Oireachtas Joint and Select Committees
Wednesday, 26 March 2014
Joint Oireachtas Committee on Education and Social Protection
Social Welfare Entitlements for Self-Employed: ISME, SEA and SFA
1:10 pm
Joanna Tuffy (Dublin Mid West, Labour)
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I note the sad passing of Deputy Nicky McFadden, a member of the committee. She was a Member of the Dáil since 2007, and before that a Senator, for the Fine Gael Party. She was an excellent representative and a colleague and friend to members of the committee. On behalf of the committee, I express our sympathies to her family and colleagues.
I welcome the witnesses. I wish to draw their attention to the fact that, by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of their evidence to this committee. However, if they are directed by the committee to cease giving evidence in respect of a particular matter and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. I also wish to advise them that the opening statements they have submitted to the committee will be published on the committee's website after this meeting. Members are reminded of the long-standing parliamentary practice to the effect of the privilege statement I have just outlined.
Today's meeting is on the entitlement of self-employed persons to social protection payments. It is one of a number of meetings that we have held. Several members, in particular Deputy Butler, requested this meeting. It follows our meeting with the Dundalk-based Self-Employed Alliance, SEA, last year as well as our meeting with the advisory group on tax reform. A number of other meetings related to self-employed people in the PRSI system. A number of reforms have been proposed in the advisory group's report. Given our consideration of its proposals and the fact that a number of stakeholders have commented on them, Deputy Butler suggested that we have a follow-up meeting with ISME, the Small Firms Association, SFA, and the SEA to sustain the debate and progress the issue.
To get our discussion under way, I invite Mr. Martin to make his presentation on behalf of the SFA.
Mr. Ian Martin:
The SFA represents approximately 7,500 companies and has seven affiliated organisations. Ireland is trying to encourage more people to create jobs, take risks, set up businesses and become self-employed, but there are many restrictions on people who become self-employed. For some time, we have been arguing for a voluntary additional PRSI contribution to be paid by the self-employed. We are not asserting that all such people want to pay a full PRSI rate, but they should be allowed to retain the benefits of PRSI to encourage them to start up businesses. A self-employed person who pays the S class stamp only qualifies for the widow's or widower's pension. He or she gets a guardian's payment, the State pension eventually and a restricted maternity benefit. An ordinary employee can get maternity benefit straight away, whereas a self-employed person must be self-employed for at least 12 months. This is discriminatory, particularly given the fact that we are trying to encourage more women into the workplace and to set up businesses. The self-employed also get the adoptive benefit and the bereavement grant. This system needs to change.
Recently, I was speaking with someone in the UK. Were I an owner-manager of a business in the UK, I would effectively pay the same social welfare stamp as my employees. If my business closed down, I would also qualify for unemployment benefit. It would be means tested eventually, but I would initially get the same as my former employees. Self-employed people in the UK pay approximately 11%.
The tax rates paid by the self-employed are also at issue. We all discuss the reduction of rates, but the self-employed pay higher rates of tax and PRSI than anyone else. We are meant to be the people generating jobs. We are taking risks and putting our necks on the line but we are getting nothing in return. That Ireland is a high-tax country has been recognised and discussed for some time. The person taking the risk must be rewarded. Self-employed and employed people should be treated the same. We live in the same country and use the same services, so why are we discriminated against? I can understand why it was the case years ago, but most of my colleagues and I pay ourselves on the same basis as we pay our employees, for example, monthly. We do not pay our taxes 12 months in arrears unless, for example, the tax relates to investment rental income, but that is true of PAYE workers as well. Why does the system discriminate against us, particularly in terms of voluntary PRSI?
Our members believe that a voluntary system is the right approach. I have been suggesting it for two or three years. A compulsory system would turn people off. Instead, people should be allowed to opt in.
For example, if I am an A1 contributor and I decide tomorrow to set up my business, I then become an S1 contributor and I lose all the benefits I have paid in the past 30 years. That is wrong. One should be able to retain those benefits in some manner. They could be restricted for a five year period or whatever to enable the person to take the risk because we know many businesses fail within the first year. All the statistics are available. We have to recognise those failures but encourage such people to get up off the ground and start again. If somebody who was running a business failed it is unlikely they will go to work for somebody else; they will try to start again. That is why we would like to have a voluntary system in place.
1:20 pm
Joanna Tuffy (Dublin Mid West, Labour)
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I invite Mr. Fielding to make his presentations on behalf of the Irish Small and Medium Enterprises Association.
Mr. Mark Fielding:
May I pass on my condolences to the late Deputy McFadden's family, friends and the members, her parliamentary colleagues? Our sympathies go to her children, Caren and Eoin. Ar dheis Dé go raibh a anam.
The Irish Small and Medium Businesses Association, ISME, represents just over 9,000 member companies employing approximately 225,000 employees, and we welcome this opportunity to make this submission. The sector we represent accounts for 99.8% of all enterprises, two thirds of all employment, and over 50% of all added value created in Ireland. Those enterprises play a decisive role in Ireland's economy and in the society. We are drivers of innovation and we also ensure social and regional stability but we rely on the Members of the Oireachtas to understand not only the role but also the needs of the SME sector and ISME, the only independent representative SME organisation, will work with the members of this committee to achieve a comprehensive, sustainable and socially reliable private business sector.
If I came in here today and told the members that 324,000 of our citizens were being discriminated against because they are from the Traveller community, were black, gay, disabled or even Protestant, they would be able to immediately sort it out for me. They would right the wrong and give me a solution, but there are 324,000 self-employed people within the SME community who are being treated differently from others because of who and what they are. They work the same as everyone else; some would say they work harder. They pay the same taxes, actually we pay higher taxes. They pay the same rates and the same property tax yet they are treated differently. They are even regarded in many areas throughout the country as local heroes because they employ thousands of people who were responsible for the economy of many small towns and villages. However, when things go wrong for them their treatment is deplorable in comparison to others, in particular their own employees. It is our experience that the vast majority of the self-employed who subsequently become unemployed have already invested their savings in an attempt to keep their businesses afloat and are therefore very much on the bread line when their business closes. They have no additional income and in many instances they are highly indebted.
We have heard the Minister for Social Protection on this issue. She constantly and consistently outlines that despite constraints, the Government is determined to do its utmost to protect the most vulnerable in society and among the most vulnerable in society currently are the self-employed people who have lost their businesses. That is borne out by many spokespersons from the Society of St. Vincent de Paul, the Salvation Army and other similar organisations.
The system in Ireland is completely unfair as it is based on antiquated, bureaucratic and cumbersome legislation. There is something badly wrong when a system that provides automatic welfare entitlements to employees in the event of a company closing down will not give a cent to the company owner, leaving thousands of individuals and their families on the bread line. The system is driving some of our entrepreneurs to emigrate. That is in total contrast to the United States where business failure is regarded as a badge of courage and entrepreneurs, with the scars of business, are seen as local heroes.
