Dáil debates

Tuesday, 24 May 2005

Priority Questions.

Anti-Poverty Strategy.

3:00 pm

Photo of Willie PenroseWillie Penrose (Westmeath, Labour)
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Question 49: To ask the Minister for Social and Family Affairs if his attention has been drawn to the recent report by the One Parent Exchange Network showing that the average debt for lone parents approaches €8,000; if the absence of affordable child care is a contributory factor to preventing many lone parents entering the workforce and means they must stay at home to look after their children; his plans to address this situation; and if he will make a statement on the matter. [17240/05]

Photo of Séamus BrennanSéamus Brennan (Minister, Department of Social and Family Affairs; Dublin South, Fianna Fail)
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The research into indebtedness among lone parents was commissioned by the One Parent Exchange Network with funding from my Department's money advice and budgeting service and the Society of St. Vincent de Paul. It focuses on the situation where debt has become a dominant aspect of people's lives and has come to carry serious social and health implications. The revelations on debt from an earlier study carried out by OPEN in 2004, entitled Living on the Book, prompted OPEN to seek a partner and launch further research into indebtedness among lone parents.

The issue deals with the extent to which the absence of affordable child care is a contributory factor in preventing many lone parents from entering the workforce. As part of the ending child poverty initiative under Sustaining Progress, a steering group has been established, chaired by the Department of the Taoiseach, to address the obstacles to employment faced by lone parents. This group is scheduled to report back to the Cabinet committee on social inclusion by the end of July 2005. The steering group will examine five specific topics to assess how they impact on employment opportunities and family circumstances. These are income supports, employment, education, child care and support programmes and information.

In addition, I have established a working group in my Department to review the income support arrangements for lone parents. Some of the main issues to be addressed by the working group include the contingency basis of the one-parent family payment, cohabitation, maintenance and the role of secondary benefits. As part of this review, 40 organisations dealing with lone parents were asked for their views. Detailed submissions have been received from OPEN, the money advice and budgeting service and from many of the other groups consulted. The Department is examining the submissions received and is considering the issues raised. It is intended that this review will feed into the work of the Sustaining Progress group.

The research conducted by OPEN found that the average size of arrears of a lone parent household is €1,092 and the average size of credit based debt was €7,862. The arrears relate to utilities such as rent, electricity supply, gas and telephone bills. Lone parents in debt are more likely to be using home collection credit or illegal moneylenders than mainstream providers. The money advice and budgeting service was set up to combat money lending and to assist people in managing their money with a view to regaining control of their finances. The service has been and remains a practical response to those in debt or at risk of getting into debt.

I met last week with the Irish Bankers' Federation as a result of the report's findings and received assurances that the legal requirements for opening bank accounts and accessing bank services will be communicated to counter staff, and that it would continue co-operation with related bodies, including the money advice and budgeting service. Later this week, I will meet the ESB and the Irish League of Credit Unions to discuss the report's findings on these groups. I look forward to receiving the report of the group of senior officials and my Department's review of income support arrangements. I also look forward to working with a number of groups and people, including the Minister for Justice, Equality and Law Reform who has responsibility for child care, in addressing these complex issues.

Photo of Willie PenroseWillie Penrose (Westmeath, Labour)
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This report is a severe jolt to the system and a significant rebuttal of the fatuous and ill-founded comments that have emanated from certain quarters. There has often been a distortion of the facts surrounding lone parenthood. There is no crock of gold in lone parenthood and lone parents have been badly maligned by recent utterances by certain people. Such people, following a perusal of this report, should apologise for their facile statements which were grossly untrue.

Some of the acts carried out by the Minister's predecessor have contributed to this situation, including the savage 16 social welfare cuts. We are still waiting for the back to education allowance waiting period to be reduced to six months. What about rent allowance? I can give the Minister an example of a lone parent working on a FÁS scheme with four months left on the scheme. Due to a combined income of the FÁS scheme and the lone parent allowance, she is earning in excess of the figure allowed to claim rent allowance. This means she can no longer participate in the scheme and it is unfair that everything is taken from her when she is just a few euro over the eligibility threshold. This should be looked at on a pro rata basis so that the rent allowance can be paid pro rata. This is what has lone parents in poverty. There are 80,000 people in receipt of a one parent family allowance, along with 13,000 other lone parents as well as 150,000 children.

