Ray Butler (Meath West, Fine Gael)
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I thank the Minister for Social Protection and her Department for the work undertaken so far towards securing social welfare provision for the self-employed, and I wholeheartedly welcome the report of the advisory group on tax and social welfare commissioned by the Minister.

During the general election campaign in 2011, I met many business people throughout my constituency who raised serious concerns about the complete lack of social welfare support for the self-employed. These were people who provided employment, paid PRSI, income tax and VAT, but whose businesses had collapsed following the economic downturn. I remember calling to one house in particular while canvassing and meeting a man who operated his business from the side of his house. He showed me details of numerous neatly-filled files of VAT, PRSI and income tax, which he had paid into the system correctly and on time. He explained to me that now that his business was no more, he was left to fend for himself, to pay his mortgage and feed his children with little or no support from the system he had paid into for so many years.

Therefore, it is heartening to see that in less than three years, since the Government came into power, the Minister has addressed this need by lowering the thresholds for the self-employed, and allowing them to be assessed for social welfare straight away on receipt of a letter from their accountant stating that the business has ceased trading. I also note that statistically, approximately 80% of self-employed people who have applied for social protection did qualify for a payment, which is proof of the Government's commitment to supporting our business community through good and through bad. However, we must now reinforce this provision by establishing proper system supports for the self-employed while our country comes out of the dark days of recession, as we are the only industrialised nation in the EU that has not got these features in place.

The first step is to implement the report I mentioned earlier and in doing so, introduce a new class stamp of 5.5% for the self-employed, which would automatically entitle them to sick pay and disability cover. The question is whether we make this a voluntary or mandatory system. As a previously self-employed person, I believe a mandatory system is the only way forward in order to be fair to all.

While it is encouraging that approximately 80% of self-employed applicants qualified for some form of social welfare support, it is in fact the PAYE worker who is footing this bill. Therefore, I would argue that it makes more sense to have the self-employed contribute the extra 1.5% themselves towards their own possible future social welfare needs. Revenue acquires income tax from the self-employed through their profits, or if the business is non-profit-making, it secures tax through their drawings. It therefore appears that paying a little extra on a stamp benefits the self-employed more and covers any eventual sickness or disability.

In respect of the collapse of a business and subsequent full unemployment, I have studied the British model whereby social welfare support comes in the form of an income-based jobseeker's allowance, which is of course means-tested. I believe this model best suits the needs of our self-employed.

It is fair to say that over the lifetime of this Government, the progress made towards supporting and recognising the social protection needs of the self-employed has positively evolved but more fool-proof foundations need to be introduced to ensure they are better protected in the future and further research on other European models needs to be explored and considered.

Joan Burton (Dublin West, Labour)
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I thank Deputy Butler for raising the issue of providing social protection for the self-employed, which he has raised on many occasions in this House because it is a very important issue for the hundreds of thousands of self-employed people in the country.

Self-employed persons are liable for PRSI at the class S rate of 4%, which entitles them to access long-term benefits such as State pension, contributory, and widow's, widower's or surviving civil partner's pension, contributory, and maternity benefit. 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.

In 2011, I established the advisory group on tax and social welfare to meet the commitment made in the programme for Government. The advisory group is examining and reporting on issues involved in providing social insurance cover for self-employed persons in order to establish whether or not such cover is technically feasible and financially sustainable. Any proposals for change in the social welfare system must be financially sustainable and cost neutral.

On 6 September 2013, I published the group's report on the issues involved in providing social insurance cover for self-employed persons. The group found that the current system of means-tested jobseeker's allowance payments adequately provides cover to self-employed people for the risks associated with unemployment. I thank Deputy Butler for acknowledging the changes we have made in respect of self-employed people and farmers, who for the most part are self-employed and who can catastrophically lose their business. It used to be that they had to use the previous year's accounts. We now take current up to date evidence of what has happened to them. The group found that 80% of self-employed people have access to jobseeker's benefit. Consequently, the group was not convinced that there was a need for the extension of social insurance for the self-employed to provide cover for jobseeker's benefit.

