Joan Burton (Dublin West, Labour)
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I thank the committee for the invitation to consider the budget and Estimates process for 2013. I welcome this new initiative, which has been put in place on foot of a commitment in the programme for Government to enhance the role of Oireachtas committees in engaging with the whole-of-year budgetary process.

As I outlined at our meeting on 22 May 2012, the Department will spend approximately €20.5 billion on a wide range of schemes and services this year. These services and supports have some impact on the life of every person in the State, and the scope and scale of this expenditure plays a key role in the wider economy and helps to partially offset the effect of the downturn.

The Comprehensive Expenditure Report 2012-2014, published last December, provides for new expenditure reduction measures of €1.033 billion over the next two years in the Department's budget. This includes €540 million of new savings to be achieved in budget 2013. Reducing overall expenditure in 2013 and beyond, as required by these expenditure ceilings, while protecting the most vulnerable people in Irish society will be extremely difficult. A critical analysis of social welfare policy and expenditure will be required and the committee's input in this regard will be valuable in informing the budget process. My officials have provided committee members with briefing material, including a fairly detailed brief on expenditure in the Department, which I hope will assist in our deliberations today. I propose to quickly go through the key points in the briefing in order to inform and begin our discussions. I welcome the views of committee members and I look forward to their engagement on how the Department can achieve its expenditure ceilings in 2013 and 2014.

I would like to take this opportunity to briefly update the committee on some of the Department's key priorities. The Government's priority is to reduce the level of long-term unemployment and, in so doing, to ensure the overall level of unemployment will fall as the economy returns to growth. There are two major elements to the Government's response, namely, the action plan for jobs and Pathways to Work. The goal of the action plan for jobs is to create new jobs, while the goal of Pathways to Work is to help ensure that as many of these jobs as possible, along with other job vacancies, are filled by people on the live register.

As the committee is aware, the Department has established the new National Employment and Entitlements Service, which is central to the realisation of the Government's Pathways to Work policy. The first step in establishing the National Employment and Entitlements Service was integrating staff from FÁS, the community welfare service and the Department. This integration, which involved the transfer of almost 1,700 staff, was completed on schedule in January of this year. It will facilitate the delivery of a one-stop-shop service and greatly simplify the process, as people previously had to engage with three separate organisations for welfare and employment services.

The delivery of a one-stop-shop service is being piloted in four of the Department's offices and will be extended to a further ten offices by the end of the year. Development of this new integrated service is predicated on a case management approach which begins for the client from the moment he or she first contacts the Department.

This personalised response will monitor the client's progress towards the employment, training or education opportunities on an ongoing basis.

There is occasional public debate on whether people on the live register have a financial incentive to work and reference to the relatively high wages that would need to be earned to match or exceed that said to be available on social welfare. However, the great majority of people on the live register have a significant financial incentive to work. For example, some three quarters of people on the live register claim a weekly payment that comprises the personal rate only. The maximum rate is €188 per week. More detailed information on the incentive to work for people on the live register is contained in the committee's briefing material. As members will see, the amounts paid in some cases, for example, where rent allowance is paid to large families of two parents and a significant number of children, can be relatively large. This has been pointed out in many studies and is the basis for my discussions with the Department of the Environment, Community and Local Government with a view to transferring responsibility for rent supplement to that Department.

I am conscious that the people who turn to my Department for support played no part in causing this financial crisis and I will do my best to ensure that the burden of resolving the crisis does not fall disproportionately on their shoulders. One of my key priorities, therefore, is to ensure that the Department's reducing resources are targeted at the people who need them most.

Members will be aware that I had a particular interest in the area of fraud and control when I began in the Department. For this reason, I asked my officials to increase their efforts to combat fraudulent activity. Social welfare fraud is often perceived as a victimless crime, but it is not. It undermines public confidence in the entire system as well as being unfair to other recipients of social welfare payments and taxpayers. It is important at this point to state in the clearest terms that the majority of people on social welfare are claiming only the entitlements due to them. However, we must ensure that any fraudulent activity within the social welfare system is vigorously prevented and combated.

The Department is conscious of its obligation to protect public money and is determined to ensure that abuse of the system is prevented and dealt with effectively when detected, bearing in mind that taxpayers and people paying PRSI are carrying the cost of social welfare. The committee's briefing material provides members with some further information on the work of the Department's control division, including this year's control targets, information on the fraud initiative that I launched late last year and a summary of how control savings are calculated.

I will revert to our consideration of the 2013 Estimates. Table 1 in the briefing details the Department's expenditure on its various programmes in 2012. As can be seen, the largest block of expenditure relates to pensions and will amount to €6.2 billion, approximately 30%, of overall expenditure. Members may wish to note that expenditure on pensions, on a no policy change basis, will increase by at least €200 million in 2013 and increased by a similar figure this year. We have a demographic dividend, in that more older people are living for longer. As such, more people qualify for longer for the State contributory and non-contributory pensions. It is not atypical for someone entering pension age today to claim a pension for a further 25 to 30 years. The demographic challenges are increasing annually.