Lone parents have to micro-manage their money. They know what every item of household goods costs. When they succeed in getting maintenance from their partners, there is an immediate reduction of rent allowance so they are no better off. Does the Minister agree that lone parents, under the current structures, are effectively ensnared in a poverty welfare trap? Does he agree that affordability of child care is now acute for lone parents? A worker on the minimum wage has to work from Monday morning to 1 p.m on Wednesday in order to pay for child care before he or she earns a brass farthing to pay for the other household expenses. People who want to go to work cannot afford child care. They are ensnared in a vicious cycle of poverty. It is time to tackle this once and for all to ensure affordability of child care.

Does it worry the Minister that financial companies and money lenders are charging families up to 200% interest on loans? The report commissioned by OPEN, which represents 78 lone parent groups, referred to that fact. Is the Minister concerned that lone parents find themselves in the position of accumulating rolling debts? Is he surprised or shocked by the finding that the ESB charges up to 22.9% on hire purchase agreements, which is almost equivalent to a moneylender charge? It is time the Government prevented legal moneylenders from charging more than a 30% annual percentage rate of interest. This would be a start in helping lone parents and would represent a positive response to this excellent report from OPEN.

Photo of Séamus BrennanSéamus Brennan (Minister, Department of Social and Family Affairs; Dublin South, Fianna Fail)
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I am concerned that some lone parents and other welfare recipients appear to encounter considerable difficulties in opening accounts with banks and other financial institutions. As a result, they are often obliged to obtain loans at higher interest rates from finance companies outside the mainstream or from moneylenders. As I indicated, representatives of the Irish Bankers' Federation have responded to my concerns this week. These are issues of serious concern and I did not pull any punches in making this clear to the IBF.

I will meet ESB management shortly. The report points out that some ESB charges are up to 22.9% for credit purchases on certain products. I am informed that lenders who charge an interest rate of 23% must apply for a moneylender's licence. It is a source of concern that there are currently 50 licensed lenders who may charge more than 23%.

Photo of Willie PenroseWillie Penrose (Westmeath, Labour)
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It is frightening.

Photo of Séamus BrennanSéamus Brennan (Minister, Department of Social and Family Affairs; Dublin South, Fianna Fail)
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Legal moneylenders are entitled to charge from 23% to more than 100%. We must examine this legal entitlement and warn people of its implications.

Although the rates charged by the 50 licensed moneylenders are very expensive, I am even more concerned about unlicensed lenders. The money advice and budgeting service works hard in this area and has a budget for this year of €13 million. It deals with 16,000 cases on an annual basis in its efforts to help people escape the grip of moneylenders. In so far as I can, I warn anybody who cares to listen to avoid availing of the services of illegal moneylenders. People would also be well advised to avoid licensed moneylenders and the associated interest rate of 23%. The full force of the law will be brought to bear on the activities of illegal moneylenders.

Photo of Dan BoyleDan Boyle (Cork South Central, Green Party)
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Question 50: To ask the Minister for Social and Family Affairs the actions his Department intends to take on the recommendations of the survey undertaken by the One Parent Exchange Network, entitled Do the Poor Pay More? [17239/05]

Photo of Séamus BrennanSéamus Brennan (Minister, Department of Social and Family Affairs; Dublin South, Fianna Fail)
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The report into indebtedness, Do the Poor Pay More? was commissioned by OPEN with funding from my Department's money advice and budgeting service and the Society of St. Vincent de Paul. The report focuses on the situation of those for whom debt has become a dominant aspect of their lives and has come to carry serious social and health implications. The revelations on debt from an earlier study by OPEN in 2004, Living on the Book, prompted the organisation to seek a partner and launch further research into indebtedness, its prevalence and depth, among lone parents. The report has 13 key recommendations that are being examined by my officials.

To date I have met the Irish Banking Federation and the Irish Payment Services Organisation to explore ways in which those on low incomes can better access financial services. The meeting identified a number of areas in which progress could be made in facilitating wider access to financial services, including customer identification requirements and universal bank accounts.

In regard to customer identification, the IBF has agreed to communicate with its member retail banks to ensure staff is reminded of procedures for opening an account and the attendant customer identification requirements. It has further committed to liaising with the financial regulator, IFSRA, on this issue. The existing guidance notes on money laundering set out, as good industry practice, the measures to establish identity that might reasonably be expected of credit institutions. However, they state that any measures adopted should not deny a person access to financial services solely on the grounds that they do not possess certain specified identification documentation.

The banking industry has proposed the development of a universal bank account as an integral part of a national payments strategy. My Department will consider this issue as part of its review of current payment strategies. The IBF has assured me of its commitment in helping to deliver real progress on these and related issues. Since the introduction of the money advice and budgeting service in 1992, it has developed a good working relationship with the IBF.