The facts are that an employee who loses his or her job has an immediate entitlement to benefits. A self-employed person has none. There is no means test for the unemployed employee but the self-employed person is fully means tested. The personal savings of the employee are not assessed. All the savings of the self-employed are assessed. Any other income in the employee's case is not assessed but all income is fully assessed for the self-employed. The co-habitee income is not assessed on the employee but it is assessed on the self-employed person. The value of all property is ignored for the employee but the value of all the property other than the family home is taken into account for the self-employed. Invalidity is covered for the employees but it is not covered for the self-employed, and disability is covered for the employee but not for the self-employed.
Right down the line, when it comes to the social welfare system, a self-employed person who loses their business and loses their job is at the end of the queue. We are happy that the self-employed people generate employment and wealth, and pay higher taxes, but in the event of those people becoming ill, incapacitated or unemployed, they find themselves without the support given to their employees. That is economically unsound. It is a disincentive to entrepreneurship as well as morally repugnant.
It is bad enough that the self-employed are crippled by the loss of their business in many cases, and they have lost their life savings, without being further penalised and humiliated by the State. We urgently require reform of the social welfare system. ISME is recommending that the self-employed and proprietary company directors be allowed choose a higher PRSI contribution, as has been mentioned already. It will be an opt in or opt out, therefore, if they choose to pay a higher rate of PRSI they will be covered. If they do not, they will remain as is, so to speak.
The current method of assessing the self-employed for jobseeker's allowance should be simplified with regard to income, spousal income, and assets and savings. We also believe there is a need for a national awareness information campaign aimed at the self-employed in regard to their entitlements and their benefits. Information also on the classification of different types of employment - the difference between contracts of and contracts for service - must be included.
While ISME acknowledges that it is not the role of the social insurance system to promote and encourage entrepreneurship, we would also say it is not its job to hinder it. The current system is acting as a disincentive and an inhibitor of entrepreneurship, which significantly and unnecessarily penalises the self-employed.
As I stated at the outset, we rely on the Members of the Oireachtas to understand not only the role but also the needs of the SME sector and I ask them to consider the needs of the 324,000 citizens who are currently discriminated against as self-employed.
Joanna Tuffy (Dublin Mid West, Labour)
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I invite Mr. Dolan to make the presentation on behalf of the Self-Employed Alliance.
Mr. Denis Dolan:
The Self-Employed Alliance from Dundalk would like to thank the committee for inviting us back to further highlight our case. It is clear that the self-employed are treated in an unequal, unfair and inequitable way compared to the PAYE sector. We all strive, want, need and aspire to a fair, equal, just and transparent working society for all without any discrimination or a two tier-society yet as we outlined in detail in our previous submission, inequality and discrimination exists to this day for self-employed individuals. They were continuing to come knocking on our door up to 24 March 2014.
In the past six weeks, one of our members had to let his only two members of staff go after two years working for him. They both went to the Department of Social Protection, registered and were in receipt of all supports and services within a very short period enabling them to sustain some semblance of a lifestyle. When the self-employed owner whose business had ceased went to the same Department of Social Protection office seeking help and support, he got nothing. Essentially, he was interrogated and asked about potential assets but he had none other than the family home. He was asked for the two previous years' accounts to allow them be scrutinised. He was informed that after some time an assessment officer would be appointed to examine his circumstances, etc. The individual literally has got nothing. All his funding and effort went into the business yet, unfortunately, his business failed. During the course of his time in business this person paid all his rent, rates, staff, etc. That has generated revenue for staff families, which in turn circulated to the benefit of the local economy. The same individual has been left high and dry, and quite clearly is treated as a second class citizen.
The system in its current form is not fit for purpose and clearly treats self-employed people in a discriminatory and unequal way.
Clearly there are simple and effective measures that can be implemented immediately to provide a level playing field.
It seems many self-employed are deemed to be great when things are going well, generating employment and revenue for all concerned as is pointed out in various CSO reports, but if suddenly that self-employed individual hits hard times and ceases trading, all supports and services are pulled and a barrage of unnecessary hurdles are put in place.
The enormous contribution self-employed people bring to the social and economic fabric of our society is acknowledged. I will give a snapshot of the contribution small and micro businesses bring to the Irish economy. Small workplaces employing fewer than 50 people account for just over 1.25 million, 60% of the Irish workforce - 940,000 employees, 209,000 self-employed and 104,600 self-employed with employees.
Small enterprises employing fewer than 50 people generated more than half of the total turnover in the service sector. Turnover of small service sector enterprises increased by 65% between 2000 and 2004 to reach almost €74 billion in revenues based on CSO figures, a not insignificant amount. Small enterprises in the service sector employ an average of five people and have an average turnover of just under €900,000. In the second quarter of 2006 three quarters of all people in employment in small work places were classified as employees. Just over 8% were classified as self-employed with paid employees. Nearly 17% were self-employed without any paid employees. Of the 4,418 enterprises, employing three or more people in Ireland, 81% accounted for small industrial enterprises. Almost half of these enterprises had fewer than ten people employed.
Our alliance, representing the self-employed and its ever-growing numbers, predominately represents what I would call self-employed micro businesses employing approximately three to five people. We feel it is somewhat disingenuous to bundle us in with the CSO definition of having up to 50 employees. The dynamic of a micro business employing three to five people is significantly different from those small business employing ten people or more. Therefore a distinction or a category change is urgently required.
Although the valuable contribution of the self-employed to the Irish economy is acknowledged, nothing has changed and glaring inequalities remain. In fact things on the horizon may make things worse for the self-employed, notably the looming threat from the banks, which has in fact passed the threat stage as banks are now stopping loans and calling in overdrafts, targeting in particular small and micro businesses. Allowing this to happen will have dire consequences across the entire social and economic infrastructure of Ireland, especially bearing in mind the contribution of the self-employed as a whole. We should not forget that the taxpayers ultimately bailed out the banks.
On 19 March I called to the social welfare office in an effort to establish what supports are available to a self-employed person. The level of ignorance, and the lack of knowledge and transparency are alarming. Not only did I encounter this, but having spoken to many of our members it is clear that little or nothing has changed even though in October 2012 we were told social welfare offices could and would provide pertinent information. When I requested a copy of the publication, Your Social Security Rights in Ireland - A guide for EU Citizens from the Department of Social Protection, I was met with blank stares. Having eventually located it on the web all I can see are two minuscule general references to self-employed with no detailed information whatsoever.
The Government is encouraging more and more people to embrace the self-employed route and entrepreneurial spirit. While we welcome this, some of the more cynical might suggest it is a safety valve because if these enterprise fail, then as legislation stands the Government has to give them little or nothing. As we all know, the percentage of start-up failures is very high. So with few if any support structures in place for the self-employed it is akin to walking the high wire without a safety net. The current clarion call by the politicians encouraging people into the self-employed route should come with a clear health and safety warning
Since we submitted our 17 reasons or disadvantages for the self-employed nothing seems to have changed and as pointed out things are nominally worse.
