Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

Departmental officials have provided for the use of the committee detailed briefing material which includes comprehensive financial and recipient data. It also provides updates on the Department's performance in meeting its output targets for 2016.

It is useful, in the first instance, to outline the scope and scale of the Department's expenditure and its importance, not alone for those who directly receive the various payments but also for society generally. An allocation of €19.85 billion was provided for the Department this year. This represents 37% of gross current Government expenditure and is €229 million more than was provided in the Revised Estimate for 2016. Each week some 1.35 million people - pensioners, people with disabilities, people on maternity or sick leave, carers and jobseekers - receive a payment from my Department. In addition, over 623,000 families receive child benefit each month for almost 1.2 million children. What is significant about these figures is not just their scale but also what they represent - a social compact where the State, on behalf of all citizens, provides support for those citizens who, for whatever reason, need support at certain points in their lives. Importantly this compact which in 2017 will take about two thirds of all social insurance and income tax receipts can only be sustained if all citizens have confidence in the integrity of the system.

There can be a misconception that most welfare payments go to unemployed persons, but that is not the case. The biggest single bloc of expenditure in 2017 will be on pensions - the State pension, the State contributory pension and widow's and widower's pension - which will amount to almost €7.3 billion or 37% of overall expenditure. Expenditure on working age schemes comprises two programmes, namely, income supports and employment supports which, combined, account for about €4.7 billion or 23% of total expenditure. Income supports, including jobseekers allowance, one-parent family payment, maternity and paternity, account for almost €3.7 billion or 18% of overall expenditure. Expenditure on employment supports, including community employment, back to education and enterprise and various employment programmes, amounts to just under €1 billion or 5% of my Department's expenditure. The next biggest subhead is expenditure on illness, disability and carers' payments which will amount to over €3.8 billion or 19% of overall expenditure in 2017. Expenditure on children and families will account for nearly 13% of total expenditure or €2.6 billion, of which €423 million will be spent on family income supplement paid to low-income working families. Expenditure on supplementary payments such as rent supplement, agencies such as MABS and the CIB and miscellaneous services accounts for €863 million or 4% of overall expenditure.

Nearly all of the expenditure incurred by the Department is demand-led. This demand is driven by demographic trends, including ageing of the population, and economic factors such as developments in the labour market. As we all know, Ireland has experienced a recovery in employment that has been much more rapid that even the most optimistic analysts projected. There are now more than 2 million people in employment, with 65,100 net new jobs added in the past year alone. As a result of this growth in employment, CSO data show that the unemployment rate as of April 2017 was 6.2%, a reduction of 3.5 percentage points over two years and about nine percentage points lower than its peak level of just over 15% four short years ago. Long-term unemployment now stands at 3.6%, which represents a reduction of 43,700 people in the past two years. The level of youth unemployment has fallen to 12.9%, a fall of 8.5 percentage points over two years and down from a peak level of over 30%. These trends in unemployment have fed into the live register. At the end of April there were 42,000 fewer people on the live register than at the same time last year and over 79,800 fewer than this time two years ago. The live register peaked at a figure of 470,000 in mid-2011 but stands at 263,400 as of last month, a reduction of over 44%. The last time it was at this level was nearly nine years ago, in October 2008, when the population was lower than it is now.

The reduction in the live register is freeing the resources we need to meet demands emerging from demographic changes. In addition, it provided the basis on which I could, in budget 2017, take steps to ensure everyone would benefit from the recovery, including retired people, people with disabilities, carers, lone parents, farmers and people who were unemployed. In doing this and referring back to the concept of the social compact mentioned I sought to balance the increases in social welfare payments with measures designed to make sure the system was seen to work for and by people who were contributing to the system such as people in employment and paying PRSI, including self-employed persons. On budget day I announced the first general increase in all weekly rates of payment since 2009 at a cost of €284.5 million in 2017. Approximately 1.5 million people have benefited from this increase, which took effect in March. As promised in the programme for Government and the confidence and supply agreement with Fianna Fáil, I also extended social insurance benefits for the self-employed. Since March self-employed contributors can avail of the treatment benefit scheme which includes free eye and dental examinations and contributions towards the cost of hearing aids and contact lenses.

This will be extended in October to include other benefits for those employed and self-employed.

I also introduced changes to improve the reward for work for lone parents who take up some employment. The income disregards for the one-parent family payment and jobseekers’ transition payment increased by €20 from €90 to €110 per week. This change improves the level of take-home earnings of lone parents. Farmers in receipt of farm assist also saw the reintroduction of disregards from their farm and off-farm income from self-employment last March. I was also pleased to be able to increase the number of places on the rural social scheme by 500 this year.

A number of the 2017 budget measures have yet to take effect. Most significantly, from December, self-employed contributors will be eligible to apply for the invalidity pension for the first time. This will give them access to the safety net of a guaranteed income support if they have the misfortune of experiencing a debilitating illness or injury that prevents them from returning to work.

Treatment benefit entitlements will also be extended from October 2017, which will provide further dental and optical benefits to both employees and to the self-employed for the first time. That includes free eyeglasses or a subsidy towards them, certain periodontal treatments, certain contact lenses where medically necessary and scale and polish from the dentist. This was removed some years ago but is now being restored to employees and extended to the self-employed for the first time, as well as their dependent spouses.

From the commencement of the next academic year in September, a €500 annual cost of education allowance will be made available to back-to-education allowance participants with children. This includes lone parents as well as couples. This will help parents to return to and remain in education.

