Joan Burton (Dublin West, Labour)

I will outline the changes I have made since I was appointed Minister in March and give a flavour of the challenges facing us and how I propose to tackle them. I have looked with fresh eyes at the existing social protection system, schemes and policies. I am targeting aspects of the system for change and development while, at the same time, following through on commitments for my Department in the programme for Government. The job we all have is to rebuild our welfare state in a way that is appropriate to the 21st century and this is a huge challenge.

I refer to expenditure on social welfare. The social protection budget increased dramatically during the Celtic tiger years. In 2001, spending on social protection stood at €7.84 billion and the 2010 outturn stands at €21.35 billion. This is an increase of 272%, which is way in excess of the increase in inflation of approximately 30% during the same period. Spending on schemes, services and administration in 2011 is estimated at €20.62 billion. Support for children and families accounts for 11.8% of expenditure or almost €3 billion, of which €2.07 billion will go on child benefit. A wide range of supports for people of working age accounts for more than 54.7% of overall expenditure or almost €11.3 billion. Jobseeker's allowance and jobseeker's benefit account for in excess of €3.6 billion while more than €1.1 billion will be spent on the one-parent family payment. Carers will receive €762 million in total. Pensions and other supports for retired and older people account for 29.6% of overall expenditure or €6.1 billion.

Now that the recession has bitten hard and deep we have a scale of expenditure that is completely out of step with our ability to fund it. We do not have the means or revenue as a country to support our level of spending. This year, spending will be approximated €18 billion more than overall Government income. The Government will get €42 billion from tax and PRSI, over €20 billion of which will be spent by the Department of Social Protection. The Department accounts for 39% of all current expenditure and therefore a sustainable fiscal position cannot be achieved without some reduction in welfare expenditure.

A core commitment in the programme for Government is the restoration of fiscal stability. Restoring fiscal stability is essential to saying "Goodbye" to the IMF and the troika. Even those who favour default would have to cope with exactly the same issue, except in that event, the deficit would have to be cleared in a year rather than over the period in the negotiated programme. My Department has recently completed a comprehensive review of expenditure which will inform the budgetary process and will help to identify how we find a balance between reducing expenditure and supporting those most in need through the supports and services offered by my Department. I am conscious of how many people rely on support from the Department of Social Protection. Offering them the continuation of that support is vital but we must equally help people get to back to work and achieve economic independence. We talk about national sovereignty but personal financial independence is also an issue, particularly for people of working age. If they from time to time lose their job or become ill, they should get support from the social insurance system.

People have spoken recently about illness benefit and statutory sick pay. The number of people claiming illness benefit and other disability payments has increased greatly in the past ten years from about 170,000 to 247,000. The cost to the Exchequer of paying illness benefit, not disability and not invalidity benefit, has risen from €330 million to €900 million during that period. At any given time there are 80,000 people on illness benefit. That amounts to 20 million working days lost for which the Department of Social Protection is paying. In European terms, the 20 million working days, compared with the number of people at work in the economy, is very high when compared with our competitors. We have people in work who become seriously ill and for whom the supports exist. The cost to the State of all schemes that cover illness and disability will amount to over €2.7 billion this year. Illness benefit is €900 million and other payments related to illness and disability bring the total to €2.7 billion.

Introducing statutory sick pay would only mean that employers would have to pay for sick pay for their employees for a period of up to four weeks. After that, the State would continue to pay and would fund invalidity and disability payments. This reform would still leave Irish employers in a very favourable position compared with their counterparts in competitor countries, such as Britain and the Netherlands, where employers pay for sick leave for more extended periods. The social protection budget could be cut by more than €150 million if this reform was introduced.

