Dr. Seán Healy:

I thank the committee for inviting us. We are very happy to provide an input on this issue, which we have been addressing ourselves in a variety of ways for quite a number of years.

Social Justice Ireland supports the indexation of the minimum core social welfare payments to ensure that recipients do not fall behind the rest of society. We propose that the benchmark should start at 27.5% of average earnings, as a minimum. The reason we picked that for a starting point or as a first stage in the benchmarking process is that it is equivalent to 30% of gross average industrial earnings, which was the standard that had been set and was achieved in the budget of 2007. We also believe that the Government should commit to reaching the benchmark of getting up to 27.5% over a two-year period. We further propose that a pathway and process would then be outlined for the indexation of social welfare payments to 30% of average weekly earnings. The indexation of social welfare rates would provide certainty to households and people on fixed incomes. It would also provide certainty to the Government in its planning. It would further begin to address the many challenges of making ends meet that people with limited resources experience on an ongoing basis.

Our submission, which we have sent to the committee, is quite detailed. It outlines in depth the process whereby benchmarking was established a few decades ago and how the index and targets were set. We show how they were set and how the benchmark was reached in 2007. The progress made on social welfare payments and benchmarking between 2001 and 2007 marked a fundamental turning point in Irish public policy, because the achievement of the benchmark to average earnings of core social welfare rates indicated significant progress. It also marked the delivery of a long overdue commitment to sharing the fruits of the country's economic growth that went back to the mid-1990s.

We propose that the benchmark should start at 27.5% of average earnings as a minimum. The Government should commit to reaching that over two years. At the moment, that benchmark is the equivalent of €222.08. This means that there is a shortfall of €14 between it and the core social welfare rate for a single person today. We also propose that a pathway and process would then be outlined for the indexation of social welfare payments to rise to 30% of average weekly earnings. This should be overseen by an independent body, which would outline the indexation pathway and base any recommendations on independently verified data and calculations. We must point as a model here to the living wage technical group, which has a very clear pathway and process in place for how it calculates the living wage level per hour, year after year.

In terms of the impact of indexation, there is comprehensive research to show that the social welfare system is the key to reducing poverty among the poorest in society. I accept there are others. If people have a job, they need things like refundable price credits and things of that nature to be done. At the core, however, the poorest and most vulnerable are those who are depending on the core rates of social welfare. Welfare payments target those most in need in society and are very successful at reducing poverty. Social welfare payments also play a central role in alleviating poverty generally. When resources are focused on the welfare system, they assist those who need most help. Conversely, when the Government provides limited resources to the welfare system, it undermines the living standards and the needs of the weakest in society. That is a critical issue that needs to be taken on board.

It is also important to note that the value of core social welfare payments has been falling over the past decade. That might not be tremendously obvious to members, but I draw their attention to a report supplied to the committee by the Parliamentary Budget Office. That report is in the public arena and is only a month or two old. It analysed changes in the social welfare rates from 2011 to 2022.

It also looked at core social welfare rates and rate changes over time compared with inflation and wage changes. The analysis shows that flat increases in social welfare payments, such as the €5 increase to be applied to core benefits in 2022, result in disproportionate failures in keeping pace. Benchmarked against inflation or wage changes, the value of the payment is not €208 now, but €193 compared with 2011. This is an important point and is one of the reasons we are arguing strongly that the benchmark should be linked to the income that people are getting in society. Otherwise, there will be a falling back, which is why we would not be happy with just indexing the payment to inflation. If it does not keep pace with wages, people will fall behind the standard of living that is generally accepted in society. Indexation would provide certainty for the Government in terms of resources and revenue generation. It would also provide certainty for those on fixed incomes who have to make ends meet on limited resources on an ongoing basis. All social welfare payments should be included in the indexation process, not just a few select ones. This is one of the objections that we have to the idea of picking and choosing particular social welfare payments to increase at budget time while not increasing others, the core rates in particular.

In terms of resourcing, all direct taxation should be included. It should not just be increasing PAYE taxation or something of that nature.

In general, fluctuations in the poverty rates among those largely dependent on the welfare system have in the past correlated with policy moves that allowed the value of welfare payments to fall behind wage growth. Consequently, a great effort is required to increase these payments to catch up. If those dependent on social welfare are not to fall behind the rest of society at times of economic growth, the benchmarking of welfare rates to wage rates is essential. If we do not do this and instead continue as we have been, the division in society will get deeper. Something I am prepared to discuss with anyone is that deeply divided two-tier societies are not just bad for the people who are suffering in them because they do not have incomes, but also for business. Everyone would benefit from a benchmarked welfare rate at the core, which would keep the value of the rate rising with the rest of society. Benchmarking seems to be the key. We have suggested rates in our submission as the first two steps. There is a question over whether even this would be sufficient to allow people to live life with dignity, but the bottom line in this discussion as I understand it is whether indexation should be promoted.

I will conclude with that. We will take whatever questions the committee has in due course.