Mr. Niall Egan:

I thank the joint committee for giving us the opportunity to appear before it to discuss the issue of family income supplement in the context of the transition of single parents to it. I will also take the opportunity to discuss the new back to work family dividend which will assist parents who are moving from welfare payments to work.

I am joined by my colleagues, Ms Catherine Kellaghan, principal officer with operational responsibility for the Department’s Longford headquarters and the schemes operated from there, including family income supplement, and Mr. Michael Cunningham, assistant principal officer in the child and family income policy section. I have responsibility for policy on both jobseekers and lone parents. I understand the clerk to the committee has circulated copies of the presentation and my colleagues and I will be pleased to address questions committee members may have at the conclusion of the statement.

Family income supplement is a weekly tax-free payment for employees on low earnings with children. The payment, effectively, preserves the incentive to take up or remain in employment in circumstances where the employee might only be marginally better off than if he or she was claiming other social welfare payments. Family income supplement is an important policy instrument in reducing child poverty in working households, as well as improving incentives to work. It is estimated that the Department will spend approximately €349 million this year on family income supplement, an increase of more than €50 million when compared to last year.

To qualify for payment of family income supplement, a person must be engaged as an employee in full-time paid employment which is expected to last for at least three months and working a minimum of 38 hours per fortnight, or 19 hours per week. The applicant must also have at least one qualified child who normally resides with him or her or is part of a family supported by him or her. Furthermore, family income supplement is calculated on the basis of 60% of the difference between the income limit for the family size and the weekly family income of the persons raising the children.

An integral part of the family income supplement scheme is that once the level of payment is determined, that rate will continue to be payable for a period of 52 weeks, provided the person concerned remains in full-time employment. The rate of payment may be increased following the addition of a child to the family, either through birth, fostering, adoption or guardianship, in the course of these 52 weeks. On the other hand, the rate of payment will not change if there is an increase or decrease in the recipient’s earnings or other family income. A key advantage of this approach which is unique to the family income supplement scheme is that claimants can be certain they will receive a guaranteed level of income support throughout the period. This certainty is important to the success of the scheme as it provides a real incentive for families to avail of employment opportunities and ensures a degree of income stability for recipients.

In line with this policy, current social welfare legislation generally precludes changing the family income supplement rate within the 52 week payment period. However, in the light of changes to the one-parent family payment scheme, regulations were introduced in July 2013 as an exceptional measure to enable entitlement to family income supplement to be changed during the 52 week period such that former one-parent family payment recipients in receipt of family income supplement will have the supplement payment automatically increased to compensate them for 60% of the loss of their one-parent family payment.

There has been a steady growth in recent years both in the number of families supported by family income supplement and associated expenditure, with the numbers in receipt of the supplement rising from 26,000 families with 56,000 children in 2009 to 50,000 families with 112,000 children by the end of last year. Increased awareness of family income supplement as a consequence of the Department’s information strategy for the scheme and significant improvements in customer service and processing times for family income supplement customers have contributed to the increased numbers. Some of the increase in the numbers in receipt of family income supplement is also due to transfers from the one-parent family payment arising from the gradual reduction in the age of the youngest child to seven years.

The final phase of the one-parent family payment scheme age change reforms will take place on 2 July this year. The maximum age of the youngest child at which a lone parent's payment will cease will be reduced to seven years for almost all recipients. It is expected that approximately 30,000 lone parents will move from the one-parent family payment on that date, of whom approximately 5,200 are already family income supplement recipients. These individuals will see their family income supplement automatically increase from 2 July and letters were issued to them last month explaining their transition from the one-parent family payment. This will ensure their family income supplement payment will increase to partially compensate them when they move from the one-parent family payment.

Lone parents who will be affected by the final phase of the reforms to the one-parent family payment scheme have been invited to attend information seminars in their local Intreo office. To further encourage lone parents to take up employment or increase their hours of employment, departmental staff are actively promoting at these information seminars the family income supplement scheme as the best financial option available to them. Lone parents who can increase the number of hours they can work to 19 per week will be significantly better off than when in receipt of the one-parent family payment only.

To assist further, the Tánaiste and Minister for Social Protection, Deputy Joan Burton, has asked the Labour Market Council to specifically examine the issue of how employers nationwide can assist lone parents in increasing their hours of work to enable them to qualify for the family income supplement payment. The employer engagement sub-committee of the Labour Market Council considered the issue on 1 May. Officials of the Department sought employer support to increase the number of hours available to these clients to take them over the minimum 19 hour per week qualification threshold for family income supplement. Members of the committee were supportive and undertook to raise awareness of the issue and encourage employers to increase the number of hours available to this client group to take them over the threshold. It should also be noted that lone parents who will move from the one-parent family payment to family income supplement from 2 July will be entitled to receive the new back to work family dividend which was contained in the recent Social Welfare (Miscellaneous Provisions) Act 2015 which the President signed into law last week. This payment allows lone parents and jobseekers to retain the child proportion of their social welfare payment when they move into employment. They retain the full amount for the first year and half the amount in the second. For each child, subject to a maximum of four children, this equates to an additional payment of €1,550 in the first year and €775 in the second.

As the dividend has no impact on an individual’s entitlement to family income supplement, it offers an additional and significant incentive to lone parents to take up employment on top of their existing family income supplement payment. Staff of the Department are actively promoting both the back to work family dividend and the family income supplement sceme, as, combined, they offer a substantial incentive to parents who make the transition to employment. Both in-work supports are captured by the Department’s Better off in Work calculator which is available on its website.

I hope I have given the committee a brief insight into the family income supplement scheme and the steps the Department is taking to promote it and the back to work family dividend to both lone parents and jobseekers. We are very happy to take questions and provide any additional material the committee may require.