Éamon Ó Cuív (Galway West, Fianna Fail) | Oireachtas source

I thank the officials for the paper. I understand it is fairly general because they are still working on the report. It is very timely that we are having this meeting and I am glad to make an input to it, looking at the matter from a broad point of view.

I will first address the means testing of capital. Normally thrift is encouraged in any state. I have found that because they worry about the future, people on low incomes are sometimes very thrifty. I have met people in very poor housing who worry - wrongly, technically, but that does not stop the worry - that they will not be able to afford a nursing home or some other contingency and so they do without and save money. The second general statement I will make on saving is that it is fair to say that, over the years, the State has been encouraging couples to have joint accounts. If there is one full-time homemaker in an earning couple, it is generally perceived in society that it would be good practice for the couple to share all the income because it is just a particular division of labour as to how they organise their lives.

Generally-speaking, the Department does not count the first €20,000 of income and it ignores the first €50,000 of income for the disability allowance and carer's allowance. After that, for the next €10,000, it assess it at €1 per €1,000 per week, which is equivalent interest of 5%. The next €10,000 is double that again, which is 10% per week. After that, you hit the wall and it is assessed at 21% per week. It is interesting that with the medical card, there is a choice of doing it on the nominal system or using real interest earned. For the past ten years, there has been no need to place a bet on that because it has been a 100% certainty that any sane person with a lot of savings will opt for the actual interest earned. That will have been nil in some cases, less than 1% in other cases and above 1% only in very rare cases. It might be a little more than that now.

Let us look at how this really traps people. In the case of disability allowance, over the years I have dealt with cases involving parents of highly disabled children who grow to adulthood. They will never have an opportunity to work and will never have an opportunity to work or make social security contributions. The parents, being hard-working, will own a house and have some savings. As often happens, parents die ahead of their children. Let us take a simple case where the parents die and leave a family home to be divided between two, three or four children, or whatever number of children they had. Let us presume the person who was highly disabled from birth inherits €150,000. In the case of the offspring who are in employment, there is no tax on that because an inheritance of that amount would not attract any tax. Mr. Egan will accept that. The one person who loses everything by getting something is the person on disability allowance because the Department wipes out the disability allowance.

I have been on about this situation, and the Minister knows about it. I recall one day in the Dáil when she was taken aback by the realities of this situation. This type of reality is not a rare occurrence.

The next issue we hit are contributory pensioners with an increase for an adult dependant. I am going to take the example of two couples to show how this thing needs reform and needs this reform now. In couple A, one person worked full time and the other was caring for children, parents, relatives and everybody. There are many people like that in this country. This was the case in the past as well, and there are many people who worked like this to rear their families who are now helping to rear their grandchildren to support parents in situations where there are two working parents. These people have made a ginormous contribution not to the State but to society.

Let us presume a good income was coming in here in this example, and if that all the income, including property bought, retirement lump sums and inheritances, of the pensioner - and I am specifically saying this about the contributory pensioner in this example, that is, the person who had been earning - was kept by this pensioner in his or her own name, then the full IQA rate would be paid. In other words, there is a very odd relationship in the context. Despite the fact the spouse was caring for people full-time, the actual pensioner kept everything, including all the savings, investments and everything this couple got. I do not think most people would think that was an ideal situation, unless there were some unusual circumstances.

Now, let us take an example of another couple, with the same amount of money, in a situation where they had put everything in their joint names. What happens then? The adult dependant would be assessed on half of the savings. In that circumstance, no adult dependant allowance is paid. Each of the couples in these examples would have the same amount of money, the difference being that in one case it is just in one name. The people who shared everything, those two people who loved each other in such a way that they shared everything and saw all their income as a household income and not as two personal incomes, will not get the increase for an adult dependant. In my view, it is mind-boggling how this can be considered fair.

It is well known that I believe we should be very generous. Some work has been done on this issue and the one-parent family payment. We should, however, be very generous in relation to means-testing one-parent families. We need to up the thresholds and the disregards. Generally, we need to make it attractive for people to earn income.

I would like to come to a general principle. I think it is fair to say that in the taxation system, when people hit a tax rate of over 50%, they consider it as coming into the level of a disincentive. If there are proposals from political groups suggesting there should be a tax rate of 60%, 70% or 80%, the argument put forth all the time by economists, and so on, is that there is a massive disincentive when we get to this level of claw-back of money earned by people. These may be very wealthy people, maybe even people earning millions of euro. It would be better to stimulate the economy and to allow these people to keep at least half their money.

In this regard, it is important to look at our general approach to income earned from self-employment. I refer to private pensions, and disability allowance and jobseeker's allowance, in this context. Generally speaking, it is a euro for a euro. Of course, there is a disregard for disability allowance but there is not for jobseeker's allowance. If somebody were to get some employment, the State thinks in this case it is okay to take 100%, and never considers that this is creating a massive disincentive for a very large number of very small people. This means it is very hard for them to get off the floor.

When we look at the fish assist and farm assist schemes, it is considered generous to leave the person who earns the money with 30% of it. The richest people in the country do not pay anything like this. We seem to think this is a good system and one that is fair and stimulates the economy. I remember being utterly shocked when I went to the Joyce Country first. Now, it was worse in those days and we are coming from a very dark and bad place. I was absolutely horrified when I found out about the situation of small farmers, and they were virtually all small farmers in the area. I would say eight out of ten households had some kind of a small farm. Many of them were depending on assistance schemes because Connemara land is not the best. In those days, it was 100%, and then there was the concept of the own produce consumed. This meant that if people cut their own turf and grew their own potatoes and vegetables, they had their jobseeker's allowance - because there was no farm assist scheme in those days - reduced accordingly. I remember when I came into this House I persuaded the Minister at the time, Deputy Michael Woods, to change this situation. It was one small step forward.

