Heather Humphreys (Cavan-Monaghan, Fine Gael) | Oireachtas source

I thank the committee for the invitation to meet with it today to present the 2021 Supplementary Estimate for the Department of Social Protection. I am seeking a Supplementary Estimate of €473.5 million for 2021. The purpose of this is to address a shortfall in funding for my Department that is partially needed to fund the Christmas bonus for Vote 37 social assistance recipients. There is also a net overspend caused by funding of Covid-19 supports during 2021.

I was pleased to announce that a Christmas bonus will be paid at the rate of 100% again this year. As the committee will be aware, the Christmas bonus recognises the needs of people who are long-term financially dependent on their social welfare payment for all or most of their income, such as pensioners, people with disabilities and carers. This year, those in receipt of jobseeker payments and the PUP will receive the bonus once they have been in payment for at least 12 months - down from the 15-month requirement of previous years. It will benefit more than 1.4 million long-term social welfare recipients and is estimated to cost approximately €313 million. This cost is broken down into €131.4 million for Vote 37 recipients and €181.4 million for Social Insurance Fund recipients. The bonus that is paid to people in receipt of payments from voted schemes is met entirely by the Exchequer. As the committee will be aware, there is a 2021 deficit on the Social Insurance Fund, which is subvented by the Exchequer. This means that the Christmas bonus paid to those on social insurance schemes increases the fund deficit. Indirectly, the Exchequer will fund the cost of this Christmas bonus in full as it will provide funding to meet this increased Social Insurance Fund deficit. As the cost of the bonus is not included in the original Estimates for the Department and, unless equivalent savings on other schemes meet the entire cost, a Supplementary Estimate is required to ensure that the bonus gets paid. In the brief provided to the committee, I have separately included the additional cost of the Christmas bonus to be paid for each scheme showing the effect of the bonus on the requirement for a Supplementary Estimate. This table also provides the outturn position on the various schemes prior to the payment of the bonus, which eases comparison between the original Estimate and the Supplementary Estimate. I hope the committee finds this approach useful.

The balance of the Supplementary Estimate is required to meet a net overspend on the schemes and services delivered by my Department. In May 2021, a further Revised Estimate of €29.14 billion was considered by the committee for projected 2021 social protection spending. This Estimate was based on Government decisions at the time that included that both the PUP and the employment wage subsidy scheme, EWSS, would cease after June 2021. It was anticipated that income support for people who were unemployed after that date would be provided, where necessary, through the standard jobseeker income support schemes. Given the fact that the PUP and the EWSS were extended beyond that date, we see overspends on these schemes and underspends on jobseeker payments.

I will go through that in a little more detail now. Both the PUP and the EWSS continue to be paid up to the end of 2021. Covid-19 has fundamentally impacted the pattern and level of spending as compared with that projected in May 2021. Spending on the EWSS scheme will be more than €2.2 billion higher while more than €700 million in additional expenditure will be incurred for the PUP. The Covid enhanced illness benefit scheme will cost nearly €67 million extra. There are also areas of underspending. In particular, jobseeker spending will be nearly €1.2 billion less than anticipated. This is largely due to the strength of the recovery in the labour market combined with the extension of the PUP. I have provided the committee with full details of all schemes where the projected end of year Vote expenditure deviates from that projected in May 2021.

The position of the Social Insurance Fund has also altered from the May 2021 projections. Fund expenditure was estimated to be in excess of €15.3 billion. Spending is now expected to be just under €15 billion - some €347 million less. PRSI income is now projected to be more than €11.95 billion, which is €825 million more than estimated. This means that the subvention required from the Exchequer is significantly reduced. Instead of an anticipated subvention of €3.76 billion subvention, the required subvention will be €2.59 billion. This is €1.17 billion or more than 30% lower.

Taking account of the altered pattern of spending I have highlighted, it is now projected that overall social protection spending in 2021 will be €30.54 billion. This is a difference of €1.4 billion over the May 2021 estimate. Not all of this €1.4 billion is being funded through the Supplementary Estimate. There is additional PRSI income over that previously estimated of €825 million. The Vote benefited from additional income of nearly €97 million, mainly due to more than expected recoveries of overpayments from employers on 2020 temporary wage subsidy scheme, TWSS, claims. Taking account of these, the total Supplementary Estimate required to meet the shortfall is €473.5 million.

The expenditure giving rise to this €473.5 million is made up of €312.4 million to pay the Christmas bonus to long-term recipients of social welfare payments and in excess of €23 million to bring forward to the week of the budget, both the €5 increase in the fuel allowance payment and the change to the means test for the scheme, while €138 million of the Supplementary Estimate refers to net overspending on the Department’s schemes and services as set out in my earlier comments.

To conclude, I hope that my opening statement, together with the briefing material provided to the committee, has given it a clear overview of the Department's expenditure in 2021 and the reason underlying the necessity to seek a Supplementary Estimate.