Do countries have fiscal space for universal child grants?

It is a known fact that in nearly every country, children are more likely to live in (monetary) poverty than adults (19% versus 9% respectively in 2018). This has immediate effects on the well-being of children, their development prospects and consequently their adult life. Cash transfer programs targeted at the poorest households have become one of the key policy tools for ameliorating the situation with a proven track record of success.

However, contemporary approaches to targeting are notoriously error-prone. Deserving groups may be excluded, some miss out due to fluid transitions in-and-out of poverty. Cash transfers are operationally costly, and sometimes give rise to intra-community tensions. Some cash transfer programmes impose conditions that diminish dignity, re-enforce gender stereotypes that exacerbate women’s time poverty, or promote political patronage.

Universal child grants are monthly cash transfers that are provided to the caregiver of every single child that lives in a defined jurisdiction – perhaps only subject to legal status requirements. Universal child grants are proposed as a possible solution to fix these challenges associated with the targeted cash transfer schemes. They can essentially reduce child poverty to the bare minimum or eradicate it altogether. Two obvious objections are the fiscal implications of full coverage and the potential unintended negative consequences (such as increasing fertility or reduced labor supply).

Universal child grants are monthly cash transfers to the caregiver of every single child that lives in a defined jurisdiction.

Click image to access the report.

Recently UNICEF, ILO and the Overseas Development Institute convened an international conference to explore arguments and evidence from implementation of alternative cash transfer schemes and their implications for universal child grants. (Find all key conference background documents – agenda, session recordings, participant list, concept note here) I had the pleasure of attending and presenting at this conference and am eager to share key takeaways and reflections.

First, it would be better to use the word ‘benefits’ in place of ‘grants.’ While this may sound like mere semantics, the word ‘benefits’ frames the proposition as a need to fulfill an entitlement: a positive right, not the idea of a favour, which the word ‘grants’ is more associated with. If there are no costs associated with changing the framing, I would think ‘universal child benefit’ would be more appealing term, but I will stick to ‘universal child grant’ for the rest of the this post.

The next three takeaways are communicated in three numbers: 35, 8 and 1.5.

35% of children/households receive child/family cash benefits globally. Differences exist across countries and regions with 88% coverage in Europe and Central Asia, 28% in Asia and the Pacific and 16% in Africa. Given the large shares of children in Africa and Asia, these figures imply that almost two thirds of children (1.3 billion) are not covered by any form of social protection. Some 23 countries already have non-contributory universal child grants while an additional 40 countries have non-contributory means-tested schemes, and there are a lot of lessons learnt from these schemes to inform other countries in design and implementation. (Click on the report cover image to download the full ILO-UNICEF report)

8 policy options have been proposed for creating fiscal space in national budgets to fund universal child grants outlined in this paper:

  1. Re-allocating of public expenditures;
  2. Increasing tax revenues;
  3. Expanding social security coverage and contributory systems;
  4. Lobbying for aid and transfers;
  5. Eliminating illicit financial flows;
  6. Using fiscal and foreign exchange reserves;
  7. Managing debt; and
  8. Adopting a more accommodative macroeconomic framework.

The paper illustrates how Governments can apply them based on their unique circumstances. The authors contend that “fiscal space for social protection and the SDGs exists even in the poorest countries.”  Mario Györi showed how reallocating the funding for a current food and energy subsidy could create fiscal room to fund a universal child allowance, with greater impact on poverty.

1.5% of GDP, on average, is required to fund universal child grants in various countries. An important contribution frm one session at the conference was that funding for universal child grants should be indexed as a share of government expenditure and not GDP, and I fully agree with this position. Linking funding to government expenditure would directly put the question of prioritization (not trade-offs) in focus.

The World Bank and the IMF representatives in the final plenary agreed, in principle, to the idea of universal social protection for children (at least for those aged 0-2 years).  Michal Rutkowski, Senior Director for Social Protection and Jobs at the World Bank described the idea of supporting children (especially the vulnerable) and investing in their future as marriage made in heaven: good social contract and good economics.

Author’s presentation at the International Conference on Universal Child Grants, Geneva. Click image to access slides.

Listening to presentations from different countries, it was clear that governments around the world recognize the need to progressively move towards universal child grants in some shape or form. There were discussions about administration and implementing challenges, and the question of the covering the last mile (reaching the hardest to reach). The question of benefit level and provision for the caregiver (or rest of the household) are also open questions for which there was not much time to cover.

To achieve SDG goal 1.3 to implement nationally appropriate social protection systems for all children, the best route would be through universal child grants. They should be prioritized in government allocations as an important first step towards social protection for all. A global universal child grant fund – like the Global Fund for HIV, Tuberculosis and Malaria should be created to accumulate enough reserve to finance grants starting with the poorest countries, and where political conditions are least favourable. These are often the very countries where child poverty rates are highest and where the investments would yield the highest returns. Operational headwinds may abound but that should not be enough justification for delaying action. I look forward to the final publications from the conference and the next steps in the space.

 

Frank Otchere  Social Policy Specialist at UNICEF Innocenti, is a Statistician and Demographer by training, and has worked on several Transfer Project impact evaluations, including Ghana, Malawi and Zimbabwe. 

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