Thursday, 16 February 2012
Topical Issue Debate
Social Welfare Code
I hope there is some leniency with my time. I thank the Ceann Comhairle for selecting this important issue for debate in the Dáil. We are all aware of the importance of having a safety net in place in the social welfare system for when one falls into personal difficulties such as illness or where one loses one's job unexpectedly. It is important that people who find themselves in these positions have seamless access to the welfare system and that they receive due payments in accordance with their contribution rates as laid down in law.
Like many colleagues in the House, during the course of the recent general election campaign I encountered hundreds of self-employed people throughout my constituency of Longford-Westmeath who had become unemployed unexpectedly. This occurred due to the downturn, due to illness, for other reasons or due to a closure of the business. Such people are liable for PRSI payments under the class S rate of 4% which entitles them to access long-term benefits such as the State pension contributory or the widow's, widower's or surviving civil partner's pension contributory. It can be gleaned from the foregoing that this does not qualify them for jobseeker's benefit irrespective of how long they have been making contributions. These people are compelled to recourse to jobseeker's allowance which, as we are aware, is means-tested.
For many formerly self-employed people this turns out to be their first encounter with the social welfare system. This has turned into an emotive, tortuous and complex process in so far as the assessment must reflect the income that the self-employed person might expect to get from his or her business in the following 12 months or so. Generally, this is posited upon what he or she has earned during the previous 12 months. A minute examination of the previous year's activities and income arising is then gone through. Most people do not have one euro left at that stage. It is rather like looking for last year's snow in the middle of spring. It is an exhaustive process that takes a long time and it taxes everyone's patience. These people are left in limbo without any income to pay for the essentials of living, such as keeping food on the table or keeping a roof over their heads.
The fall-back advice is to go to the community welfare officer. However, this is not a straightforward process. One's history must be reviewed and an assessment must be carried out and this is part of the vicious cycle. In the meantime the self-employed applicant is not even a statistic on the unemployment register. By virtue of this consequence alone, such people do not qualify for participation in the various schemes or opportunities that might arise therefrom. They are left in no man's land. They feel bruised and isolated and deeply irritated and understandably so.
As a result of these situations I have encountered in recent years I specifically requested that a commitment should be included in the programme for Government to examine the feasibility of providing social insurance cover for self-employed persons. I compliment the Minister on establishing the advisory group on tax and social welfare to progress this issue and to establish whether cover is technically feasible and financially sustainable. I realise the Department must go through this process.
We should not forget that many of these people who were self-employed also provided valuable employment for others. Many were sole traders or partners and found themselves to be victims in so far as money due from the main contractor or sub-contractor which may have gone out of business did not materialise or else they were subject to part payment, ultimately leading to the collapse of the self-employed person's business. This is why they find themselves going to the Department.
We must confront this issue and address it in a positive and constructive way. We must address the plight of the self-employed. From my discussions with self-employed persons I believe that given the opportunity they would be willing to contribute to a special rate of PRSI contribution. I accept that this would likely be significant but it would enable them upon cessation of employment by virtue of a downturn or other circumstance to qualify for benefits immediately and have access to the full range of social welfare insurance benefits that arise from making contributions at a given level or class. This may not mean such a person would be entitled to the full range of social welfare benefits but it should correspond to the appropriate class. As an accountant, the Minister will be acutely aware of this and will be better able to understand it than most.
I do not believe this would open the floodgates although I understand the Minister will have some concerns in that regard. Many self-employed persons must register as an employer. Self-employed people never receive any recognition for their role as tax collectors who furnish payments to the Exchequer on a monthly basis and must employ people to do so.
It is time the issue of the exclusion of self-employed people from the social welfare system was faced and addressed in a positive way. That is the least these people deserve. I compliment the Minister on making a good start.
I thank Deputy Penrose for raising this important issue which is critical for the people, families and communities affected by the loss of employment by so many self-employed people. Not only did these people employ themselves and their families, but they employed many others, particularly in the construction area and allied sectors.
