Joan Burton (Dublin West, Labour) | Oireachtas source

Before I refer to the issues directly associated with statutory sick pay, I am keen to emphasise in the clearest possible terms that the Government is totally committed to the role the 200,000 small and medium sized enterprises play in the Irish economy, employing more than 650,000 people. This point was also outlined by the Minister of State, Deputy Perry. These enterprises contribute some €10 billion to the Exchequer each year. In many ways they are the backbone of our economy and our communities and they are central to our economic recovery. Precisely because of our commitment to the SME sector the Government's action plan for jobs 2012 contains more than 270 measures to transform the economy, including many initiatives to improve supports for business. The Government also provides a range of measures to support employers which place people in employment. These include the JobBridge national internship scheme, which I launched, the employer job (PRSI) incentive scheme, also an initiative from my Department since I became Minister, the revenue job assistance scheme, also from my Department, and several workplace supports specifically for people with disabilities.

I need not remind Deputies that our social welfare system is the product of an evolutionary process dating back at least 100 years. Welfare states have evolved in Europe and elsewhere as a combination of the social welfare system, what the State provides; the fiscal welfare system, benefits provided through the tax system; and the occupational welfare system, social benefits provided by employers or employees through their contributions. Other countries, including Sweden, for example, which has an open trading economy like ours, have undertaken welfare reform in the area of disability and illness. They have placed certain obligations on employers, including paying for an initial period of absence through illness. This formed a key element of the reform process of social welfare.

My Department will spend an estimated €847 million on illness benefit payments in 2012. The Department will spend some €3.4 billion this year on the range of illness and disability payments to provide income supports to almost 300,000 people, adults of working age, and their families. These figures are somewhat incredible and the figure of 300,000 people indicates that almost one in six people of working age, or 16% of our working age population, is in receipt of an illness or disability related payment. The figures are truly astonishing. During the past ten years, especially when the economy was going so well, the number of people in receipt of an illness or disability-related payment from the Department of Social Protection has risen by more than 100,000 and expenditure on disability payments has increased by more than €2 billion. I listened carefully to the contributions of the two spokespeople from Fianna Fáil but how or why did Fianna Fáil let this occur at the most prosperous time in the history of the country? How did Fianna Fáil manage to put an extra 100,000 people on some form of illness or disability payment? We must reflect on that question as part of the discussion under way tonight. These are staggering figures and Members will be aware that the social insurance fund, from which illness benefit payments are made, is seriously in deficit. The deficit is expected to be €1.82 billion in 2012.

While consideration of all the issues is not yet complete and, as the Minister of State, Deputy Perry, noted, no final proposals are under consideration by the Government, this is the background against which the question of introducing a scheme of statutory sick pay, SPP, for the public and private sectors is being considered. Anyway, it is part of my role as Minister for Social Protection to provide for the long-term sustainability of the social insurance system for our pensioners and those who become unemployed or fall ill. This is the essence of the social insurance scheme, an insurance scheme into which one pays when one is earning such that one can draw benefits at another stage. Like all insurance schemes, if one has far more people claiming than the scheme was designed for, then one must question how to keep vital supports for people who have fallen ill and as a result can no longer work. Both Fianna Fáil Deputies across the floor have been involved in business and they know perfectly well what I am referring to, as does the Minister of State, Deputy Perry. This is an important issue, one that we must reflect on as a country in terms of how we best direct resources to the people who require this support.

The least I can do is to ask my officials to examine where the boundaries between the State and the private sector lie in the area of protection of people from loss of income from employment through illness. This aspect is vital. An earlier Fianna Fáil from the time of Lemass would have recognised the importance of doing this and of carrying out an honest examination of these matters. This is difficult for all parties throughout the House because during the boom years, Fianna Fáil had no problem raising the numbers claiming by the astonishing figure of 100,000. Will the Fianna Fáil Deputies present go back to some of the people who were in government at the time - I realise Deputy Calleary held a Minister of State position for some time - to ask how this occurred? I have received no explanation for it yet.

I wish to refer to some of the specific issues associated with the question of statutory sick pay. Consideration of the merits of introducing such a scheme revolves around two separate but related strategic issues, the need to secure Exchequer savings on one hand - let us not forget that Fianna Fáil bequeathed us a very tough programme that it signed up to with the IMF - and the need to drive positive policy reforms on the other.