The report found that 59% of lone parents surveyed were in arrears to the ESB. It also found that utility companies such as the ESB and Bord Gáis were not seen as totally transparent in their dealings with low-income families using pre-payment meters. I have invited the ESB to meet me to discuss the report and I also intend to meet the Irish League of Credit Unions.

Those who receive social welfare payments through the electronic payment option operated by An Post can opt to avail of its household budget scheme. Under this scheme, An Post makes regular deductions of up to 25% of a person's social welfare payment towards their household costs, such as rent or mortgage payments to local authorities, ESB, Bord Gáis and Eircom. This ensures people are not faced with a single large bill for these services.

I emphasise that I consider it a priority that those on welfare supports or on low incomes are given the opportunity to achieve financial inclusion so they can attain control over their own finances. This is an important step on the ladder to better prospects and an improved quality of life for them and their families.

Photo of Dan BoyleDan Boyle (Cork South Central, Green Party)
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I am surprised this question was not taken with the previous one. Why does it take the release of a report of this type for the Minister and his Department to react? Why were the deficiencies in the system, which the report identifies, not recognised earlier? Why is there no response to the obvious inadequacies in payments lone parents receive before they are exposed by representative bodies such as OPEN? At the launch of this report the consumer director of IFSRA, Ms Mary O'Dea, said it was obvious the title of the report, Do the Poor Pay More?, was a rhetorical question. She observed it is evident that the poor pay more and that the situation of lone parents in particular must be examined in this regard.

The Minister said he met the IBF and intends to meet the Irish League of Credit Unions. What does he intend to do about the greatest problem in this area? The legal moneylenders are the most significant problem in terms of indebtedness. The Government had opportunities to deal with this problem when the two Bills relating to IFSRA came before this House since 2002. The Minister for Finance was told the Consumer Credit Act 1995 must be amended and that the existing rules in regard to moneylending were causing untold hardship. The Government's failure to respond is a contributory factor to the misery many experience as a consequence of indebtedness.

The Minister has been far too slow in counteracting the inconsistencies and contradictions in regard to payments and differentials within his Department. Another question I tabled today highlights the situation of a lone parent on a community employment scheme who would find herself €45 euro better off a week if she worked part-time in the private sector. However, her job does not exist in the private sector because it is social services-based. Another constituent of mine, a male lone parent who is participating in the job initiative scheme, finds his secondary benefits eroded so severely because of the recent rise on payment for this scheme that he is now worse off by €80 a week, or €4,000 per year. These cases arise as a consequence of rules the Department implements, which could be changed merely with the movement of a pen. However, no action is taken in this area.

The Government had advance notice of the content of this report. I had not been a Member of this House for long when the Free Legal Advice Centres produced a similar report, An End Based on Means, which highlighted the failures of Government policy on moneylending and in regard to those living in poverty. Some two and a half years later, there is still inaction. The Minister must address this issue with his Cabinet colleagues who have joint responsibility for this area. We should not have to return to this issue at Question Time in the future.

Photo of Séamus BrennanSéamus Brennan (Minister, Department of Social and Family Affairs; Dublin South, Fianna Fail)
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I do not accept that nothing was done in this area prior to the publication of this welcome report, for which MABS and the Society of St. Vincent de Paul provided funding. MABS has expanded over the years and now has more than 220 staff and a dramatically increased budget. This year alone we gave it €700,000 on top of the normal increase so that it could continue to advise people on managing money.

Deputy Penrose's remarks on legal moneylenders were fair. Three options are available to those seeking money. Ordinary lending rates are lower than 23% and most people take loans with single figure interest rates. Legally licensed lenders provide loans at rates above 23%, often involving hire purchase, credit cards and a range of financial products. To an extent this must be legal because the financial products provided are different from ordinary day to day lending. People should be warned that it is expensive to take this type of loan. I commented earlier on the third option of illegal lenders. I will continue to discuss this matter with the Ministers for Finance, Enterprise, Trade and Employment and Justice, Equality and Law Reform, each of whom has responsibilities in this area.

Interest rates for credit cards, hire purchase and other similar financial products will always be substantially higher than overdraft or mortgage rates. MABS ensures that this is understood, in particular by those who are vulnerable. Last week, I raised with banks their need to respond to this report because otherwise they will find that vulnerable people are forced to the second option of high rate legal moneylenders. We do not want to so force them when funds are needed.

I will consider the anomalies raised by Deputy Penrose, of which a significant number exist. As people transfer from welfare to work, a balance must be achieved so that pay is sufficient to support people and allow them to look after their families while also encouraging them to return to education or work. It is often difficult to achieve the correct balance. We will continue to work towards removing anomalies which arise occasionally and involve small sums of money.