility of education grants with no repayment obligation. From the 2024 academic year, higher education learners in multi-child households with an annual income of up to ¥6 million and students enrolled in engineering and agricultural courses will be eligible for the grant.

The government has also proposed measures including covering childbirth costs through insurance. A final decision is not expected until fiscal 2026 medical service fees are revised.

According to the draft, measures will be introduced to give families with children preferential treatment in the allocation of public housing, and multi-child households preferential interest rates for long-term fixed-rate housing loans.

The government plans to boost tax breaks for dual-income families with children when both parents take parental leave. The measure, which would effectively increase their take-home income to 100% of their gross salaries for a period of time, is aimed at increasing the uptake of paternity leave.

The draft also included a plan to scrap insurance premiums for nonregular and self-employed workers raising children.

The government plans to allow all preschool-age children to attend nursery schools by the hour, irrespective of whether their parents work. To raise the quality of preschool education, it also plans to decrease the number of children nursery school workers are responsible for supervising at any one time. For infants around the age of 1, one certified teacher currently looks after six children, and the government plans to reduce that figure to five. For 4-5 year olds, one teacher supervises up to 30 children, and that figure will come down to 25.

On Friday, Kishida said a panel would be launched to consider strategies for the future of children. The panel, which will be chaired by the prime minister, will compile an outline of strategies by June.

Challenge to secure funds

Securing the financial resources to implement the family-focused measures will be a challenge. There is a possibility drastic reforms of the social insurance system and tax systems could be needed.

The policy draft outlined Friday featured a range of measures, including a plan to make school lunches free of charge, which is predicted to cost ¥460 billion annually.

“The government will have to spend about ¥8 trillion a year if all the measures are implemented,” a government source said.

A plan to increase social insurance premiums has been mooted, with taxpayers paying a few hundred yen extra per month, which would raise ¥1 trillion a year. Trillions more will be needed, so the government will have to devise other ways to plug the gap.

The prime minister has said, “consumption tax rate will not be raised for about 10 years.” He is also skeptical about opposition proposals to issue government bonds exclusively for education funding.

Prof. Shintaro Yamaguchi of the University of Tokyo said, “Continuity is important for measures to tackle the declining birth rate. The government should assess the measures while considering cost performance and securing stable financial resources.”