When the limit for the large-family supplement in the child allowance was lowered from three to two children in 2005, the efficacy of the allowance decreased considerably. The Swedish National Audit Office now recommends that the Government considers removing support for child number two and instead spending the money on more effective measures.
Economic family policy plays an important role for many families with children with small financial margins. The Riksdag’s objectives for economic family policy are to contribute to a good economic living standard for all families with children and reduce the economic disparities between households with and without children.
The large-family supplement is part of the child allowance and aims at stimulating the purchasing power of families with several children. The Swedish NAO has examined whether the large-family supplement effectively contributes to the Riksdag’s objectives.
The audit shows that the large-family supplement to a great extent redistributes resources to families with low incomes, but that its efficacy deteriorated in 2005, when the supplement was introduced for child number two.
This reduced efficacy is because families with two children on average have a relatively good financial situation compared with families with three children or more. A smaller share of the money for the large-family supplement thus goes to households with the worst financial conditions. This also means that the cost-effectiveness of the measure declined.
“In 2019, SEK 1.3 billion was paid out in large-family supplement for child number two in a family. But the SEK 150 per month that this gives the family is of relatively minor importance for its financial living standards,” says Niklas Österlund, project leader for the audit.
The Swedish NAO’s calculations show that the efficacy of the allowance in terms of redistribution to financially vulnerable families with children would increase if these funds were distributed to households with three or more children instead.
Another means of improving cost-effectiveness would be to redistribute more funds to single parents, who are also over-represented among financially vulnerable families with children.
A combination of these measures would also be possible.
The Swedish NAO recommends that the Government review the large-family supplement in the child allowance.
“The Government should take a position on whether the large-family supplement for child number two can be re-designed into more accurately targeted measures, without creating conflicting objectives with other policy areas which also affect financial conditions for families with children,” says Auditor General Stefan Lundgren.
The child allowance consists of a general child allowance, an extended child allowance and a large-family supplement.
The general child allowance of SEK 1 250 per month is paid for every child in Sweden.
The large-family supplement is SEK 150 per month for the second child, SEK 580 per month for the third child, SEK 1 010 per month for the fourth child and SEK 1 250 per month for the fifth child and any further children.
In 2019, expenditure for the general child allowance amounted to about SEK 29.2 billion.
Expenditure for the large-family supplement amounted to about SEK 3.7 billion in 2019.
The fundamental function of the child allowance is to compensate for the greater dependency burden that children entail for a family.
The large-family supplement is targeted more at the family as a whole than the general child allowance.
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