Self-employed persons are liable for PRSI at the Class S rate of 4%, which entitles them to access long-term benefits such as the State pension, contributory, and widow's, widower's or surviving civil partner's pension, contributory. Ordinary employees who have access to the full range of social insurance benefits pay Class A PRSI at the rate of 4%. In addition, their employers make a PRSI contribution of 10.75% in respect of their employees, resulting in the payment of a combined 14.75% rate per employee under full-rate PRSI Class A. For employees earning less than €356 per week, the rate of employee's PRSI is 4.25%
Any changes to the PRSI system to extend the full range of social insurance benefits, including jobseeker's benefit, to self-employed persons would have significant financial implications and would have to be considered in the context of a much more significant rise in the rate of contribution payable.
I established the advisory group on tax and social welfare last year to meet the commitment made in the programme for Government. The advisory group will, inter alia, examine and report on issues involved in providing social insurance cover for self-employed persons in order to establish whether such cover is technically feasible and financially sustainable. In addition, the actuarial review of the social insurance fund, which is due to be completed in mid-2012, will examine this matter. Obviously, since the crash, the social insurance fund has gone into significant deficit and that is part of our problem and we must find a way to get the social insurance fund to grow so we can meet all the requirements on the fund.
Self-employed workers may establish eligibility to assistance-based payments such as jobseeker's allowance. They can apply for the means-tested jobseeker's allowance if their business ceases or if they are on low income as a result of a downturn in demand for their services. In general, their means will take account of the level of earnings in the past 12 months in determining their expected income for the following year and, in the current climate, account is taken of the downward trend in the economy. As in the case of a non-self-employed unemployed claimant of jobseeker's allowance, the means of the person's husband, wife, civil partner or cohabitant will be taken into account in deciding on entitlement to a payment.
I share the Deputy's memory of the snow last year and of the distress of families that found themselves in the unfortunate position described so eloquently by Deputy Penrose.
Even in trying to bring equality to the system, is it not the case that all current earnings from self-employment are taken into account and there are no disregards as there are in similar cases where people are not self-employed? Also, earnings are assessed as gross income less the work related expenses.
Notwithstanding the Minister's comment on the actuarial review and the significant deficit, we should not resile from confronting this problem. The mark of this Government will be to do something new. This is a reforming Minister and she can leave her mark on the social welfare system by dealing with this issue. She should not resile from the issue and if it is necessary for the self-employed to pay at a rate of 20%, so be it. At least then when they have to go to the social welfare office in four year's time - hopefully the situation will have changed and that will not be necessary - they will be able to get an immediate payment. We must put food on the table today and there is no use promising utopia tomorrow. We must look after the people. Self-employed people have basically been written out of the script, but I do not intend to allow that situation continue. I have had a taste of that situation myself, so I know the two sides of the coin, as does the Minister.
I know the review group is to come back with a report, but the Minister must not allow that report gather dust nor let reports gathering dust become the hallmark of the Government. She must act on the report and bring it to an Oireachtas committee where we can debate it. She will find people from the self-employed sector more than willing to participate in that debate and to make positive progress.
I appreciate the Deputy's comments and views. Our social insurance must change to accommodate the fact that many more people will, at some point in their working lives, be self-employed, be self-employed contractors or set up a small family company, for example, in the construction industry. In some cases, employers have structured employment so people who would formerly have been deemed employees, are contractors and self-employed. We cannot call our system a universal social insurance system unless we take account of these patterns of employment. Many of the self-employed people mentioned by Deputy Penrose are people who worked in construction, whether plumbers, carpenters or something else. Traditionally, these people would have been employed as employees, but the manner in which the construction industry has developed over time has meant that many of these people became self-employed subbies. Often they were left waiting for payment and this, in turn, contributed to their distress.
I am conscious that currently, in law, even if people have the wherewithal and wish to make a contribution, they are unable to do so and many self-employed people have made that point to me personally. Self-employment covers a wide range of jobs and professions. Barristers are self-employed and we often do not think of some of the wide range of people in various jobs and professions as self-employed. I know from speaking to many of these people, not only those in the construction sector, that many of them are interested in being allowed to make a contribution so they will have some cushion of safety in the event their business or employment goes south.