Dáil debates

Wednesday, 9 July 2014

Topical Issue Debate

Social Welfare Code

1:00 pm

Photo of Ray ButlerRay Butler (Meath West, Fine Gael)
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I would have liked to have spoken a couple of weeks ago during the debate on the Social Welfare and Pensions Bill, but my mother passed away that week and I was not able to do so. I am very grateful to have the opportunity today to speak about the provision of social protection measures for the self-employed, a matter I have continued to raise at meetings of the Oireachtas Joint Committee on Education and Social Protection. When I was canvassing during the recent local elections, this was raised as a serious issue for those whom I met who were self-employed and feared they would have no protection in the event that their business collapsed or they suddenly became ill. Other Deputies have also raised this matter and thank them for keeping it on the agenda for discussion.

The self-employed pay stamp at 4% and it is proposed to increase this rate to 4.25% and maintain it for an approximate two or three year period. Depending on the level of economic growth, the rate would continue to increase incrementally by 0.25% every second year or so to eventually reach a maximum rate of 5.5%. Progress has been made in recent months in resolving this matter for the self-employed. ISME, the Self Employed Alliance and some unions have spoken at length at Oireachtas meetings in giving their points of view on introducing a new stamp rate for the self-employed to offer security at vulnerable times. The introduction of a new stamp rate would provide the self-employed with social welfare payments on the closing of a business, in times of illness and disability, while all other welfare payments would be means-tested. After much discussion at several meetings, I am encouraged and heartened by the positive responses from the Self Employed Alliance which represents smaller sized employers and is wholeheartedly in favour of the introduction of the new stamp rate.

While the other representatives of the self-employed are also in favour, the elephant in the room is making it a mandatory payment, as opposed to a voluntary contribution. However, I argue that voluntary participation cannot correlate with social protection measures. Making it a voluntary payment would only serve to negate the possibility of having sufficient social welfare funding available to cover the needs of the self-employed. Therefore, a mandatory payment is required in order for this to work.

As the seeds of small business start to show signs of taking root again nationally, this appears to be the most opportune time to formally introduce this stamp rate and in doing so provide social welfare cover for those who would ordinarily have no security if the situation remained the same. Furthermore, I have spoken at length to the Ministers for Social Protection, Finance and Jobs, Enterprise and Innovation about the introduction of a new stamp rate and they have all reacted positively to this becoming a real option for the self-employed. I also welcome news that ISME is preparing to undertake a survey of all its members on the subject. I am hopeful the self-employed will recognise the absolute benefits of such a move.

There are approximately 340,000 self-employed persons in the country, all of whom may need access to social welfare protection at times of vulnerability. Therefore, we cannot allow the current system to remain in place. The glaring gap must be bridged to provide them with security when they need it most and I hope all sides involved will accept this finding.

1:10 pm

Photo of Phil HoganPhil Hogan (Carlow-Kilkenny, Fine Gael)
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I thank the Deputy for raising this issue, which I am taking on behalf of the Tánaiste and Minister for Social Protection.

Self-employed persons pay PRSI at the class S rate of 4%, subject to a minimum annual payment of €500. This entitles them to access long-term benefits such as 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 employer's PRSI is 8.5%.

Self-employed workers may access social welfare supports by establishing eligibility to assistance-based payments such as jobseeker's allowance and disability allowance. In the case of 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 assessing means from self-employment, income from the previous 12 months is used as an indicator of likely future earnings. Given the variety of self-employment situations, the means assessment procedures are applied in a flexible manner to ensure that circumstances that would be likely to lead to a significant variation, either upward or downward, in the level of a person's income from one year to the next are taken into consideration. It is recognised that the downturn in the economy had an impact on many self-employed persons and the consequent reduction in their income and activity levels. This may be reflected in any assessment of their means from self-employment for jobseeker's allowance purposes. As in the case of a non-self-employed claimant for jobseeker's allowance or disability allowance, the means of husband, wife, civil partner or cohabitant will be taken into account in deciding on entitlement to a payment.

In September 2013, I published the report of the Advisory Group on Tax and Social Welfare on extending social insurance coverage for the self-employed. The group was asked to examine and report on issues involved in extending social insurance coverage for self-employed people in order to establish whether such cover is technically feasible and financially sustainable, with the requirement that any proposals for change must be cost neutral. 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. In this context, the group noted that almost nine out of every ten self-employed people who claimed the means tested jobseeker's allowance during the three-year period from 2009 to 2011 received payment. 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, however, 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.

This recommendation will require further consideration in conjunction with the findings of the most recent actuarial review of the Social Insurance Fund, which indicated that the self-employed achieve better value for money compared to the employed when the comparison includes both employer and employee contributions in respect of the employed person. My colleagues in government and I will reflect on the findings of the advisory group on this issue and will further consider the recommendations contained in the report and that will take account of future developments in the budgetary and fiscal position.

Photo of Ray ButlerRay Butler (Meath West, Fine Gael)
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I thank the Minister for his positive response. I thank the outgoing Minister for Social Protection, Deputy Burton, for all the help she has given the self-employed through her Department. Hopefully, the new Minister will finally put the new stamp in place. We are the only country in industrialised Europe that does not offer social protection for the self-employed. We have come a long way since I entered the House three years ago and raised this issue at a meeting of the Joint Committee on Education and Social Protection. I was told the rate would be at least 30% but it is now down to 4.25%. This will give recognition to self-employed people.

Recently, a lady rang a local radio station to describe how her husband who was self-employed got sick. She earns €440 a week. They have two children and a mortgage repayment of €1,600 per month. Her husband was assessed for social welfare benefits and a payment of €1.80 per week was approved. That has to stop and we must put a system in place. Everybody gets sick and sometimes people suffer a disability.

In England, welfare payments for the self-employed are based on their profits. If people generate between zero and £7,000 in profits annually, they fill out an exclusion form. They pay £3.30 a week in national insurance if they generate between £7,000 and £12,000 in profits annually and they pay 9% in the higher bands. The Sunday Business Postran an article under the headline, "No Country for Sick and Self-Employed". However, we are relying on the self-employed to get this country up and running. We cannot leave the system the way it is. We have to put a new system in place. I want the unions to come down off their high horses to put this new stamp in place - at the end of the day, are they acting for the self-employed or who are they acting for? We must put a stamp in place for the self-employed.