Thursday, 8 December 2005
Financial Resolution No. 5: General (Resumed).
Séamus Brennan (Minister, Department of Social and Family Affairs; Dublin South, Fianna Fail)
My Department has a pivotal role to play in ensuring the fruits of our economic growth benefit the most vulnerable and that those who need support and encouragement get it. I have repeatedly stressed that as a country we can only really be proud of our booming economy and vibrant, modern country when it reaches down and lifts those who, for whatever reason, have been left behind or marginalised. For that reason, I am determined that the substantial resources available to my Department will be targeted at delivering a 21st century welfare service to the people.
It must be a service that responds in a way that is about more than allowances and benefits, important and all as those welfare and financial lifelines are to hundreds of thousands of citizens. It must be a service that blends recognition, compassion and support with encouragement, incentives and activation so as to ensure that the potential and contribution of each person is not overlooked or neglected by our system.
It was with this philosophy and direction in mind that I approached this budget with a number of key priorities in mind. I wanted to continue to improve the position of our older people and to recognise their valuable contribution to this country. They deserve to have a decent income that allows them to live out their later years with dignity and security without the threat of poverty or isolation. I wanted to take a decisive step towards the elimination of poverty and especially to intensify the confronting of the unacceptable blight of child poverty. I wanted budget 2006 to assist in the development of a programme of supports and opportunities for those parenting alone who, with their children, are in danger of falling into a cycle of deprivation and marginalisation. I wanted to improve income supports to, and recognition of, carers who perform a valued and valuable service for the whole of society. I wanted to ensure this budget reflected and underpinned with financial support, the evolving new social agenda I am pursuing and that has at its core a social welfare support system that is active instead of passive and that assists people to live with dignity and enables them to make a valuable contribution towards society. This budget has delivered on these objectives and by any standard, it is ground breaking. The facts speak for themselves.
The budget delivers the largest ever spend on social welfare of €1.12 billion. Total expenditure in 2006 will reach €13.5 billion. That is double what was spent in 2000 and will benefit 1.5 million people. Some €800 million of this is being spent in substantial increases in allowances, pensions and entitlements and a further €300 million specifically for a range of social policy reform measures. Social welfare payments have been increased by almost four times the expected rate of inflation. The lowest rates of social welfare have been increased by an unprecedented €17 per week to a new level of €165.80, with proportionate increases in the qualified adult allowance. Means tested old age pensions have been increased by €16 per week to €182 and contributory pensions by €14 to over €193 per week. A wide-ranging reform programme will boost the entitlements of older people, alleviate poverty, support activation and recognise carers. Fuel allowances are being increased by €5 per week as part of a major fuel poverty relief package costing over €42 million. Carers allowances are being increased by over €26 per week so that the top rate of carer's allowance will now stand at €200 per week. A range of measures costing €28 million will promote activation by improving income disregards and tapers for people with disabilities and many others. Maternity benefit is being increased to 80% of reckonable weekly earnings.
I wish to make a few points on the main features of the budget from my Department's point of view. The needs of older people have been a priority for this Government. We have delivered record increases in pensions since taking office. Pensions have increased by over 80% since 1997 which is well ahead of the increase in the consumer price index and gross earnings over the same period. The further increases in pensions announced in this budget reaffirm our commitment to providing decent social welfare pensions for people.
The increase of €17 per week to the lowest social welfare rates, and to which I referred earlier, will apply to a wide range of schemes, including those paid to widows under 66 years of age, the unemployed, people unable to work due to disability or illness and lone parents. In framing these proposals, I was especially mindful of the fact many in these groups are at risk of consistent poverty and of the target in the programme for Government and Sustaining Progress to achieve a rate of €150 per week in 2002 terms by 2007 for the lowest social welfare rates. With the lowest rate at over €165 per week, we are now on course to complete that commitment in next year's budget.
Over the past year I, with the support of my Government colleagues, have been laying out a strong new social reform agenda and major funding of more than €300 million is being made available to underpin and give tangible effect to these important and necessary reforms. The reforms, while protecting those who are disadvantaged among us, must also strive, as I have said repeatedly, to get behind the welfare payments and tackle the social issues involved. It is a well established fact that the best route out of poverty is through employment. That is why, through these reforms, I want to create the changes and opportunities that will bring people from welfare dependency to financial independence by providing the stepping stones to a better standard of living and income.
