Minister for Finance Brian Lenihan clearly signalled in the Budget that the cost of child benefit would have to be cut. This was to be achieved through both taxing and means testing the payments.

Now, however, it has become clear to the Government that - for both legal and logistical reasons - it cannot pursue this course of action. 

Senior civil servants have said they cannot apply a means test to the universal payment because of the avalanche of work it would generate. There are 600,000 families and 1.15 million children in receipt of child benefit.

Nor is it possible to tax child benefit payments because these payments have been legally regarded as the income of the child.

Another problem is that the Constitution guarantees the State will support families, which is taken to mean all families alike.

There are also concerns that legal difficulties would arise with any difference in the treatment of cohabiters, separated and married couples.

According to Labour Spokeswoman on Finance Joan Burton, the Government could never have delivered on its promise to tax child benefit.

"Means-testing is horrendously expensive and potentially extremely difficult to administer," she said. 

The coalition is now likely to bring in a flat-rate reduction to make the savings it deems necessary to the current €2.5bn expenditure on child benefit payments.

A 10 per cent cut in the current rate would result in a drop from €166 to €150 a month for each of the first two children, and from €203 to around €180 for each subsequent child. (Source: Irish Independent)