1:30 pm
Willie O'Dea (Limerick City, Fianna Fail)
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I thank the people for their presentations, which were very clear and coherent.
For means-tested payments such as jobseeker's allowance and disability allowance there is no justification for a difference in treatment between calculating the means of a person who has been employed or a person who has been self-employed. I note the differences Mr. Dolan has pointed out - I come across them regularly in my constituency work and we will need to continue to bring them to the attention of the Government.
In the course of my constituency work I have also noticed that if somebody who had been employed goes off the jobseeker's benefit and applies for jobseeker's allowance, in most cases it is a fairly routine process and the person will be fixed up fairly quickly. However, there seems to be a mindset among some people in the Department that when formerly self-employed people present they must prove their case and that the default position is that they are not entitled to it. I have come across cases where people have had to go through several Gestapo-type interrogation sessions just because they happen to have been self-employed, which is wrong. I believe that some serious re-education on the part of some social welfare officials is necessary and desirable.
Regarding the contribution aspect, I take it that the witnesses are proposing that people could opt for a higher rate if they wanted to be included in, for example, an illness-benefit scheme, and could opt for a higher rate again if they want to be included in both an illness-benefit and jobseeker's benefit scheme. I take it that the witnesses are proposing that the rate would be calculated to make it cost-neutral for the State. Is that correct? I do not know if they have worked out the rate.
We did some research on this and we produced legislation on the matter. I believe we proposed a rate of between 3% and 4% extra to cover both on the basis of a voluntary opt-in system, for which there is plenty of precedence. However, the Minister keeps telling me that it would not work, although I am not clear why. In so far as I can deduce, the logic of her replies seems to be that at the 3% to 4% level it would not cover the cost and would not be cost neutral.
If it is possible to come up with a figure that is reasonable and people can opt to contribute extra to get into one or both of those schemes - illness benefit and jobseeker's benefit - then it is a no-brainer. What is proposed is changing the law so that people can make their own contributions and get into the system if they are willing to pay for it. However, I would like to know if the witnesses have worked out the rate.
Ray Butler (Meath West, Fine Gael)
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I thank the various groups for coming today. I wish to give some insight into what has been happening in this committee over the past three years. This was a huge issue in the 2011 general election. I have been pushing this because it affects me personally. I come from a self-employed background. I had a shoe shop for 24 years, which unfortunately had to close because of the recession. When I first became a member of this committee, we met representatives of the Department of Social Protection. High-ranking civil servants proposed a 30% PRSI contribution for the self-employed. That was the first figure. We subsequently invited in representatives from various groups, including the Self-Employed Alliance from Louth and Meath. They outlined how their businesses collapsed with no access to social protection.
There followed the Mangan report, commissioned by the Government, which recommended that a new stamp be introduced at between 4% and 5.5%, which is a long way from the 30% originally suggested by the official from the Department of Social Protection to whom I referred. We had to wait nearly two full years for that report to be published, after which various groups pronounced that a 4% to 5.5% stamp could not be introduced when small businesses were struggling so much in the recession. We can see all sides of the issue, but my question to these groups is whether, having dismissed the report entirely, they engaged with the Department and the Minister in a meaningful way. Did they, for example, make any inquiries about the implementation of the proposals contained in the report? I would like answers to these questions because I have raised the issue of introducing social protection measures for the self-employed with the Minister, Deputy Burton, on many occasions in the past three years. She told me that it was never her intention to bring in a full 1.5% rise straight away but rather to introduce an increase of 0.25% in the first year, after which the scheme would be reviewed over a period of time, depending on the state of the economy.
We are all agreed that the current position in regard to the self-employed is not satisfactory. We have an obligation to address the social protection shortfalls in the system in respect of that cohort. Ireland is the only industrialised nation in the European Union which does not offer such protections. In Britain, for example, benefit is allocated on the basis of profits. A self-employed person in that country whose business profits are below €7,000 - I am giving the figures in euro - can apply to be exempt from paying any contributions. Those with profits of €7,000 to €15,000 pay €3.30 per week. Where the company's profits are between €15,000 and €50,000, the owner pays 9%, which entitles him or her automatically to sick pay and disability pay, with assessment for long-term payment arising thereafter, where applicable.
I am asking ISME and all the other organisations representing the self-employed to put their weight behind the proposal for a new stamp in order to assist those who contributed so much to the general economy and take some of the burden off the shoulders of PRSI workers. In fairness to the Minister, she has reduced the threshold such that some self-employed people are now receiving social protection. However, self-employed people are not putting into the fund; it is PRSI workers who are funding it. As we know, self-employed people do not want to be begging for anything. They want to contribute their share.
We must push for change in this area. The jury is out, in my view, as to whether any new system of contributions should be mandatory or voluntary. I really do not know which is preferable. I have seen many instances in this country where something that is voluntary has fallen by the wayside. In that context, I am leaning towards making this system mandatory as we move forward. Starting with 0.25% and working up from there gives everybody a chance to get on board as we proceed. Voluntary systems do not seem to work in this country, looking at how things have worked out on previous occasions.
I took part in a discussion on local radio recently during the course of which a woman rang in to relate what happened to her family when her self-employed husband became ill. She was working and bringing home €450 per week to support two adults and two children. Her husband was assessed as being entitled to €1.60 per week. As I recall, their mortgage was €1,600 or €1,700 per month. It is time to stop the grandstanding and move forward on this issue. We must work together and get the new stamp up and running. Self-employed people, when the economy starts moving, will begin employing people and helping to rebuild our economy. We must put in place a system to safeguard them so that if anything goes wrong or their business fails, there is inbuilt protection for them and their loved ones. I am pleading with all the organisations represented here today to get behind this proposal. It has been discussed at Cabinet and the relevant Ministers are in favour of it. I hope all the delegates will leave this meeting prepared to put their weight behind it. I am confident it can be introduced, if not in this budget then in the following one. Certainly, I hope we have a system up and running before the end of the Government's term.
1:40 pm
Marie Moloney (Labour)
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Deputy Butler has rather stolen my thunder by asking all the questions I meant to ask.
Ray Butler (Meath West, Fine Gael)
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I apologise, Senator Moloney.
Marie Moloney (Labour)
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It is no problem. Since he and I were appointed to the committee, we have constantly raised the situation of the self-employed. We have always fought their case in this forum.