I think there are only about 4,000 people on the fish assist and farm assist schemes. It would be interesting to find out how much it would cost to take a very finite step and put those recipients at the same rate of penalty, or hand-back to the State, from their income as the richest people pay. I refer to 50%. This would be a 20% improvement in the situation. The witnesses are going to tell me about disregards for eco-schemes, etc. My own belief is that the disregards should not be for eco-schemes but for all European CAP payments. The charge on the remainder of the income is still 70%.

The next matter concerns jobseeker's allowance, farm assist and all the rest, including disability allowance. I refer to somebody who is on jobseeker's allowance, disability allowance or farm assist and what happens if the spouse or partner gets a job and goes earning. After the employee's PRSI is deducted, which is small anyway, let us say this person earns €360 a week. This person will now have lifted the family quite considerably, which is very desirable. The person has got employment and is working hard for their income. For the other partner receiving a payment from one of the schemes already mentioned, how is it possible to calculate how much will be taken off the family's social welfare payment? The €360 is taken and then €60 is subtracted from it. This leaves €300. This is then multiplied by 60%. We now have €180 remaining. Then this €180 of the original €360 is taken away from the social welfare payment.

Again, when one compares this to the high rate of tax one suddenly realises how penal it is.

I am sorry for going on so long but I have a finite agenda. The Leas-Chathaoirleach might indulge me because I did present this paper to the committee. Non-contributory pension means tests are a very interesting idea. Mr. Séamus Brennan brought in the provision, when he was Minister, that if a person gets a job then he or she has a non-contributory pension. In 2022, there were 97,727 non-contributory pensioners. In 2013, there were 95,801 non-contributory pensioners but when the increase in population is taken into consideration the number has dropped quite dramatically.

If a person earns €200 a week then that is not counted for the means test but there is a snag. For whatever reason, the Department regards an income of €200 a week earned from farming or fishing as self-employed income so it is not disregarded. Let us say there are two people who each earn €200 a week but one is in a PAYE job and the other is self-employed. One gets to keep the full pension and the other, with the exception of disregards for the agri-environment grants, loses a €1 per €1 out of the pension. Probably the biggest single group of people who are on non-contributory pensions are small farmers and fishermen. Why? Because they were not allowed to pay PRSI for many years and if their income is not over €5,000 they still cannot pay PRSI. What would it cost? Nothing.

In the last year, I had a case where a person was brought to court because he had not declared his or her full income from fishing and the State wanted 100% of the fishing income back. The case went back years and he owes a big debt to the State. At the stroke of a pen we could change the wording of the provision to say "any income earned up to €200 a week by a non-contributory pensioner is disregarded". Such a provision would save the Department a lot of time spent chasing people.

In the last week I had a case where it was alleged, and there is no evidence of this although I have written asking for the evidence, that somebody who is literally living from hand to mouth had an income from picking periwinkles. This man is a pensioner. If the Department has noting better to do - it is not the departmental officials' fault because they are only following the law - and thinks this is useful and should not be corrected then I am a little bit surprised.

When the rural social scheme was introduced the idea was that if a person joined the scheme, he or she could keep his or her income. The rural social scheme was taxable but once a person was eligible to join the scheme then he or she got to keep all of the farm income. Therefore, if a person worked 19 hours a week then he or she got the same pay as somebody would get who is on a community employment, CE, scheme or whatever. Suddenly, the rules changed and the same anti-enterprise view was taken. Now a single person who joins the scheme gets the basic rate. Ironically, a couple who joins the scheme will only get the top-up amount for working 19.5 hours because the full assessment of the farm income is taken into account so there is no gain from being on farm assist. When I wrote my report the top-up amount was €22.50 and I think it has been increased to €23. It means it is still less than €1 an hour for the work and that is regressive. The scheme was purposely designed to work the other way and be a stimulant to farmers to make the fantastic contribution that they can make. If anyone goes around the rural parishes of Ireland and wonders at all the beautifully maintained green areas, sports facilities, halls and all the rest then one will see that the rural social scheme has made a fantastic contribution. Every community would say that because these are highly-skilled workers who are used to working.

The rule changed in 2016 although I could be wrong about the year. I have repeatedly tried to get the figures from the Department on how many people with a dependent adult, child or children have joined the scheme since because simply it is not worth their while. The only people for whom it is worth their while joining the scheme now are single people with no dependants.

I have summarised some of the more glaring, urgently needed changes to the scheme. We do not need to wait years to start making the necessary changes. We do need reform and we have needed reform since long before I was in politics. I have worked for 50 years and grew up in a situation where means testing never entered my life but things changed when I became a co-operative manager in the west of Ireland. Then you would hear people saying that the people of the west would not work. The people who made that comment really did not understand that 100% of the income that people would have earned from these small farms, fishing and so on would go straight to the State. As I said, I predicate my case on the fact that the richest people think it is not worth working if they do not get to keep 50% of their income for themselves yet we expect the people who are least well off to live with what to me is an absolutely Victorian means-testing system. I am not saying this personally. I am saying this system, and long before the time of our guests, is Victorian and urgently needs reform.

At one stage my proposed changes were estimated to cost €50 million. I do not believe they would cost that much because the stimulus given would far outweigh that. Even if it did, as pointed out earlier, the percentage is very small when one subtracts €50 million from the Department's spend of €27,000 million. I thank the Leas-Chathaoirleach for his indulgence.