Expenditure on working age income supports, including jobseeker's and one-parent family payments, accounts for 28% of overall expenditure, some €5.7 billion. Expenditure on working age employment supports, including the community employment, CE, scheme, JobBridge, Tús and various employment supports, amounts to more than €983 million or nearly 5% of the Department's expenditure. This represents an increase of €122 million, some 14%, over 2011 and is a clear indication of my priorities in this area.

Expenditure provision for illness, disability and carer's payments will amount to more than €3.4 billion or nearly 17% of expenditure in 2012. These supports include carer's allowance and benefit, domiciliary care allowance and disability allowance among others. In total, payments to carers amount to more than €700 million.

Expenditure on children and families will account for nearly 12% of expenditure or nearly €2.4 billion, of which nearly €2.1 billion will go towards child benefit while €200 million will be spent on family income supplement.

Expenditure on supplementary payments, agencies and miscellaneous services accounts for €1.2 billion or nearly 6% of expenditure. This expenditure comprises four main elements, namely, rent and mortgage interest supplements of €487 million, the household benefits package of €335 million, free travel amounting to €77 million, and fuel allowance amounting to €214 million.

Members may also wish to note that three quarters of expenditure is incurred by a relatively small number of schemes. This is broken down on table 2 of the material. Other than expenditure on child benefit, members may wish to note that this expenditure relates to the cost of the weekly rates of payment for the recipients involved. It does not include the cost of supplementary benefits, for example, free travel and the household benefits package. As outlined in the table, 1.473 million people are in receipt of weekly payments in respect of 2.2 million people, a significant portion of the population. We pay child benefit to approximately 600,000 families in respect of nearly 1.2 million children. Social welfare's reach into every corner of the country, including the majority of households, is significant.

The sheer scale and scope of expenditure by my Department reflects the Government's commitment to protecting the most vulnerable in our society and recognises the role of welfare expenditure in the wider economy. However, we are in a difficult economic situation, which is reflected by the fact that we are still spending considerably more each year than we take in through revenue. Expenditure ceilings for my Department for 2013 and 2014 have been set in this context and, to be frank, achieving them poses the Government a major challenge.

Table 4 shows how social welfare expenditure increased significantly in the 2002-11 period. It is interesting to note that, in 2009 after the bank collapse and the guarantee, our expenditure increased significantly. Table 5 details the increase in weekly recipients and beneficiaries while tables 6 to 8 outline the payment rates during those years for various social welfare schemes. Those rates continued to increase after the crash.

One of my key priorities as Minister for Social Protection - the country's largest spending Department - is to bring some balance to our expenditure and funding, in particular by starting to put the Social Insurance Fund on a sustainable footing. This is important not only so that we can recover our economic sovereignty, but also to ensure that the social protection system is sustainable in future. The significant shortfall in the Social Insurance Fund, which is being met by the Exchequer, and the prospect of an acceleration of this deficit in future must be addressed. The committee considered this issue last week.

The Exchequer still makes the most significant contribution to social welfare expenditure in terms of resources, as it funds all assistance-based schemes and child benefit. However, employees, employers and the self-employed also make a significant and valued contribution to the social welfare system through the operation of the Social Insurance Fund. The Revised Estimates of expenditure for 2012 provide for social insurance income of close to €7.1 billion, but expenditure on social insurance will be almost €8.9 billion. The deficit of just over €1.8 billion will be financed by the Exchequer.

This is now likely to be exceeded in 2012. The recently completed actuarial review of the Social Insurance Fund was presented to this committee on 20 September last. I hope the committee found that presentation useful. It is hoped the review will inform the short, medium and long-term policy development in relation to the social insurance system generally.

On the budget for 2013 and beyond, €20.55 billion overall was allocated to the Department of Social Protection in 2012. During the period 2009 to 2012, inclusive, budget saving measures to the value of approximately €2.7 billion were introduced. The details of these measures are contained in table 3 of the pack provided for Members. This means that social welfare expenditure in 2013 would have increased by €2.7 billion more had these measures not been introduced. Achieving a further €540 million in expenditure reductions in the budget for 2013 as set out in the comprehensive expenditure report will be difficult. The scale of the reduction means my Department must continue its examination of all schemes and services, which was commenced as part of the comprehensive review of expenditure completed last year and informed the Government's consideration of the budget for 2012.

I hope I have provided members with a good overview of the Department's expenditure in 2012, the challenges ahead in 2013 and beyond and the wide variety of considerations which must inform the budget and Estimates process for 2013. I must stress that our system of social protection is a major piece of social investment and a major source of stimulus into the economy because our pensioners, carers and unemployed people who receive income support from my Department spend it in shops and businesses. It is an important part of economic demand and stimulus in an economy which has experienced a banking and construction industry bubble collapse.