How are German child benefits changing?

Berlin wants to bring in a simpler way of attaining child benefits. Some say the new system only makes things worse.

Photo by Sandy Millar on Unsplash

Dear Reader,

When my partner and I welcomed our second child to the world last November, we only had a few days to enjoy the moment. In the back of our minds, we knew that a mountain of paperwork was awaiting us.

First, we needed to register our baby with the Standesamt. Once he was registered, we could take his birth certificate to the Bürgeramt to get him a passport. Meanwhile, his information was automatically passed on to the Finanzamt, which assigned him a tax number.

Only after obtaining the tax number could we apply for Kindergeld (child benefits). This application had to be submitted to the Familienkasse.

Simultaneously, we had to contact our local Elterngeldstelle to access parental allowance.

Filling out the forms for parental allowance is particularly time-consuming. This dense, 26-page document scrutinizes every detail of your life to ensure fair payment. Is this child your biological child, adopted, or simply residing under the same roof? While you might think that all babies do is drink milk and cry, these distinctions are crucial to the German bean counters who set the level of your payment.

Parental allowance is so complex that a cottage industry has emerged to provide private consultancy on maximizing benefits. We ended up paying €150 for assistance. The consultant identified two missed bonus payments for our first child and advised my partner on how to make the most of the fact that she was part-time self-employed.

I’m not complaining. German support for parents of small children is second to none. But sometimes it feels like this is only true if you have the time (and money) to get your head around how the system works.

For parents like single mothers, the system becomes even more complex. Families living at or below the poverty line are entitled to various additional benefits, each managed by a different administrative office.

There is the Kinderzuschlag (supplementary child benefit), administered by the Familienkasse. Children are also entitled to Bürgergeld (basic income) payments, handled by the Jobcentre. Rental support falls under the jurisdiction of the Wohngeldstelle, while the Unterhaltsvorschuss (an advance on the father’s alimony payment) is managed by the Jugendamt.

According to official estimates, only a third of eligible parents actually apply for the Kinderzuschlag, and access to benefits such as support for school materials is as low as ten percent.

It is estimated that over 5 million children are entitled to child benefits above the basic level, but less than 2 million actually receive them.

Thus, the primary way that German governments attempt to deal with child poverty - via state handouts - is turning out to be a dud. Many parents either aren’t aware of their entitlements or are overwhelmed by the complexity of the task.

The result: child poverty has been creeping up for years. Every fifth child is now born into poverty, a level one charity called “a disgrace” for a wealthy country like Germany.

Olaf Scholz’ centrist government aimed to change this.

In its coalition agreement, his Ampel government stated its intention to streamline child benefit payments into a "simple, automatically calculated system" that disburses benefits "directly, without bureaucratic hurdles."

Two and a bit years later, the Families Ministry has outlined the initial details of this plan.

Proposed is a new government agency called the Family Centre, which aims to alleviate the burden on parents and ensure they receive benefits they are entitled to.

“We want to switch from a system that tells people they have an obligation to collect, to one that gives the state an obligation to provide,” said Families Minister Lisa Paus (Greens).

So far, so good…

However, the next part of what Paus had to say has gone down less well. She confirmed that 5,000 new bureaucrats would have to be hired to staff the Family Centre. And, despite the fact that this new agency is supposed to take work away from other government bodies, there will be no reductions in staff elsewhere.

The estimated annual cost in salaries alone is in the realm of €400 million. To put this in context, that is similar to the entire farm subsidy that the government just cut, much to the ire of rural folk.

The reasons for why so many new staff are needed illustrate just how intricate German bureaucracy is.

Der Spiegel recently listed some of the problems involved in setting up a new child welfare office. Removing children from the Bürgergeld system does not reduce workload at the Jobcentre, as Bürgergeld is rife with complexities such as additional payments for families with electric water heating systems. Jobcentre staff will still need to calculate each family’s needs depending on their number of children. Additionally, because basic child support is a form of tax credit while supplementary child support is a welfare payment, the new agency will require separate application systems for these two payments.

Der Spiegel notes:

“Fewer than 5,000 additional jobs would require radical change to both the new law and also other social benefits. That’s because a fundamental problem is that there are a number of other benefits, such as unemployment benefit, housing benefit or child support advanced payments, that interact with the new child benefit but are not harmonised with it.”

One can only guess as to what exactly this means.

As far as I can make out, the inner workings of the German administrative apparatus are a ‘black box’ more mysterious than the mind of ChatGPT. Child benefit payments influence unemployment benefits, which affect housing benefits, which in turn have an impact on heating subsidies, thereby influencing child benefits… and around ad infinitum…

The additional staff are critical to making sure that applications keep moving down this pipeline. If it were to get clogged up then the whole system could implode.

With Germany still in the middle of a budget crisis, the huge costs involved in setting up a new government agency of this size are simply not politically feasible.

The Free Democrats (FDP), a junior coalition partner who control the key finance ministry, have described Paus’ plans as “delusional” and called on her to completely redraft the law.

The opposition CDU have had a field day, claiming that the government is creating a “bureaucratic monster.”

Family minister Paus has since back peddled, making the vague promise that: “I’m sure that staff numbers can be cut via synergies and determined digitalisation.”

In more bad news for the proposed new law, an economic institute the government tasked with evaluating its effect on the job market concluded this week that, in its current form, it would result in the equivalent of 70,000 job losses.

The FDP are pointing out that the coalition agreement committed the government to passing a law that both alleviated child poverty and encouraged parents to stay in work.

In other words, if you’re planning to start a family any time soon it’s time to start getting your paperwork in order!

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