I thank the delegates for their presentations. As Deputy Butler has covered most of the ground, I have only a couple of issues I would like clarified. The portrayal we have had today of the self-employed versus employees carried a suggestion that the latter enjoy unlimited benefits. In fact, an employee will only receive jobseeker's benefit - for nine months and no more - if he or she has made contributions in the governing tax year. It is not an automatic entitlement; applicants must meet the criteria that apply. When we had representatives of the expert group before the committee we spoke at length about the percentage the self-employed would have to pay under a new system. Those witnesses suggested that self-employed people would have to contribute up to 14.5% or 15% to qualify for the same benefits as employees. The delegates might like to consider what the return would be for an extra 10% of their earnings in a year, which could suggest that the benefit is not as attractive as one might think. For a single person, for instance, the payment for nine months of jobseeker's benefit would be approximately €6,700. I agree that people who get sick must be looked after. There is not a shadow of a doubt in that regard. A person who experiences long-term illness is in big trouble, whatever else happens.
An issue I find strange and which I am constantly raising is the situation whereby even if a self-employed person is fortunate enough to access jobseeker's allowance, he or she does not receive a credit contribution for that money. Despite having paid one's self-employed stamp all along, one's pension entitlements will be eroded because in coming off self-employed and onto jobseeker's allowance, one does not get a credited contribution. That is an anomaly we must review.
Jim Daly (Cork South West, Fine Gael)
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I thank the witnesses for their participation, which has been very helpful. I welcome the focus on this issue and commend Senator Moloney and Deputy Butler on their endeavours in this area. They have been extremely exercised on this urgent issue, which we have found to be prevalent on the doorsteps. I tend to concur with Deputy Butler on the question of whether any system of contribution should be compulsory. My concern is that there might be a lack of awareness if the contributions were voluntary, which could result in people falling between the cracks. Will the witnesses comment on the question of compulsory versus voluntary contributions?
Mary Moran (Labour)
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I thank the delegates for their contributions. I am particularly pleased to see the witnesses who have come from my own part of the country and who do valuable work in the Dundalk area. My colleagues, Deputy Butler and Senator Moloney, are very passionate about this issue and have done a great deal of work on it. My husband is self-employed and I absolutely appreciate the difficulties and fears facing people throughout the country.
The big worry is that if somebody gets sick that there is nothing there and one has no comeback. I agree with Deputy Butler when he said that we need support across the board for the stamp and that it should be made compulsory. The quicker it is introduced the better and the more progressive it will be.
1:50 pm
Joanna Tuffy (Dublin Mid West, Labour)
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I ask Mr. Dolan or either of his colleagues to commence.
Mr. Denis Dolan:
I concur with Deputy Butler to make it compulsory. My only caveat would be to have a gentle and gradual increase for obvious reasons and due to the current overall economy. Its introduction would make an excellent starting point and we agree with him that the sooner it is introduced the better.
Joanna Tuffy (Dublin Mid West, Labour)
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I shall return to Mr. Dolan's colleagues in a few seconds and call Mr. Fielding.
Mr. Mark Fielding:
I shall mention a couple of things. Deputy O'Dea asked how much it would be to opt-in but his question was answered by one of his colleagues.
With regard to the invalidity and sickness benefit, it would increase by about 1.5%, as mentioned in the Mangan report. Senator Moloney mentioned 14% or something which was the figure for full entitlements.
With regard to the issue of a mandatory or voluntary increase, we must think in terms of competitiveness at the moment because any increase in costs for businesses - self-employed or otherwise - will stop the creation of jobs. There is a misnomer that self-employed are out of the woods on this issue. The troika only left a month and a half or two months ago but we still struggle to make ends meet and maintain jobs in this country. We are lucky that we have seen an increase of 60,000 jobs over the past year. I hope that will continue but there are still areas where businesses cannot afford an increase in costs. A mandatory increase would be an increase in taxation.
A point was made about businesses being discriminated against. The Taoiseach has asked for us to be the best small country in the world for business and I would like it to be the best small country in the world for small business. On the one hand, a successful business is taxed at the higher rate of 55% compared with 52% for employees. If a business is unsuccessful and goes wallop one is discriminated against again in this matter. Whether we talk about voluntary, opt-in, opt-out or whatever, we need to start talking in terms of the entrepreneur. To become the best small country for business we need to start cherishing entrepreneurs which we are not doing at the moment if we tax them higher, humiliate and penalise them when they are not as successful as they could be. We are driving these people out of the country. It is from that point of view that we need to be careful. A mandatory system will cost jobs. The scheme can be brought in over a period but there is an opt-in situation. Small business owners are quite able to understand the differences and can insure themselves if needs be but that needs to be done on a voluntary basis.
Mr. Ian Martin:
I concur with what Mr. Fielding from ISME has said. I would not like to see a compulsory charge imposed on anybody. The nature of self-employment and trying to create one's own business is to make a profit. One intends to make money at the end of the day and not to fail. A percentage of people will automatically opt out of anything because they think that they will be very successful and become multi-millionaires so we cannot put restrictions in place. When one starts a business - and it does not matter what it is - cashflow is crucial in the early years. If one must suddenly pay an extra 10% in PRSI, for example, it will kill the business from the outset. We must encourage people instead.
I suggest that we look at what happens throughout Europe. Other European countries have an opt-in or opt-out situation. Why make it compulsory in Ireland when we must compete with the rest of Europe? Let us look at what is happening in Europe, take the best of what we think is in Europe and introduce it in Ireland. We do not have a system that is fit-for-purpose at the moment. If we are, as the Taoiseach has said, to become the best small country in the world in which to do business then we must take best practice from other countries and adopt it here.
With regard to means testing and similar issues, the self-employed situation can be easily changed to automatically include business assets. For various reasons a lot of people in small businesses - mainly to provide for their old age or avoid paying tax - were encouraged to buy properties by their accountants, for example. They bought properties to save them from paying capital gains tax and all of the other bits and pieces such as corporation tax. Let us explain what happens if a limited company goes wallop but the assets are privately owned and there is a mortgage of €0.5 million or €1 million. One cannot pay the mortgage because the business is gone and one cannot sell it because nobody wants to buy the property. If one has a property worth €200,000 then it is deemed that one has a notional income of €8,000. The reality is that one cannot sell the property, nobody will rent it, one cannot get rid of it and one owes the bank money, yet one is still deemed to have a notional income. That property should be excluded when a self-employed person seeks means testing under the present system.
Let us compare the extra benefits an employee has with those for a person who is self-employed. As Mr. Fielding has said, every extra benefit that we want costs approximately 1% extra. That is a simple way to look at the matter. We cannot afford what is being argued for. If we all became employees and paid the same PRSI because every self-employed person joined a large company or whatever, the country would not be able to afford it.
The argument put forward by the Department of Social Protection is that everybody will fail. We know that only a small percentage of people will claim so I think that it will be a net win. It is a bit like reducing income tax. Everyone would benefit from reduced income tax and would, therefore, spend a little bit more money. If we all contributed a small amount of money only a very small number of people would make a claim. Over the past 20 or 30-year period businesses have survived, apart from the past couple of years of the recession where lots of businesses have failed. The majority of small businesses have survived and not failed so there will not be major claims.
Joanna Tuffy (Dublin Mid West, Labour)
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Do other witnesses wish to comment? I refer to the people who have not spoken yet.
