Willie O'Dea (Limerick City, Fianna Fail) | Oireachtas source

I am very glad that we helped to persuade the Government to give them that break.

I also welcome the increases for those of working age. However, nothing has yet been done about the averaging system for pensions. This was a particular measure introduced by the previous Minister for Social Protection, Deputy Joan Burton, and it has given rise to a situation where a person who enters the social welfare system just before his or her 56th birthday and pays stamp for ten years will be entitled to a full pension. If somebody pays stamp equal to 20 years contributions over a longer period, in many cases, he or she will be entitled to less. A system which provides that one receives a higher pension in making fewer contributions is patently unfair. I know that this is a particularly difficult problem to unscramble. However, we have all had people in our constituency offices who paid stamp back in the 1950s or 1960s before leaving the workforce, generally because they got married. They later re-entered the workforce. Surely, it is not beyond the wit of the entire intelligentsia in the Department of Social Protection to find some way to mitigate the impact. The homemaker's scheme which Fianna Fáil introduced in 1994 was an attempt to do this to some extent, but there are many hard cases. Many people come to me to point to their situation which is impossible to justify.

Above and beyond this, we must tackle the question of pensions generally. The demographics show that after 1980 the birthrate dropped substantially and it only began to recover in the early 2000s. However, it never recovered to its 1980 peak. That is one side of the equation. The other is the fact that we are all living longer, which is something to be applauded. We should not look at pensioners and the elderly as bed-blockers and a demographic time bomb. They are the ones who worked hard to build the country. Unfortunately, however, the numbers are such that the social welfare system will become unsustainable in a relatively short space of time. The statistic is that there are five workers for every pensioner, but that is due to change gradually in the next 30 years to a ratio of 2:1. That is a relatively short space of time and more and more pressure will be placed on the system in the interim. That has been evident for some time and it is incumbent on us as a society to look for solutions. There has been a great deal of talk about solutions, but little or no action has resulted from it.

Traditionally, one of the things successive Governments did to encourage people to provide for themselves was to give them tax relief. Studies conducted by the ERSI and others have identified a significant dead-weight loss associated with tax incentives for those in the upper income levels. In other words, they had the resources to save and would probably have provided for themselves anyway. As such, the tax relief was a bonus. That is why the last Government and its predecessor began the process of reducing this pension-related tax incentive. I cannot judge where we are in relation to it, but it is probable that we have reached the point of diminishing returns. The Minister may be aware of the very important document produced by Social Justice Ireland which recommends a universal pension scheme. What is proposed is that the revenue gained in abolishing all tax relief on pensions would be sufficient to provide for a universal pension. I have read the document and it is impressive, well put together and well argued. Whether the figures stand up, I am not qualified to say. However, I would like to hear the Minister's views on the matter.

Defined benefit pension schemes are disappearing rapidly. We have proposed in the past few years a few simple amendments which would at least help to arrest that trend or mitigate the position for workers when a pension scheme collapses. However, we did so without success. In her wisdom, the previous Minister advised the Dáil to vote down the amendments. I see no reason a healthy pension scheme should not be required to be at least 90% funded before it can be closed down. There are various other factors in liability calculation. The liability calculation is absolutely artificial. It is an accounting fiction. While a certain amount has been done in that regard in that trustees are now entitled to a greater extent to invest in Irish Government bonds, surely that process should be accelerated. I think it was Einstein who said the definition of insanity was doing the same thing over and over again and expecting different results. There is a touch of that about the pension system. We have heard plenty of talk and discussion, seen plenty of papers and documents and had plenty of seminars but very little action. The previous Minister used to regale us with tales from far-flung places such as Australia, Canada and New Zealand where a marvellous system of auto-enrolment had been introduced. That system was introduced recently in the United Kingdom. A recent study conducted by Mercer shows that it has worked very well there where 90% of young people have not opted out. In fact, 80% of people under the age of 35 years have managed to keep paying at the highest possible rate. It is time to have a very serious look at the pension system here. It is a problem which is coming down the line and I trust the Minister will turn his attention to it once the Social Welfare Bill is out of the way.