I have identified child poverty as one of the Government's key challenges. National and international research confirms that children who grow up in disadvantaged households are more likely to do poorly at school, to struggle to find a job and to be unemployed, sick or disabled when they become adults, precipitating an inter-generational cycle of disadvantage and deprivation. The long-term cost of poverty in childhood for individual children, their families and communities and indeed for society at large, demands that we address this issue as a priority. Measures to address child poverty cannot be progressed in isolation from other aspects of our income support arrangements. In the context of budget 2006, I had a number of specific objectives in this regard. Specifically, I wanted to substantially increase total family income by giving unprecedented levels of increase to all the basic social welfare rates. I wanted to reform our current income support arrangements to maximise the benefits of work for low-income households. I wanted to meet the remaining Government commitments in relation to child benefit, to target additional resources at those most in need of additional support through those instruments that could be implemented immediately and to ensure these specific measures are congruent with a longer-term Government strategy on child income support. More than €100 million is being invested in increases that lift the child benefit payment rates to €150 for the first two children and €185 for the third and each subsequent child. The entitlement is paid to more than 540,000 families in respect of more than 1 million children.
With these new increases the Government has now fully honoured its commitment on child benefit. When taken together with the Government's child care package announced yesterday, this represents a significant contribution to the alleviation of child poverty and to support for children. All families with children of less than six years will benefit from the new child care payment. This will bring the total annual cash support, including child support to at least €2,800 per annum per child.
The family income supplement has an increasingly important role to play when it comes to practical, targeted and concentrated measures to tackle poverty. That is why I made major changes to the support scheme in yesterday's budget, making it particularly beneficial to larger families, and increased funding by a further €25 million. FIS is paid to parents in low income employment with the objective of directing more resources to larger families. Under the changes that are now being introduced, FIS payments will make further significant contributions to incomes in thousands of low income homes.
As a result of the improvements, it is estimated that more than 5,000 additional families will become eligible for the payment next year. Depending on the size of the family, weekly increases in FIS will range from more than €11 to €169 a week. For example, for a family with four children its weekly FIS payment could rise by €64.80 a week while FIS for a family with six children could rise by nearly €117 a week. FIS can contribute significantly to boosting child support incomes. For example, a family with earnings from employment of €20,000 with two children of less than six years would qualify for €3,900 in FIS annually. When one adds to that the child care payment of €2000 and €3,600 in child benefit this family would have an annual tax free child welfare income support of €9,500 a year. For a family on the same income of €20,000 but with four children, two of them aged less than six years, the annual FIS support would amount to €7,644, giving the family a total child support package of €17,684 a year. On an income of €30,000, the same family would still qualify for total child support income of €11,694 annually.
Another important support for thousands of families on low incomes is the back to school clothing and footwear payment. This payment is being substantially increased by €40 per child and entitlement to it is being further extended. I am also making a further €2 million available to the school meals programme which makes a valuable contribution to the quality of life and educational opportunities of children in low income families. More than €10 million is now earmarked for the various school meals initiatives next year. These measures are the first steps in a concerted programme of action for the next few years aimed at vastly improving our system of child income support.
Most Deputies will be aware that in 2005 the National Economic and Social Council has spent considerable time and effort analysing the issues and developing proposals in regard to child income support. It has been examining, in particular, the possibility of merging FIS and child dependant allowance into a second tier child income support, which would avoid the disincentives inherent in child dependant allowance. That report will set out the broad principles of such a payment rather than a detailed operational blueprint. My priorities for 2006 will include how best we can pursue the proposals arising from the report. In the meantime, my budget package addresses these broad principles by adjusting the FIS income thresholds in a way which makes a bigger contribution toward larger families than previously. This approach is a key feature of previous proposals for a second tier child income support payment.
