Mary Hanafin (Dún Laoghaire, Fianna Fail)

Promoting social inclusion, protecting the most vulnerable and recognising the contribution that older people have made to this country have always been major priorities for this Government. When we could, we provided unprecedented increases in welfare payments and ensured, for example, that the value of the State contributory pension more than doubled over the past ten years from just €113 per week to more than €230 per week. Even through the economic difficulties of the past two years, the Government has done its best to prioritise social welfare.

The October 2008 budget provided for increases of between 3% and 3.8% in the basic payment rates at a time when inflation for 2009 was expected to be 2.5%. Prices have actually dropped considerably this year. In framing the April supplementary budget, very tough decisions had to be made across the range of Government expenditure. In that context, the provision of €21.3 billion for social welfare services in 2009 - 20% more than the amount spent in 2008 – was a clear demonstration of our commitment to protecting the most vulnerable people in Irish society.

Both tax rates and borrowing had to be increased to fund this extra expenditure on social welfare. Providing a 100% Christmas bonus this year would have added another €223 million to the bill, money which, unfortunately, the State does not have. In seeking to contain the increased welfare budget to €21.3 billion, there were no easy options, and I assure Deputies that the decision not to pay the Christmas bonus was not taken lightly.

The increases provided for in the October budget were taken into account, as were the April forecasts for price deflation this year. The decision not to pay the bonus was announced in April so that people would have nine months' notice.

I appreciate that non-payment of the Christmas bonus effectively amounted to a 2% cut in the annual social welfare basic payments to those affected. However, it is important to recall that basic welfare payments were increased last January and that by September 2009 the consumer price index, CPI, had fallen by 6.5%. The average decrease in the CPI is now expected to be between 4% and 5% this year.

Given that tax revenue has deteriorated even further since April, putting increased pressure on the public finances as a whole, I regret that it will definitely not be possible to pay a Christmas bonus this year, as the Taoiseach already outlined this morning. I know that any welfare cuts are hard for people to cope with but if the Government does not take steps now to reduce overall public expenditure and restore stability to the public finances, we risk making the economic position far worse for everyone, including welfare recipients, in the long term.

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