We have all made representations on behalf of single parents. In fact, the matter was discussed again at the Joint Committee on Social Protection this morning. The Minister will be aware that Dr. Michelle Millar and Dr. Rosemary Crosse were commissioned by his Department to carry out an independent analysis of how the changes to the lone parent allowance made by the previous Government had played out. The result is a searing indictment of the new system. The authors state:

One of the greatest concerns of those interviewed about the policy changes is the reduction in the combined income of those one-parent family payment recipients who were in part-time employment prior to the change. With the exception of those countries that introduced a time limit on welfare payments, there is no evidence of activation resulting in lone parents in receipt of welfare being financially worse off as a result of policy change. Policy often has unintended consequences but if the premise of activation policy is to reduce poverty levels by increasing the number of lone parents in paid employment, then a policy which results in lone parents in paid employment being financially worse off has evidently created an unintended consequence and needs revision. This neither encourages welfare recipients to enter into employment nor will it result in an increase in the income of the household; rather, it has the perverse effect of encouraging welfare dependency and reducing household income.

By any standards, that is a pretty damning indictment from somebody who was commissioned by the Government to conduct an independent report on how the system is working. Various charts have been produced by people who represent lone parents showing how lone parents who go to work fare. We are supposed to be encouraging lone parents to go to work, but they will lose money as a result of these changes.

Right on cue, a number of organisations representing lone parents have released literature advising lone parents, whose working family dividend will run out, that if they are in receipt of child maintenance, they should switch from FIS back to jobseeker's transitional payments. In other words, they are advising them to switch from work-related to welfare-related payments, which is the precise opposite of the policy intention behind those changes. They were meant to move people from welfare to work, but they are moving them from work back to welfare. A number of organisations which have communicated with us, including the Society of St. Vincent de Paul and SPARK, have pointed out that there are many anomalies in the current system. For example, a lone parent returning to education may be eligible for the SUSI grant depending on whether he or she is in receipt of rent allowance. The system is riddled with anomalies like that. I welcome the change announced by the Minister. Any improvement is obviously welcome, but I noted in the public expenditure statement accompanying the budget that the change would cost €9 million per annum. I received a reply from the Minister on 17 August. I had asked what the cost of changing the age limit to 12 years would be and I was told it would be €9.9 million. Quite frankly, that would be a much better approach and would not cost the State anything. I commend the presentation from Dr. Michelle Millar to an Oireachtas committee to the Minister. She suggested a number of alternative ways of dealing with the matter. It is a running sore and will not go away.

I welcome the proposal to increase job seeker's allowance from €160 per week to the top rate, which is something I recommended, for people who re-enter the education system. In this and in other jurisdictions there is a differential between the rate of social welfare paid to people aged under 25 and over 25 years. We can argue the case in different ways. I am not persuaded that the differential needs to be extended further, but it will be as a result of the Bill. Somebody on the full rate of jobseeker's allowance will receive an increase of €5 per week, but somebody on the lower rate, which is applicable to people aged between 18 and 24 years, of €100 per week will only receive an increase of €2.70 per week. Therefore, the gap continues to widen.

Somebody in the public domain asked the Minister about this recently, and he said he did not want to send out the wrong signal. I understand that, but what are we saying? Are we saying that if we give somebody who is 23 years of age and unemployed €102.70 per week he or she will strive mightily to re-enter the education system or grab a job, whereas if the same person was given €105 per week he or she would sit at home? I do not think there is any logic to that view.

I refer to the activation system. We all know that society is changing, and we are in an era where traditional skills are disappearing and people have to upgrade their education on a regular basis. It is only right that there should be a system of reskilling and retraining. Generally speaking, we call that activation. However, unfortunately in this country, activation is tied to compulsion. We have a system of retraining and reskilling which is compulsory. Changes made in the past couple of years have introduced compulsion to a much greater degree than had previously been the case.

We now have a situation where if somebody is offered a training or an education course, regardless of how irrelevant or inappropriate it may be, he or she must sign up or lose some or all of his or her welfare payments. Equally, if somebody is offered a job, regardless of how low paid, insecure or inappropriate, he or she must sign up or face social welfare penalties. We are ramming square pegs into round holes from one end of the country to the other. I know people who were offered jobs, through JobPath, which they had no interest in or qualifications for and which were located up to 50 km from Limerick city. The cost of going to work would mean they were at a loss over and above what they received in social welfare payments.

The social welfare system has become more authoritarian and unsympathetic. It is forcing many people into low-paying and unskilled jobs which, of course, only benefits employers. We have to examine the system quite seriously.

The Minister will recall that the Government instituted a study on JobBridge. I will not take up the time of the House or embarrass certain people by reading out some of the testimonials I have received from people who had very bad experiences with JobPath and Turas Nua. A very detailed study into the operations of Turas Nua and the sort of results it has or has not produced, as the case may be, is now overdue.