Marie Moloney (Labour)
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I did not say that. It was Deputy Butler.
Ray Butler (Meath West, Fine Gael)
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Yes, I said that about the PAYE worker.
Mr. Kevin McArdle:
As a self-employed person I pay income tax, PAYE, PRSI, USC, RCT and VAT. I changed my shop ten years ago and in the past ten years I have paid €110,000 in rates to my local authority with no reduction in charges since the recession commenced. People who sought a reduction in rates from the local authority were basically told, and I have it on record, to pay up or close up. We have contributed to the system but, without doubt, we have been treated like second-class citizens. We said the same on the last occasion that we were here and we stand by that claim. We want all of our payments taken into consideration and we are not just looking for a hand-out from the Government. I shall refer to a point made by Deputy O'Dea. When someone who is classed as self-employed goes to a social welfare officer he or she is classed as an unemployed self-employed person and, as Mr. Dolan said earlier, is met with blank stares because the staff in the social welfare office do not know how to handle such cases. The first thing that we seek is equality.
Joanna Tuffy (Dublin Mid West, Labour)
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Please clarify.
Marie Moloney (Labour)
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I wish to clarify that I did not make the comment about the PAYE workers that Mr. McArdle attributed to me.
Joanna Tuffy (Dublin Mid West, Labour)
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That has been acknowledged. Deputy Butler said that he made the comment.
Marie Moloney (Labour)
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I did not. I never said it.
2:00 pm
Marie Moloney (Labour)
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I am telling Mr. McArdle that the recommendation from the expert group that came to this committee was that this would be the amount paid to bring them up to full benefits, the same as an employee. We discussed that in full at the committee. I never said it; it was the recommendation from the expert group.
Joanna Tuffy (Dublin Mid West, Labour)
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I suppose they were suggesting this was to cover the full cost. The anomaly is that, for employees, the full cost is not being met either, but the expert group wanted the self-employed to meet the full cost. As a group, are all the witnesses saying it should be compulsory?
Mr. Denis Dolan:
First, with regard to what Deputy Ray Butler said earlier, a mirror image of what happens in the UK seems to me to be a logical starting point. Second, in our submission, we also make the point that those in the Self Employed Alliance Dundalk are predominantly in businesses where one individual is perhaps employing three to five people. These are minuscule or micro enterprises and it is wrong to be bundled, as we are, into the Central Statistics Office's category of "1-50", when the dynamics are so significantly different. The three of us sitting here are at the minuscule or micro level - call us what one likes. We are one individual, one owner or one self-employed person. To mirror the 0.25% increase in order to recognise this point would be a contribution to enable us to get those supports should things go pear-shaped.
Ray Butler (Meath West, Fine Gael)
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To come back on that-----
Joanna Tuffy (Dublin Mid West, Labour)
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I ask Deputy Butler to wait. I call Deputy O'Donnell.
Kieran O'Donnell (Limerick City, Fine Gael)
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As an observation, would it be considered a first step that instead of bringing in absolutely the same terms as would apply for someone who is an employee in the strictest sense, we would bring in an initial measure so someone who is self employed would qualify for, say, three months? I come from this background myself and I see this in my constituency all the time. The biggest issue that arises for people in the SME sector is that they try everything in their power to stay in business, and social welfare is normally a very last measure. In many cases, the human dimension kicks in, or the wife says, "We just cannot keep going". The individuals then apply for jobseeker's allowance because they cannot get benefit and, invariably, they then end up going to the community welfare officer for supplementary welfare allowance. I am not suggesting nobody qualifies but many do not, and they need something. However, in many cases, they will go back to being self-employed in another area. Do the witnesses consider there might be a way of bringing in such a system on a transitional basis, so that instead of the period being six or nine months, it would be three months? Is there merit in putting forward that case? I believe it needs to come in and I would like to hear the views of the witnesses thoughts in that regard.
Ray Butler (Meath West, Fine Gael)
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We must remember that ISME and the Self Employed Alliance Dundalk are dealing with two different groups of people. As Mr. Dolan said, he is talking about people who have one to five employees whereas Mr. Fielding could be talking of companies employing a workforce of 50 to 100, with both being termed a small enterprise.
Ray Butler (Meath West, Fine Gael)
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That is fine. When I was self-employed, if my accountant had told me I had to pay another 1.5% onto the 4.5%, and given I would be paying my income tax or, if I was not making a profit, I would be paying tax on my drawings, then surely to God I would have swapped a little of this to put onto a stamp in order to protect my home and my wife and children. Let common sense prevail. When the Mangan report was published, many groups came out and categorically said small businesses could not do this. We all know small businesses are suffering but nobody spoke to the Minister or the Department about what way it was going to be implemented. If that was the case, the Minister would have said, as she said to me immediately afterwards when I brought it up under Topical Issues, that she never had any intention of putting 1.5% straight away onto the 4%, and that she was going to introduce this in stages.
We could be further down the road in this regard. The big question is whether we make it voluntary or mandatory. We have seen things done on a voluntary basis in this country before and I keep repeating that they have not worked. I believe the way forward is to do this on a mandatory basis and to bring it in at 0.25%. As Mr. Dolan and the others are saying, let us move on and see if it works. Then, if the economy is going better two or three years down the road, we can then bring in another 0.25%, but at least we will have started to recognise self-employed people for the first time in the history of the State through social protection. This would mean they do not have to beg for their payments or wait to see if the community welfare officer is up to speed on self-employed people and social protection, because if the community welfare officer is not up to speed on this, there is no money to feed the person's family or pay the mortgage.
Willie O'Dea (Limerick City, Fianna Fail)
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Deputy Butler said there is a wrong situation here which needs to be addressed and that we need unity in our approach, and I agree with him on that. Unfortunately, before we can jointly get together to make a push to achieve something we need to have some clarity as to what exactly we are trying to achieve. Mr. Fielding said the figure for the extra social insurance benefit to qualify would be 1.5%. That is based on a mandatory system, as the expert report stated. If social insurance is applied across the board to all the self-employed and everybody had to pay, the figure would be 1.5% to make the extension of these benefits cost-neutral. However, the Minister and her Department are saying, and I happen to agree with them on this occasion, that if there is a voluntary system, that 1.5% contribution will not work.
With regard to the voluntary, opt-in, opt-out system that some are recommending, nobody seems to have a figure for what would work with such a system. This is probably because it is contingent on a number of things which we do not yet know, such as how many people will sign up and so on. We want to progress this and to move ahead, but we have two different points of view coming across here from the witnesses who have come in. Some are opposed to a compulsory system and-----
Ray Butler (Meath West, Fine Gael)
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Everybody is in favour of it but the question is whether it is mandatory or voluntary.
Willie O'Dea (Limerick City, Fianna Fail)
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That is what I am saying. That is a crucial issue because the solution to this, if everybody agreed on a compulsory system, is a 1.5% increase, which can be done gradually. However, if we are talking about a voluntary, opt-in, opt-out system, we have to work out what extra contribution we are talking about for people who want to opt in.