The group found that extending social insurance for the self-employed was warranted in cases related to long-term sickness or injuries. To this end, the group recommended that class S benefits should be extended to provide cover for people who are permanently incapable of work because of a long-term illness or incapacity through the invalidity pension and the partial capacity benefit schemes. The group further recommended that the extension of social insurance in this regard should be on a compulsory basis and that the rate of contribution for class S should be increased by at least 1.5 percentage points.

In the course of its deliberations, the group identified a range of issues associated with the subject of social insurance for the self-employed that should be addressed, and made a number of recommendations in this regard. These include, among others, the means assessment for self-employed income in terms of accessing jobseeker's allowance payments, credited PRSI contributions, self-employed access to activation and training schemes and the role that information campaigns might play in addressing information deficits, particularly with regard to entitlements to jobseeker's allowance, as we have just discussed them.

Ray Butler (Meath West, Fine Gael)
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I thank the Minister for her reply. There is no perfect solution to all cases when it comes to social welfare and the self-employed. I have heard various groups from the Irish Small and Medium Enterprises Association, ISME to the Irish Farmers' Association, IFA, and others, say that they want it to be voluntary. I do not think it will work voluntarily. I understand the economy and how the country is now but we must move forward. If one makes a profit one pays one's income tax. If one does not make a profit but breaks even one pays tax on one's withdrawals. Surely it would be better to put 1% or 1.5% onto a new stamp to give one protection for one's family and future and to have something there if the business folds.

I put to ISME and other groups the question should we leave the system as it is? The system does not work for the self-employed. We need social protection. We saw what happened when the Celtic tiger crashed. The Minister has done excellent work for the self-employed. Could we do this now and bring it to a head with an increase to 5.5% from 4%? I spoke on local radio with various organisations during the week. To judge by the feedback in the form of e-mails and texts the business people understand that they must pay a little more. They know that and they want this stamp. The majority of small independent businesses want this stamp and security for their families if anything happens to their business.

Joan Burton (Dublin West, Labour)
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I thank Deputy Butler because his is a very sensible suggestion. The 2010 actuarial review of the social insurance fund, which I published last year, determined that the self-employed are obtaining better value for the level of their current social insurance companies than are those in employment, where they and their employer pay a combined contribution of 14.75%. The actuarial review went so far as to say that the effective annual rate of contribution needed to provide the core full-rate State pension currently available to self-employed contributors is approximately 15%.

The advisory group's proposal was to move to an area of cover for self-employed people that it considered was very important in respect of long-term or permanent incapacity or illness, and to cover them for this, for a small amount extra. There are private insurance schemes available, income protection schemes to cover long-term personal illness and invalidity but, as I am sure Deputy Butler knows, and as most small business people know, while they are in the private sector these are extraordinarily expensive. The advisory group's proposal would have given this kind of cover for long-term invalidity and illness, which happens to a percentage of people who cannot work again, either for themselves or as employees. This would have given them a route back, and through the partial capacity benefit scheme that I brought in since becoming Minister, as part of the reform of social welfare, it would have given them an opportunity to become involved part-time, depending on the level of capacity.

I agree with Deputy Butler that the committee's proposal of 1.5% was modest. Perhaps it is slightly ahead of its time and the organisations to which Deputy Butler refers would on reflection and study, and perhaps through talking to self employed people, review whether this really is good value for money. The principle of social insurance is that the whole population concerned is covered and contributes. That allows what we hope is a small number of people affected to be in effect covered by a community rating principle. On the other hand, if one goes for private cover that is done on a slightly different rate and the private institutions charge handsomely for it. Some self-employed people can certainly afford that but I am aware that many of the self employed people about whom Deputy Butler speaks would not be in a position to buy that kind of very expensive scheme for themselves.