I wish to comment specifically on lone parent families. Only about half of all lone parents are in paid jobs. This is one of the lowest participation rates in the OECD. Particularly worrying is the fact that more than 40% of one-parent families are categorised as at risk of poverty at a time when Ireland is continuing to enjoy strong economic growth. My Department provides income support to about 80,000 lone parents through the one-parent family payment at a total cost this year of more than €760 million. I have previously expressed concern about this situation. As colleagues will know, I have initiated a major review of the one-parent family payment to assess how best we can support lone parents in their efforts to improve their own lives and those of their children. That review is now being finalised and I will bring it to Government in January next with a view to publication and wide consultation. I very much look forward to hearing the views of the House, lone parent representative groups and others on these proposals.
In the normal course of events I would do nothing to the structure of the payment until the review is published and debated, but I have decided not to delay action on one important aspect of the payment. As many in this House may know, there has been no change in the income limits applying to the one-parent family payment since the scheme was introduced in 1997. I have said publicly on many occasions that I want to give lone parents an opportunity to continue to increase their earnings without raising their fears about losing their entitlement to the payment, which I know from speaking to many lone parents, represents their financial security. In recognition of this I am pleased, therefore, to increase the upper income limit for the one-parent family payment from €293 to €375 per week. This fairly substantial increase will encourage further employment and help to ensure a measure of financial security. Lone parents working more than 19 hours per week can also claim the family income supplement, of which I spoke earlier. While earnings thresholds have a major role to play, other important factors also affect the ability of lone parents to take up employment and the nature of that employment. These have been identified in the Government's discussion document which I will launch in the new year.
This is an appropriate juncture to mention that I am providing initial funding in the budget to the Family Support Agency and the money advice and budgeting service, MABS, so that they can further develop the services they provide to vulnerable families. The additional funding of €3 million to the Family Support Agency will enable the establishment of 12 new family resource centres around the country and increase the level of grant assistance the agency provides to marriage and family counselling agencies, among other initiatives. Since its inception 13 years ago, the MABS has developed into a nationwide network providing advice and support to people who find themselves at the end of their tether, coping with debt and the challenge of making ends meet. It is an excellent service and I am keen to put it on a sure legislative footing for the future. I am currently consulting widely with various stakeholders within MABS and I hope to be in a position to move forward with a money advice and budgeting services Bill next year. The additional funding I am providing for the service includes provision for its further development as well as specific funding for the establishment of a national helpline.
As I indicated on the publication of the Estimates, older people are a priority for my social reform agenda. We have a booming economy and it is only right that the people who laid the foundation for our current prosperity should be able to enjoy the fruits of the tremendous strides this country has made in the past decade or so. This budget makes provision for a number of important measures designed to target resources at particular groups of older people. In considering these measures I was anxious to target those who are at the greatest risk of poverty, to allow people to supplement their social welfare pension through employment, and to simplify the system of income support for older people who do not receive contributory pensions. In this regard, people aged 66 and over can be in receipt of six different non-contributory schemes depending on individual circumstances and each scheme has its own individual means test. This is an anachronism and has no place in a modern social protection system. Accordingly, I propose to combine all non-contributory payments for people over 66 years of age, other than carer's allowance, into one standard enhanced non-contributory pension scheme with a greatly improved means test. I am increasing the amount of weekly means disregard from €7.60 to €20 per week for this standard pension. I am also providing a special earnings disregard of €100 per week. I regard the latter measure as a first step of a process to provide incentives to older people to continue in employment. It is estimated that almost 34,000 people will benefit from these changes at a cost of €20 million.
When the standard pension is introduced next September, individual pensioners, currently on reduced rates of payment because of their means, will be better off by up to €12.50 per week and up to €20.80 where a qualified adult allowance is payable. I am also pleased to tell the House that under the new arrangements, a single pensioner with no other means will be able to have up to €35,000 in capital and still qualify for a pension at the maximum rate. This figure will be doubled to €70,000 in the case of a couple.
Research shows that the incomes of pensioners decline with age and that pensioners have a higher risk of poverty as they grow older. Accordingly, it is appropriate that we should target additional resources at this group and I have, therefore, increased the additional allowance paid to those over 80 years of age by €3.60 to €10 per week. This measure will benefit over 100,000 pensioners including 33,000 receiving widow's and widower's pensions.