Joanna Tuffy (Dublin Mid West, Labour)
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Employees and employers do not get an opt-in, opt-out option in regard to the paying of PRSI for the benefits the employees get, as it is compulsory for employees and their employers. The current situation is that there is a shortfall in the PRSI pot which is then subsidised by general taxation. This goes for everybody but if this was to be done for the self-employed, it would be subsidised out of the general taxation pot, so it is not like nobody is going to pay for it. It is not even that the Government is paying for it as it is the taxpayer who pays. That is an important point. Mr. Martin said the contribution was 7% in the UK.
Joanna Tuffy (Dublin Mid West, Labour)
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Is it 11% for the self-employed and 11% for the employee?
Joanna Tuffy (Dublin Mid West, Labour)
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There is no top-up by the employer for the employee.
Ray Butler (Meath West, Fine Gael)
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It is applied on the profits.
Joanna Tuffy (Dublin Mid West, Labour)
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The figure of 11% is a lot higher than what is being proposed here. If Mr. Martin is suggesting 11%, that would be a huge increase for the self-employed here.
2:10 pm
Joanna Tuffy (Dublin Mid West, Labour)
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Obviously, however, much more is being paid into that pot in Britain by everybody concerned. I am concerned that as a result of the stance ISME and the Small Firms Association are taking, progress will not be made. Surely what has been proposed represents progress.
Ray Butler (Meath West, Fine Gael)
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Absolutely. Hear, hear.
Ms Avine McNally:
Deputy Butler inquired on two occasions as to whether the Minister has engaged in any conversations with us in respect of this matter. We met the Minister prior to the publication of the Mangan report and, as Mr. Martin stated, this is an issue we have been raising for the past two or three years. We discussed the voluntary proposal with the Minister and she was very clear that if she or her Department considered it, then it would be from a mandatory perspective. The question we must ask in that regard is "Why?" and the answer is that the system is just not flexible enough to allow it to be voluntary. It seems a little backward that we have a social welfare system which does not allow us to be voluntary or to be reflective of the current environment. Many other European countries can facilitate this voluntary opt-in, opt-out model. It is the system, as much as anything else, which is not allowing this. We sought a meeting with the Minister following the publication of the Mangan report. We did not receive a response from her Department. We have spoken to her about this issue but we have not had a formal, face-to-face meeting with her following the publication of the Mangan report.
Jim Daly (Cork South West, Fine Gael)
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May I make a point?
Joanna Tuffy (Dublin Mid West, Labour)
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I will take Senator Moloney first and come back to the Deputy.
Jim Daly (Cork South West, Fine Gael)
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That is fine.
Marie Moloney (Labour)
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My father died young at 55 years of age. When he passed away, he was working for the health board. We all expected that my mother would receive a pension from the health board but when we delved into the matter, we discovered that my father had opted out of the widows and orphans scheme. He probably only saved £2 or some similarly small sum per week by doing so. If people are given the choice of opting out and if they believe they might save some money as a result, then they will do so. Like my father, they are not thinking about the future. As a result of my father seeking to save money by opting out - or, perhaps, by choosing not to opt in originally - my mother was left without a widow's pension from the health board.
Reference was made to the assessment of capital or business property in the case of self-employed people and that fact that the latter are treated differently. I must point out that if a claimant owns property that he or she is not personally using - such as the formal business premises - and which is no longer used in the context of operating the business, then the value of this asset is assessed using a standard formula and the first €20,000 of the capital is disregarded. That is exactly the same as employees who claim jobseeker's benefit or allowance.
Kieran O'Donnell (Limerick City, Fine Gael)
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The difficulty is that they have many more assets and, in technical terms, they could be insolvent.
Marie Moloney (Labour)
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Yes, but it is assessed in the same way.
Kieran O'Donnell (Limerick City, Fine Gael)
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Yes. In reality, however, a person whose business has unfortunately collapsed-----
Marie Moloney (Labour)
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It depends on the nature of the business in which they are involved.
Kieran O'Donnell (Limerick City, Fine Gael)
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If a person is a PAYE employee, his or her family home will not be assessed. The Senator's point is valid but with the self-employed-----
Marie Moloney (Labour)
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The same formula is used to assess both.
Jim Daly (Cork South West, Fine Gael)
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Another point which needs to be made - Deputy O'Dea articulated it quite well - is that which relates to the argument in favour of the mandatory model. I take this opportunity to point out that I was previously self-employed. Many of the witnesses referred to discrimination and the fact that they want the self-employed to be treated equally. If we are introducing a voluntary code of PRSI for the self-employed, then that is a further discrimination, albeit one that is positive in nature. I am of the view that this runs counter to the argument to the effect that they should be treated the same.
Mr. Ian Martin:
If we are seeking to ensure that everything is equal, then the entire tax and PRSI system must be examined because self-employed people pay a higher rate of PRSI, USC, etc. The whole system must be readjusted and if that is going to happen, then there is a small amount of money we are paying at present which could be put into a PRSI scheme but we must all be treated the same. We are not being treated the same at present. That is the point.
Ray Butler (Meath West, Fine Gael)
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A rise of one quarter of a per cent is envisaged if we can all come together and push on. We can go down the road of describing all the ills visited upon self-employed people. I have been self-employed all my life and I never want any other person to go through what I endured when I lost my business. I did not have a penny for 14 or 15 months. I did not even have enough money to feed my children. There were nights when I sat in a dark room wondering from where I was going to get the money to put food on the table not to mention to pay the mortgage. That is why I am here. I am passionate about this matter and I want us to do something.
Joanna Tuffy (Dublin Mid West, Labour)
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Governments increased the PRSI contribution in the past. If nothing happens in respect of this matter, then it - or the rate relating to it - could be increased again in the future, with no benefits attached. I would have thought it would be better to go in and negotiate in order to get something out of the process.
Mr. Mark Fielding:
Just in case Deputy Butler is mixing my organisation up with IBEC, some 84% of our members employ fewer than ten people. We look after small companies. We also have self-employed individuals who employ 130 or 140 people.
I take Deputy O'Donnell's point. We are of the view that we are being discriminated against and that we are not getting the same crack of the whip. If we want to get this right, then it must be done gradually over a period. Allowing us to opt in over such a period is probably a better way to proceed rather than hitting us with a big stick from day one. I am aware that jobs will be lost if we do that. It must be remembered that we are dealing here with risk takers. Owner-managers of small businesses are the risk takers. They will assess whether it is good to opt in and they will accept what they will ultimately receive. If they do not opt in, their names will not be in the pot in the long term. Again, we must take into account-----
Kieran O'Donnell (Limerick City, Fine Gael)
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Senator Moloney made a very good point. A person who owns a small business and who is experiencing a rough time will, with the best will in the world, drop certain things. Everyone agrees in principle that there should be jobseeker's benefit for the self-employed. That is a given. The question that arises, therefore, is how to design it in such a way that will allow everyone to buy in. It would be a terrible shame if we could not find a way for everyone to move forward. I accept that there may be a need to reconsider the position in respect of a number of areas. Self-employed people become so battered down from trying to obtain social welfare payments, that this, in itself, almost becomes a business for them. Some of them lose their entrepreneurial flair as a result. They must be facilitated in the context of obtaining something in the first couple of months of unemployment. Many of those to whom I refer will return to self-employment when they get their next venture off the ground.
