All children aged under 16 will be eligible for a children's allowance of at least Lm107, irrespective of the household's income.

Until now, households earning over Lm10,300 were not entitled to this benefit. In all, an additional 25,000 children will now be entitled to the allowance.

This also means that the minimum children's allowance - previously Lm52 - will be raised to Lm107.

The children's allowance on the second and subsequent children has been doubled, bringing it in line with that given to the first child. This measure affects 33,000 children.

Giving some examples, Dr Gonzi said yesterday that a family of two children under 16 with an annual income of Lm7,000 now received Lm294 in children's allowance per annum. That will rise to Lm392 next year, an increase of 33 per cent. A family with three children under 16 with an income of Lm10,000 now received Lm156 per annum and will henceforth receive Lm300.

The changes to the children's allowance will cost the government an additional Lm5 million a year, 40 per cent more than in 2007.

In a recent interview, Parliamentary Secretary Tonio Fenech had explained that the measure was aimed at removing any discrimination against larger families.

The pre-budget document explains: "The government is committed to promoting policies that reduce barriers to couples deciding to have more children, to promoting policies that assist families with children and that are conducive towards balancing work and family commitments".

In crude terms, however, by encouraging larger families, the government is ensuring that there are enough people working in the future to be able to sustain the pensions of the elderly.

The government is faced with dual concerns: People are living longer - meaning that they spend many years drawing a pension and requiring more costly care. By 2010, 21.6 per cent of the population will fall into this category but by 2035, the percentage will rise to 31.2 per cent.

The cost of health care for the elderly rises sharply: It costs nearly four times as much per year to treat an 80-year-old as it does a 60-year-old.

This problem is exacerbated by the fact that people are having fewer children who will grow up to earn money, the taxes on whom will pay for government expenditure on pensioners. Between 1985 and 1995, the population grew by 9.5 per cent but only by 6.9 per cent between 1995 and 2005.

While there were 4,848 births in 1997, this fell to 3,885 in 2006. During this period, the number of deaths rose, from 2,888 in 1997 to 3,216 in 2006.

The size of families has also shrunk. Over 53 per cent of families have only one child, while a third have two. There were only 24 children in 2006 born to families with six or more children.

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