Most other European countries, including all of our major competitors, oblige employers to pay for some sick pay costs. In the Netherlands the employer pays for up to two years. In Britain, one of our most important markets and competitors, the employer pays for up to 28 weeks. In Belgium the employer pays for up to four weeks while in Germany the employer pays for up to six weeks. This has been researched in depth because it is an important issue in most developed economies with good social protection systems. OECD research has indicated a strong link between the period of sick absences and employer contributions to sick pay costs, both in the public and private sector. The social insurance fund should pay for long-term illness benefit while the short-term benefit should be payable by employers. If managers had to manage sick pay as a budget item, absenteeism could be reduced in the public and private sectors. All the OECD evidence points to this being so.

It is notable that absentee rates in the Netherlands dropped from 10% to 4% after statutory sick pay was introduced. This is the difficulty we face when debating these reforms. We can hardly expect the troika to accept a situation where the country they are bailing out is in danger of becoming this decade's "sick man of Europe". Fifteen years ago in the Netherlands, 1 million people were being paid sick pay and that figure was reduced by 50% over a period of years.

The OECD notes that Ireland does not oblige employers to pay a contribution and recommended in a report published in 2008 that Ireland should consider introducing such a scheme. Even though Ireland does not oblige employers to pay a contribution to sick pay costs we still have one of the lowest average rates of employer PRSI as measured by the OECD. Our rate of PRSI for employers is low at 9.7% compared with 18.2% in Finland, 16.2% in Germany, 23% in Belgium, and 12.9% in Poland. Even Latvia, which people talk about as a very low tax country has high employer and employee PRSI rates to provide for its social security system.

Our low employer PRSI rate means that the social insurance fund is running a deficit which amounted to €2.5 billion in 2010. This deficit cannot go unaddressed. In this debate, the choice is to increase PRSI rates, reduce benefits or change the payment model in a manner which asks employers to share some cost but also gives them control over the management of the cost. I know Senators share my concern about high absenteeism rates and their impact on productivity. One of the key aspects of the proposed reform is that it will give employers in the private and public sectors an incentive to manage absenteeism. In addition, it will reduce administrative costs in the Department of Social Protection. Approximately 300 of my staff deal mainly with processing sick pay claims. These employees would be much better employed in trying to combat fraud within the social welfare system by carrying out inspections and checking that those claiming social welfare and employers are properly accounted for within the Department's system.

I stress that these reforms apply as much to the public sector as they do to the private sector. Senators probably do not realise that my Department pays for the sick days of persons employed in the public sector. For example, it pays for the sick days of employees of the HSE. The statutory sick pay proposal emphatically does not provide for a transfer of the cost from the public to the private sector. Given that the private sector ultimately funds the public sector, either through taxation or other charges such as PRSI, this criticism does not stack up. We are trying to change the culture of absenteeism and there is broad agreement that this is a matter we should address. In the long term tackling this culture will be beneficial to both people's health and the economic well-being of the companies for which they work. Those who have been involved in managing or employing people will recognise this fact. If some individuals are seen by their co-workers to be taking more sick days that would otherwise be considered the norm, this can give rise to difficulties. If the Government is paying, the private sector is also paying - it is just that the payment is routed through Government channels.

Usually, the cry from the private sector is to define collective services narrowly and minimise State involvement. The logic behind this is to allow private businesses and individuals to manage their own affairs to the greatest extent possible. There is normally praise for reforms which minimise bureaucratic overheads in order that the overall cost will be reduced. Obviously, an issue arises with the capability of small enterprises to fund sick day payments, particularly in the context of exceptional cases involving prolonged absences in respect of serious illnesses. There is some merit in the State providing an insurance mechanism for collective cover. The key question is when this cover should kick in. Under the proposals under consideration, it would come into play at four weeks. This would be at the lower level in our peer countries and, therefore, provide an earlier and more comprehensive form of collective cover compared, for example, with the United Kingdom in which state cover kicks in at 28 weeks.

In view of its low corporation tax and PRSI rates, Ireland remains a very friendly place in which to do business. There is a need to consider the examples of the Netherlands and the Nordic countries. These states have good welfare systems which provide people and employers with support when they need it. In some ways, during the Celtic tiger era it was possible for Ministers for Finance to introduce many increases to cash payments. There is a need, therefore, to consider how we might spend the more limited funds at our disposal now as wisely as possible in order that they might benefit people in the most effective way. We must also introduce reforms which will bring the provision in this country - as is the case with the proposal to which I refer - into line with the lowest level in our competitor countries.