I apologies for interrupting Mr. Fielding. Everyone present is on the same page but the question which arises relates to the method we might use in order to encourage people to come on board.
Joanna Tuffy (Dublin Mid West, Labour)
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Those increases are mandatory for everybody else. What is the equivalent rate of PRSI in the countries to which Mr. Fielding refers? As I understand it, Ireland apparently has one of the lowest rates.
Jim Daly (Cork South West, Fine Gael)
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The culture in many of those countries is very different.
Marie Moloney (Labour)
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Is Mr. Fielding in a position to outline the rates which apply in the countries to which he refers?
Marie Moloney (Labour)
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Will he provide an indication of what are those rates?
Mr. Mark Fielding:
The contribution rate for self-employed people in respect of the voluntary scheme for unemployment in Sweden is 0.37%. The contribution rate for employers in respect of the scheme in Finland runs from 0.8% up to 3.2%. The rate relating to the voluntary scheme in Germany is 6%. In Denmark, the contribution is €41 per month. A variety of contribution rates apply.
Marie Moloney (Labour)
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Do self-employed people in those countries have access to the other benefits enjoyed by their counterparts here?
Mr. Mark Fielding:
In Denmark, it varies with the risk.
In Finland, insurance premiums vary according to risk. Again, exact statistics on occupational injury and benefits are not provided. In Austria, the contribution rate for unemployment assistance is 6% and for occupational injury is 1.4%. All of this information is contained in the Mangan report.
2:20 pm
Mr. Ian Martin:
On the voluntary contribution and opt-in, opt-out issue, in my opinion if I opt-in today I am opting in for the remainder of my life. One cannot provide for an opt-in this year and opt-out next year. When one opts in one does so for the remainder of one's life. If the desire is to have a compulsory system then a new higher rate must from the outset apply in respect of future self employed persons.
Marie Moloney (Labour)
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During our in-depth discussions with the officials on the issue of a voluntary contribution they were adamant that could not and would not happen. Where the owner of a small business which employs five people takes ill and is unable to work but his or her employees continue to operate the business and generate income, how in the witnesses' opinion would this be monitored?
Marie Moloney (Labour)
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A benefit is a benefit. If Mr. Fielding became ill and his wife was working and earning a fortune he would still be entitled to the benefit. Regardless of a person's estate and so on he or she is still entitled to the benefit. It is an issue that requires further consideration.
Ray Butler (Meath West, Fine Gael)
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I have discussed this matter with the Minister for Finance. A voluntary contribution will not work. The contribution would have to be mandatory. The Minister has agreed to the introduction of a contribution of 0.25% for the first couple of years. My argument is that a self-employed person who is told by his or her accountant that he or she is required to pay X amount of income tax, or, if not making a profit, pay tax on drawings could opt to have 0.25% of that money paid in PRSI to ensure he or she is protected in terms of income to support his or her family and to pay the mortgage. It is common sense. The witnesses are suggesting that the contribution be voluntary. However, nothing voluntary has ever worked out in this country. Let us be honest and call a spade a spade.
I have been visited at my constituency by many self-employed persons, some of whom were men who had worked all of their lives and as a result of the recession became unemployed. The fear and desolation in their faces was awful. On top of this, because they were self-employed there were entitled to nothing. Let us be honest, some of these people went on to do awful things to themselves. We must put in place something to assist the self-employed and whatever is put in place must be mandatory. One quarter of one per cent will not make much difference in the longer term.
It was mentioned earlier that this could result in the loss of jobs. That is not true. As the economy improves we can increase the contribution. It is important a new system is put in place.
Joanna Tuffy (Dublin Mid West, Labour)
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Would Mr. Dolan like to comment?
Mr. Denis Dolan:
I concur with Deputy Butler. We are speaking predominantly about businesses employing one and two people. It is important that distinction is made. A system akin to that introduced in the UK would work. We replicate so many of the laws and so on introduced in the UK. The introduction here of a system similar to that being introduced in the UK would in my view appear to be a logical starting point.
Joanna Tuffy (Dublin Mid West, Labour)
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Most people would appear to agree that the putting in place of such a system is a good idea. I presume the position of the representatives of ISME and the Small Firms Association is that it would be better if payment of the contribution was voluntary rather than mandatory.
Joanna Tuffy (Dublin Mid West, Labour)
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Why not make it mandatory if it is good that they will have that cover?
Joanna Tuffy (Dublin Mid West, Labour)
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It would benefit people with children.
Ray Butler (Meath West, Fine Gael)
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Is Mr. Martin not being selfish?
Mr. Ian Martin:
No. A person who has run a business for many years will have paid a great deal of PRSI. In regard to the contribution being voluntary, I recall that previously when a person's salary exceeded £1,600 he or she could opt-in to paying additional tax or PRSI - I am not sure which it was - for which he or she would get a slightly higher old age pension. On the advice of my father and my employer at the time, I voluntarily paid that extra money. At the time I was working for a large multinational company. Everybody with whom I was working paid the additional money in the hope of getting higher pensions in the future.
In regard to the 0.25% contribution rate, to what will payment of that contribution entitle people? In previous discussions I had with the Department on this issue, it was stated that contributions of 3% or 4% would be required in respect of one benefit. What will the person who pays that 0.25% contribution get for doing so?
Ray Butler (Meath West, Fine Gael)
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Illness and disability benefit.
Mr. Ian Martin:
It was stated previously that to pay illness and disability benefit would cost a great deal more than that.
Ray Butler (Meath West, Fine Gael)
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Yes the cost will be equal to a 1.50% contribution payment. It is proposed to start with an 0.25% contribution which will then be increased year-on-year. The contribution will entitle the person to illness and disability benefit. The person will then be assessed for a long term payment. It is a great idea.
Ray Butler (Meath West, Fine Gael)
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They will be only entitled to illness and disability benefit. They will be assessed in respect of the long term payment.
Ray Butler (Meath West, Fine Gael)
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I understand that. As stated by Senator Moloney, the provision of such a scheme would require contributions of between 14% and 17%. We know we cannot force people to pay that amount. What is being proposed is only a first step towards helping the self-employed. I agree it is not perfect. There is no perfect solution in regard to the position of self-employed persons and social welfare entitlements. While what is being proposed is not perfect, it is a start.