I welcome the extension of the social insurance system to invalidity pensioners. However, I note the committee which considered this, namely, the advisory group on tax and social welfare which reported in 2013, came to the conclusion, for reasons which are quite a mystery to me, that any extension of the social insurance scheme to the self-employed should only be for long-term benefits and should not cover things like occupational injury benefit, illness benefit, etc. A certain reasoning was given for that conclusion, but to my mind, to put it at its most polite, it is less than persuasive. In comparison to other European countries, we are way behind on this matter. The countries which have social insurance schemes for the self-employed cover long-term and short-term illnesses.

There are a number of ways in which we could introduce such a scheme. There could be a compulsory increase in employers' PRSI. We could allow people to voluntarily sign up to the scheme. Alternatively, we could have recourse to the taxpayer. The Minister has opted for the latter. I note he is following the advice of the advisory committee that reported in 2013, which rejected a voluntary system. Again, in so far as I could understand the language used surrounding the reasons for the refusal, it seemed to be the case that the committee said we had never done this before so we cannot do it now.

To say the least, that is a peculiar view given that other European countries, including advanced countries and recent entrants to the EU, have voluntary schemes for illness benefit for the self-employed. These countries include Denmark, Finland, Germany, to some extent, Spain, France, Bulgaria, the Czech Republic, Poland and even Lithuania. We have been told that we cannot have such a scheme because we never had one before.

The Minister has allocated €5 million to the introduction of the invalidity pension for the self-employed from December of next year, which is 14 months away. There was a social welfare briefing during the week, which I unfortunately could not attend. A member of my office asked what would be the cost of it in a full year. The figure given was €25 million or something of that nature. My understanding from replies I received from the Department previously was that the cost would be €74 million per year. Perhaps €74 million covers short-term illness benefit as well and that the figure of €25 million just refers to invalidity pension. Will the Minister comment on that?

We have to tackle poverty traps. There are elements to the social welfare system that disincentivise people from going to work. For example, the three-day rule provides that a person working 15 hours per week over three days can sign on for social welfare for the remainder of the working week. If that person is working 15 hours per week over four days, it is not possible. That is blatantly unfair and does not recognise the realities of the modern workplace. It should be an hours-based system. There will be some complexity in moving to such a system, but we will inevitably have to move in that direction.

There are also disincentives built into the present operation of the family income supplement, FIS, scheme, which needs refinement. Does the Minister intend to abolish the scheme? He has spoken about introducing a family dividend. Will that be a substitute for the FIS scheme or will it be introduced alongside it? This is a relevant issue.

Many other possible reforms would not cost the State a penny. For example, the time has come to abolish mandatory retirement. We should set up a special unit within Intreo or IDA Ireland that is specifically aimed at those aged more than 50 years. It is time to give more flexible access to private pension funds. That has worked well in the UK also. It will be necessary to have a proper advice scheme to advise people on what to do with their money and how to approach the matter though.

There will come a time when we will have to have a special cost of living for those with disabilities. Only 30% of those with disabilities are part of the workforce. Disability spending has reduced by approximately 10% in the past five years, which was a time of increasing demand. Everyone knows that it is more expensive for those with disabilities to live from week to week than it is for the average, fully healthy person.

The back to school clothing and footwear allowance was substantially reduced over the past number of years. Looking at the figures, it would not cost a great deal to restore it to some extent. It should be restored at the earliest possible opportunity because it was designed to assist, and only assisted, the poorest of the poor and the most vulnerable of the population.

We can say the same about fuel allowance. At a time of rampant fuel poverty, there has been a partial restoration of the fuel allowance, which had been reduced, but the partial restoration is not sufficient.

This morning the lone parents' organisations pointed out to us that non-custodial parents are now receiving correspondence from the Department of Social Protection to the effect that they need no longer contribute to their child's upkeep, which is scandalous. This legislative lacuna occurred when the concept of jobseekers' transition was created and it is time it was dealt with.

We need to seriously consider overhauling the social welfare appeals system. It would not be a matter of reinventing the wheel. Detailed studies have been undertaken on this issue by the Free Legal Advice Centres, FLAC. This organisation has pointed out the deficiencies in the system and put forward far-reaching proposals for reform. I can find no argument against any of those proposals.

I hope this is the beginning of the end of regressive budgets. I am looking forward to the debate on Committee Stage. There are a number of aspects to the Bill that I would like to see changed and there are a number of matters that I would have liked to see included in it, but we will return to that debate on Committee Stage.

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