From September, young jobseekers age under 25 years will be entitled to receive the full maximum rate of jobseeker’s payment of €193 per week when they engage in educational activity under the back-to-education allowance scheme. This is an increase of €33 or 21% on the previous level of payment and represents the largest single increase in the budget package. That is expressly for people under 25 years who enter education, having been unemployed.

Budget 2017 also provided for the inclusion in the school meals scheme of an additional 80 schools newly designated as DEIS by my colleague, the Minister of Education and Skills, Deputy Bruton. Furthermore, for the first time in many years, school meals will be extended to schools outside of DEIS, with the phased extension of the scheme to breakfast clubs in non-DEIS schools from September 2017. I do this noting and being aware that more than half of children who suffer disadvantage do not attend disadvantaged schools. They very often attend the school in the district or parish next door. That is why this is a programme that I would like to make universal in the years ahead.

Finally, a Christmas bonus, of 85%, was paid to over 1.2 million long-term social welfare recipients, such as pensioners, people with disabilities, carers, lone parents and long-term unemployed jobseekers at a cost of €220 million.

In comparing the Department’s expenditure in 2016 with the allocation for 2017, it is important to note that variances in expenditure on most social welfare schemes are typically explained by a combination of factors. These include trends, including downward trends, in recipient numbers, changes in average weekly payment values and differences in the number of paydays in any given year. In addition, comparisons between 2016 and 2017 expenditure are further impacted by the measures introduced in budget 2017, including the increases in the weekly rates of payment; and the payment of an 85% Christmas bonus is 2016 costing approximately €220 million. Provision for such bonuses is made, subject to the financial position of the State, in October of each year as part of the budgetary process and is not included in the Revised Estimates at this time.

The Department has also provided briefing regarding claims processing last year. For most of my Department’s schemes, claims are processed without delay and within or close to the Department’s processing time standards. However, for some schemes the processing time standards were not achieved in 2016. This was particularly the case in schemes such as the carer’s allowance and domiciliary care allowance, which is of great concern to me. The Department now reports that there have been significant improvements in the processing times across these schemes since 2016. For instance, in April 2017, 75% of carer’s allowance claims were processed within target, compared with7% in April 2016. That is a dramatic improvement and I am grateful to our staff in Longford and Carrick-on-Shannon for that. In addition to this, the number of claims on hand is 36% lower at the end of April 2017 compared with the same month last year. We are very much getting through that backlog.

Committee members will be aware that in recent months, delays have been experienced in processing maternity benefit claims received via the postal system. In order to tackle these delays additional staff have been allocated to the processing team in Buncrana and performance is beginning to improve. I had the pleasure of visiting the staff in Buncrana last Friday.

It is important to note, and this may not have come across very clearly in the media, that these delays only apply to postal claims. If one claims online, claims can be processed much more quickly and in fact, almost two thirds of people who claim online will get a decision instantaneously. If, in their constituency work, members come across people who have made a paper application and are still waiting for an answer, they can still put in an online application. An applicant does need a public service card to do so but that is all. I would encourage any expectant mothers or fathers to use the Department’s online facility .

A lot of public attention has focussed recently on my initiative to raise awareness of fraud. This campaign aims to encourage people to comply with social welfare rules and to report any instances of fraudulent activity of which they have knowledge. We all know the vast majority of people on social welfare are claiming the correct entitlement due to them. However, a small minority are claiming payments to which they are not entitled either because they do not understand the rules or because they deliberately choose to ignore them. Many are employers, paying people in cash who do not pay PRSI on behalf of their employees and therefore deny them social benefits. Some have hundreds of thousands of euro in the bank, and we have many estate cases on hand on those lines. Others have jobs, do not pay tax on the work they do, and claim social welfare. Some do not even live in the country or may have dual identities.

Given the scale of our expenditure even a low level of fraud amounts to very large sums of money; money that is desperately needed in other areas of Government activity, including within my own Department’s schemes and services. While fraud rates of 0.5% or 1% may seem minuscule to some, in the context of a multi-billion euro budget, the sums are considerable, certainly tens of millions if not hundreds of millions of euro. It should be borne in mind that €10 million is what it would cost to increase the back-to-school clothing and footwear allowance by 25% this summer. If I can, it is my intention to use any savings made from this campaign to do that. In addition, if the public is to retain confidence in the integrity of the welfare system, it is important that we not only tackle any fraudulent activity but that we are seen to do so. Taxpayers expect us to do that. For this reason it is appropriate that we engage in a public awareness campaign from time to time and I make no apology for so doing. To date this campaign has seen a 50% increase in reports made by members of the public to the Department. I should point out that it accounts for maybe one sixth of my Department’s publicity budget this year, five sixths of which has been spent telling people about benefits they are entitled to but may not claim, for instance the new benefits for the self-employed, the Abhaile service for people who are in mortgage arrears and the new paternity benefit scheme before that.

None of us know if and when we might require the support of the schemes and services operated by the Department. What we do know is we want supports to be available if and when we need them. For this reason we need to build and sustain a consensus across society regarding the funding model and benefits that make up our social welfare system.

Social welfare legislation provides for the carrying out of an actuarial review of the Social Insurance Fund every five years. The Department has engaged KPMG to carry out the latest review and this will be completed by mid-August. The review will examine the financial health of the fund in the short and long term. The outcome of the review will help to inform the debate on the funding approach and the types of benefits which should be available as our society evolves, the nature of work changes and our population ages. I intend to consult widely on these questions and the committee will be an important stakeholder in this discussion.

To conclude I have sought, in this opening statement, to provide a broad overview of the role of the Department and its expenditure programmes and to set out the changes made in budget 2017 that are reflected in the Estimates presented here today. I look forward to hearing members' views and will welcome any questions.