Ray Butler (Meath West, Fine Gael)
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This is the first time ever that self-employed people will be recognised in terms of social protection. In regard to whether the contribution should be voluntary or mandatory, the only way forward is for it to be mandatory. What is proposed is that self-employed persons pay 0.25% in the first instance and that the contribution then be increased to 4.25% over time. This can be reviewed in the future when the economy recovers. If the scheme is successful, the contribution can be increased by a further 0.25% and so on. It is a simple way forward, which is fair to everybody.
Marie Moloney (Labour)
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Were the witnesses members polled in regard to how many of them would opt-in to the scheme? In other words, do they have any idea of how many of their members would be prepared to make the contribution, on a voluntary rather than mandatory basis?
2:30 pm
Ray Butler (Meath West, Fine Gael)
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There was a programme on taxation on my local radio station, LMFM, that polled, I am sure, individuals from my area. The support of self-employed people was unreal in regard to bringing in this measure.
Ms Avine McNally:
I wish to pick up on that. At the time of the issuing of the Mangan report, many companies said they believed the scheme was a great idea. However, when they realised it was not giving them the jobseeker’s benefit, they pulled back a little. As Mr. Martin asked, what will they be getting for it? I recognise the Deputy's point that we are all on the one page in contending we need more recognition of the importance of self-employment through the PRSI and social welfare and protection systems, but it is a question of a voluntary arrangement. What will one get if it is mandatory?
Marie Moloney (Labour)
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Is Ms McNally suggesting that they go the full whack?
Marie Moloney (Labour)
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Getting the whole lot in the first go is the problem.
Ray Butler (Meath West, Fine Gael)
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That is not logical. The Senator is correct.
Marie Moloney (Labour)
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One cannot have it both ways. One cannot have it that one does not pay while getting all the benefits. It is a case of either/or. It is a case of paying and getting the benefit, or not.
Ray Butler (Meath West, Fine Gael)
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Absolutely. Consider the case of the family of two adults and two children in Drogheda. The mother was working for €450 per week. The husband was self-employed and got sick. He was assessed at €1.60. Would they not be happy paying an extra 0.25% to bring the percentage up to 4.25%?
Ray Butler (Meath West, Fine Gael)
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It is not voluntary.
Joanna Tuffy (Dublin Mid West, Labour)
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Although Ms McNally talks about equality, it is not voluntary for employees and their employers in regard to getting benefits. Therefore, why should it be voluntary in this instance? It just does not make sense.
Marie Moloney (Labour)
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Deputy O'Dea made a very valid point earlier, namely, that the percentage was based on everybody participating. If everybody does not participate, the money will not be in the pot to go around. That is how it works with employees also. We are all paying in and if we are not sick – please God this will be the case – we will not have to draw down the benefit. Those who are not sick or who are not unemployed are contributing to help those who do get sick or those who become unemployed. The 1.5% is based on the participation of everybody.
Willie O'Dea (Limerick City, Fianna Fail)
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I have a quick calculation based on the actuarial review of the Social Insurance Fund. The current cost to the taxpayer of extending the scheme to illness benefit and jobseeker's benefit without paying any extra contribution would be €175 million.
Kieran O'Donnell (Limerick City, Fine Gael)
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Per annum.
Willie O'Dea (Limerick City, Fianna Fail)
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I am obviously very sympathetic toward Deputy Butler’s point of view but if he says we should increase the contribution by a quarter of 1%, rather than 1.5%, it means the State will be out by €155 million per annum for as long as that arrangement is in place. Perhaps it would be a good idea to invite the Minister for Finance to come to our next meeting. We could discuss this with him in addition to the Minister for Social Protection.
Joanna Tuffy (Dublin Mid West, Labour)
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Yes, we could do that.
Kieran O'Donnell (Limerick City, Fine Gael)
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How many of the delegates' members have income protection? Many self-employed people will benefit from income protection if they become ill.
Kieran O'Donnell (Limerick City, Fine Gael)
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The only reason I was making the point is that there is a huge cost imposed on the Exchequer. I refer to both the self-employed and PAYE workers because everyone is paying into the pot. Given what is being proposed, how many of the members would have income protection of some form?
Kieran O'Donnell (Limerick City, Fine Gael)
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One joined a scheme to have income protection if one fell ill. It was basically a private insurance scheme. There used to be issues with such schemes in past years. My question was just an aside.
Willie O'Dea (Limerick City, Fianna Fail)
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I would say only half the population is covered. That includes all civil servants, etc. There would be a very small percentage.
Kieran O'Donnell (Limerick City, Fine Gael)
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Is Deputy O’Dea talking about income protection?
Willie O'Dea (Limerick City, Fianna Fail)
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Yes, but I am counting the public sector pension as a-----
Kieran O'Donnell (Limerick City, Fine Gael)
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That is different as I was not including private pensions. I was talking purely about income protection sold in the form of stand-alone policies.
Marie Moloney (Labour)
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We are on the same hymn sheet but arguing about how to make the payment.
Marie Moloney (Labour)
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We all want it and agree at this committee that the self-employed have got to be helped in one form or another. It is a question of how we achieve this, not of whether it should be achieved. Perhaps it would be no harm for the delegates to contact their members to determine how many would actually be in favour of the proposal.
Mr. Mark Fielding:
We will do that. We have never had cover in this country but now we are being asked to provide cover and to make it mandatory. All I am saying is that in other countries right across Europe, the arrangement is voluntary. We would not have a problem with that. I do not want to see a money-grab by the Revenue Commissioners. If the arrangement is made mandatory, with a figure of 0.35%, this results in a figure of 4%. I have lived long enough in this country to know taxes increase all the time. That is my difficulty from a small business perspective. If I am taxed more, I will be unable to make any more jobs that would allow us all to get out of this recession. The problem is that if I am taxed more, I will find it more difficult to employ more people.
Joanna Tuffy (Dublin Mid West, Labour)
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There are tax increases anyway. The PRSI rate was increased for everybody a budget or two ago. If anything, we should be trying to move towards a mechanism whereby one pays and gets one benefits according to a very clear system.
Joanna Tuffy (Dublin Mid West, Labour)
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Senator Moloney gave a good example of where-----
Ray Butler (Meath West, Fine Gael)
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What Mr. Fielding calls an extra tax is a safeguard to provide some security if one’s business goes wrong. I would not call it a tax. If my accountant told me I had to pay 0.25%, or an extra 1.5%, to safeguard my house and put food on the table, I would gladly pay it as a safeguard, not as a tax.
Ray Butler (Meath West, Fine Gael)
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I have been self-employed all my life and know exactly what I am talking about.
Joanna Tuffy (Dublin Mid West, Labour)
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This has been a very good debate.
Marie Moloney (Labour)
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Could we find out how many of the delegates' members are in agreement? We could end up doing something here only to find out they will not opt in at all. There might be nobody.
Joanna Tuffy (Dublin Mid West, Labour)
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I thank everybody. There will be ongoing discussions on this.