When added to the increases in the basic pension which I announced earlier, a contributory pensioner over 80 years of age will now have a pension of €203.30 per week, while pensioner couples will receive additional increases ranging from €9.30 to €10.80 per week. By any standards, these are good increases and a further demonstration of our commitment to the elderly.
As the House will be aware, a key part of our overall pensions strategy is an increase in occupational and private pensions coverage. I have received a comprehensive report from the Pensions Board on the current situation and the measures we might take in the future. That report is before the Cabinet for consideration and should be published shortly.
In the run-up to the budget, I received many representations from colleagues and representative organisations seeking an increase in the level of allowance paid under the national fuel scheme. The issue of fuel poverty is an emotive one, touching on one of the most fundamental human needs. At present, a means tested allowance of €9 is paid to recipients of long-term social welfare payments for 29 weeks of the year. I tend to the view that it is better to channel Exchequer resources into increasing basic social welfare rates rather than diluting the impact by diverting resources into allowances which, by definition, are payable to a smaller number of people. However, on this occasion I was influenced by the fact that the allowance has not been increased since 2002 and that it is targeted at the most vulnerable households, including the elderly, those who are ill or with disabilities and households with young children. Accordingly, I am pleased to be able to increase the allowance to €5 a week.
I am also availing of the opportunity to remove the current anomaly whereby residents in some local authority flat complexes with communal heating systems are ineligible for the fuel allowance. Such residents will now be able to qualify for the allowance if they meet the other conditions of the scheme.
I now turn to the topic of those who care for older people and people with disabilities in their homes. Over the past nine years, the Government has placed increasing emphasis on the role of community care in supporting the vast majority of people who wish to remain in their own homes. Earlier this year, the Tánaiste and I established a working group on long-term care. We recently received a full report from the task force on that issue and will take proposals to Cabinet in the near future.
This year will see the biggest ever increase in the rate of payment to carers. The carer's benefit will increase by €17 to €180.70. The rate of carer's allowance will increase by €26.40, bringing it to €180 per week for a carer under the age of 66. Significantly, the rate for carers over the age of 66 will increase by €30, bringing it to €200 per week and making it the single largest welfare entitlement, apart from the pensioners of over 80 years of age who I mentioned earlier. This represents increases of more than 17% for recipients of carers' allowances and I hope it goes some way to acknowledge the great work they do.
In addition, we are increasing the rate of the respite care grant from €1,000 to €1,200 from next June. The number of hours which a person can work while still receiving carer's allowance, carer's benefit or respite care grant will increase from ten to 15 hours per week and the income disregards for the means test for carer's allowance will increase to €290 for a single person and €580 for a couple. This means that a couple with two children can earn up to €32,925, while the carer receives the maximum rate of carer's allowance. I am extending the duration of the carer's benefit scheme to two years per care recipient from May 2006. I understand that my colleague, the Minister for Enterprise, Trade and Employment, proposes to extend the carer's leave scheme, which allows for the protection of the carer's employment rights for the duration of the caring period to two years.
As part of my reform programme, I am delighted to be able to announce a number of further improvements to the means testing arrangements and the main employment support services in this budget, which are designed to ease the transition to work. I am introducing a tapered withdrawal rate for disability allowance and blind pension recipients who engage in rehabilitative employment or self-employment and have a weekly income over €120 and under €350, which will benefit approximately 2,600 people. The qualifying period for access to the self-employment strand of the back to work allowance will be reduced from three years to two years on the live register and in the qualifying period for the employee strand from five to two years. Furthermore, periods spent on supplementary welfare allowance and direct provision allowance will also count towards the calculation of the qualifying period. A 50% tapered relief of withdrawal of earnings between €60 and €90 per week will be introduced for persons in receipt of rent and mortgage interest supplement. Many organisations and individuals have asked me to examine that issue.
I will conclude at this stage, even though I have not commented on all the changes proposed in this budget. Full details are available in the budget fact sheet published by my Department. It is a generous and far-reaching budget which allocates a record breaking €800 million on increases to social welfare payments and initiates a new social reform agenda, including funding for targeted initiatives that further recognise and reward carers, increases in incomes for the most vulnerable older people, specific measures to tackle child poverty issues, introduction of supports that further empower lone parents and the promotion of activation through back to work, training and education supports which enhance choices for welfare recipients.