Jim Walsh (Fianna Fail)

I thank Senator Brady for sharing time. I welcome the Minister and compliment her on the initiatives she has taken in the Department. What she has outlined shows she has a formula for dealing with the unprecedented fiscal situation, which is not easy.

The background is that the social welfare increases have exceeded the rate of inflation. The Minister and her predecessors were emphatic in ensuring the economic benefit of those years would also accrue to those in the social welfare system. This is correct and old age pensioners who spoke to me were extremely appreciative of the increases they enjoyed during the period.

The Minister pointed out that the social welfare bill, at €21.3 billion, is a very significant proportion of overall expenditure as it must be approaching 40% of total spend. It is 20% higher than in 2008, which reflects Senator McFadden's point about the growing number of people who are unemployed and the ESRI report, which was very alarming. It shows that we, in addition to various countries across the globe, are far from emerging from this very deep recession. I hope it will not be as bad or as long as the Great Depression in the 1930s but it is the closest we have come to it. I hope the process can be arrested globally because, as an exposed economy, we are dependent on such a recovery.

With the budget in October, there was an increase of between 3% and 3.6% in social welfare rates. We are in a deflationary period with a predicted deflation rate of 4% this year, which means there is between 7% and 7.5% in increased spending power for those on social welfare. It is difficult to envisage how those rates of social welfare payments can be increased next year or the year after. I presume that if we remain in deflation, the spending power of those on social welfare may be enhanced, although the rates of payment will not be increased.

The decision on the Christmas bonuses would have been difficult for the Minister as such payments were appreciated by those on social welfare but the Minister's decision was correct. It is more acceptable, in so far as a cut in anybody's income is acceptable, than cutting the rates. The figure involved, at €223 million, is very significant. Although it may be difficult to do it this year or next year, something may emerge in the future which would allow us to revisit the decision and seek to ameliorate the position, particularly with regard to pensioners. There may be a stage where economies will recover and we will find ourselves in such a position. I hope we will avail of the opportunity if it presents itself.

There are many anomalies within the rent supplement system. I compliment the Minister on the examination she has carried out and the decisions she has made are absolutely right. Rents are falling and the Minister has decided to reduce the maximum rent levels by up to 10%, with the average being 6% to 7%, as the Minister mentioned in her speech. She is also correct to increase the minimum contribution by €6 to €24 but I wonder if that is sufficient.

The contribution of anybody availing of the rent subsidy scheme should be no less than what they would pay under the differential rent scheme. It makes absolutely no sense that people are not enthusiastic about trying to get a local authority house simply because it will cost more than the rent subsidy scheme. There has been a wedge in that regard and if that remains, it should be removed because it is not logical. At €490 million, the scheme is way in excess of what was originally intended in this regard. There should be a total root and branch examination of the scheme and how it works. We should also examine whether it is right to see it continued to be administered through community welfare officers or whether it should be in some way integrated with the local authority system. Local authorities have responsibilities in such areas and I am a firm believer that where we can focus the jobs of people in a common direction, having them under one umbrella would be helpful.

I do not agree with Senator McFadden with regard to the reduction in the jobseeker's allowance. Paying people who have just left school can create a dependency culture. Although the Minister has reduced the payment to a certain demographic to €100, it is still almost 100% more than what similar people in Northern Ireland are being paid. I support the back-to-work and back-to-education initiatives.

I compliment the Minister on the changes in the pensions legislation. There is a need to address the requirements in particular of private pension schemes. Defined benefit schemes have been seriously affected because of losses incurred in the economic downturn and through investment losses, particularly over the past 12 to 18 months. The decision to allow time and flexibility to recover that funding was essential and sensible, and such action should be continued.

In all this debate I have heard unions and others talk about defined pension schemes and there is also the public pension scheme. As I stated before, although I am a beneficiary of it I do not believe it is sustainable and it must be examined. I do not see why we do not integrate the public sector pension with the State pension. Anybody in the private sector would pay PRSI and be entitled to the State pension so why should this not happen in the public sector? Why should the State pension not be integrated and factored into the calculation of the pension entitlement?

There is a coterie of people who have moved from a defined benefits scheme to a defined contribution scheme, although not through their own choice. They have shipped the same level of losses as those who have been in defined contribution schemes and they are severely impaired with regard to future pension entitlements. The area must be looked at.

Uninformed people speak about bringing pension contributions to the standard rate of income tax for relief, which shows an ignorance of how the system works and fails to recognise that less than 50% of people in the private sector can avail of any particular pension. That must be addressed. While we may be cosseted in the public sector, we should be mindful of the productive sector of the economy as the 1.7 million people working in it also have entitlements.

I agree with the pensions insolvency payment scheme, PIPS, and I compliment the Minister on her introduction of this good idea. The cost-neutral scheme will allow those in defined contribution schemes to avail of annuities. For a long time the financial services industry, particularly pension companies, has exploited pension schemes with annuities. I remember looking at some quotations for annuities where the payback was something like 3% or 3.5%. To get one's money back, a person would have to live for 25 years after retirement; if a person retired at 65, he or she would have to live until 90 before the capital sum being used to pay the insurance company was covered. On an actuarial basis, that must have been highly profitable for insurance companies and, not before time, the State is correctly stepping in on the issue.

I hope the scheme will be developed further as there are other areas where it could be used to the benefit of those on defined benefit and defined contribution schemes. The investment of those moneys is another issue and the State could perhaps utilise the significant amounts of money in private pension funds and give a modest enough return. We must at least ensure that the capital sum is protected. If people had been as wise five or ten years ago as they are today, I do not doubt that they would have been happy to invest their capital sums with the State on the basis of receiving a 1% or 2% return. Had they done so, they would be in a far better position now, particularly when one considers that some of the funds in which they invested their money have lost 30% or 50% of their value.