The question of introducing statutory sick pay was advanced in the context of the comprehensive review of expenditure undertaken in 2011. It was also considered on several occasions by Fianna Fáil in Government, for instance, in 2009, as part of the an bord snip nua process. Such a scheme undoubtedly has the potential to deliver savings to the Exchequer, in terms of reduced expenditure on illness benefit. It is estimated that savings of €23 million would result if statutory sick pay were payable for one week and €89 million if it were payable for four weeks.

The House will be aware that I recently published the 2010 actuarial review of the Social Insurance Fund. Among the key findings of the review was that the fund currently has a significant shortfall of expenditure over income with, for instance, estimated expenditure of €9 billion set against income of €7.5 billion in 2011. In the absence of any action to tackle the shortfall, the 2011 deficit of €1.5 billion will double to €3.0 billion by 2019 or, expressed as a percentage of GNP, the shortfall will increase from 1.1% of GNP in 2011 to 2% in 2019 and unless PRSI income increases and-or expenditure levels are reduced, the Exchequer subvention will need to more than treble, from 2011 levels, by 2030 and increase by a factor of almost eight by 2040.

It needs to be said also that we still have one of the lowest average rates of employer PRSI as measured by the OECD. Many of our European competitor countries devote more of the total contribution by employees, in particular, in terms of tax and PRSI-like payments, to funding their social insurance system. At an average employer contribution of 9.7%, Ireland is well below, for example, 18.2% in Finland, 16.2% in Germany, 23% in Belgium, and 12.9% in Poland. That, of course, is one of the reasons that the Social Insurance Fund is running a substantial and growing deficit.

I need to stress another important point, one which has been lost in some of the more strident responses to the possibility of the introducing a statutory sick-pay scheme. Under the illness benefit scheme, there is a waiting period of three days where, subject to any arrangements within the company or the employment, the employee bears the cost. This waiting period would be carried through into any scheme of statutory sick pay, and any notion that statutory sick pay would create an incentive to take extra days off is, therefore, wrong.

Ireland is an outlier when it comes to employers being obliged to fund some element of sick absence pay. Most other European countries, including all of our major competitors, oblige employers to pay for some sick pay costs. The reason for that is it helps to manage the sick pay and places a focus in the company on wellness so that the employer and the employee take responsibility for an employee who becomes ill for whatever reason being assisted to get back to work as quickly as possible. By contrast, in some instances, unfortunately, our arrangements almost end up encouraging employees to stay out longer and longer and then miss their connection with the labour force. That is something of which Members on all sides of the House will be aware. Across the Border, the extent of the obligation is 28 weeks for employers in the North. It is two years in the Netherlands; six weeks in Germany; and nine days in Finland. Those are our competitor countries and Ireland is an outlier.

The 2008 OECD report, Sickness, Disability and Work - Breaking the Barriers, was explicit on this point, noting that in Ireland "the potential of employers being part of the solution for raising labour market participation of people with health problems or disability is largely untapped". The report went on to recommend that Ireland should "investigate the potential of strengthening the financial incentives for employers e.g. by introducing a mandatory period of employer-provided sick-pay".

We are living through an intensely difficult economic period. Deputy Perry and I have spoken of the commitment of everybody in the House to small employers being encouraged and supported. As Minister, I have launched several schemes to support them because they are the backbone. However, we need open minds. How can we, as a first-world country, have 16% of those of working age on some kind of illness or disability benefit? I do not know how Fianna Fáil added on an extra 100,000 people in the good years when there was a great deal of money in the economy. All I will say is that for employees who become ill when they are in work, who maybe develop a serious condition or a mobility problem, a good structure of support on illness is central to the concept of the welfare state, which is what earlier members of Fianna Fáil such as the late Taoiseach, Seán Lemass, always stood for. Equally, we must have a system that encourages people to get back to work so that a couple of days' illness that becomes repeated does not end up in that individual, unfortunately, losing all connection with the labour force. That is a social loss to us as a society but it is also as great a loss to the individual and his or her family. We need a detailed debate on the issue of how we built up the level of problems that have become evident in terms of the numbers of people affected and how we help them to get back to work so that they become, once again, financially independent for themselves and their families. Equally, for those who develop a serious illness, our system needs to be able to recognise that even more rapidly, and then give them the very careful consideration and support of which, in terms of a welfare state, they need.

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