In addition to focusing on expenditure, it is essential to reform and transform the system of social protection. In the past increased expenditure on social protection was focused on increases in rates and expanding the number and size of schemes. The system has become increasingly complex. Consequently, it is difficult to understand for those who need to engage with it and inflexible for those who administer it. I would like us to put in place a system that is easier to understand, more flexible to administer and amenable to change, both as the economy changes and contingencies arise. While the system provides a basic level of income support, it does not sufficiently enable or encourage people of working age to get back to work, or, in the absence of jobs, return to education or training.

The system is fostering a culture of welfare dependence rather than one of economic independence, self-direction and self-determination. The replacement rate or the proportion of their former wages that unemployed persons receive in benefits has increased in the case of some recipients to levels which may discourage them from seeking work. In providing and retaining an all-encompassing safety net we have taken away choices and opportunities. As with so many matters relating to my portfolio, we need to strike the correct balance between social protection and encouraging initiative, employment and economic independence. Necessity is the mother of invention and we want to empower people to explore solutions in meeting their own needs. This will not happen in adopting an open-ended approach to providing payments. As the recent NESC reported points out, the social welfare system has been passive in providing much but demanding very little in return. We must turn this around in order that entitlement to support will be based on a commitment to prepare for future opportunities in a timely manner and to grasp those possibilities when they arise.

The Government has taken the first important steps on this path, including, for example, the introduction of the JobBridge scheme. I am pleased to report that over 2,500 people are now involved. Employers and host organisations have offered a further 2,500 plus individuals opportunities to participate in the scheme which is a work in progress and we are only in week 21. However, the feedback is extremely positive and the scheme has given opportunities to people who could not get jobs because they were not in a position to gain experience. However, JobBridge is not perfect and I have taken into account all the comments Members of both Houses have made on it. The scheme is under constant review in order that we might identify ways to improve it. We have taken a great deal of feedback from host employers and organisations and those participating in the scheme.

JobBridge represents a small but valuable addition in providing opportunities for particular types of people. I refer to individuals who recently emerged from different levels of education or training or those who previously worked in the construction industry and now want to try to change careers. I was happy to be involved recently with a Skillnets programme for engineers. As a result of the downturn in the construction industry, the opportunities for engineers have dried up. However, the Skillnets programme to which I refer allowed a number of them to retrain and they have now embarked on new career paths with companies which produce medical devices. I am sure Members can think of other examples where we will be able to help people who have very good work experience and education but for whom the construction industry is not there any more in the way it was during the Celtic tiger era.

My Department is carrying out a major transformation and changing the way it does business. A number of services are being integrated into the Department. Responsibility for the office of social inclusion transferred back to the Department in May 2011. The community welfare service transferred from the HSE to the Department on 1 October 2011, which involved 1,000 staff.

The FÁS employment and community services will formally join the Department on 1 January, and very detailed preparations are under way to ensure this deadline is met and that the transfer of services and staff is as seamless and smooth as possible. Senior managers in the employment and community services side of FÁS have already begun to transfer to the Department and almost 700 staff have been identified as transferring in total. The remainder of the staff will stay with the new organisation, SOLAS, which will take over the education and training functions of the old FÁS.

Once the FÁS employment and community services people join the community welfare officers at the Department, we will try to build a single point service or one stop shop where people who have become unemployed can come to claim a benefit or support from the Department and be encouraged to enter a process where they receive advice, options and opportunities, particularly with regard to education and training to get back into the job market. We all know the job market is very difficult at present but none the less there is a churn of jobs and it is very important that those on the register have as much opportunity as possible to take up this employment. Following the integration of the FÁS and community welfare officers, we hope the national employment and entitlements service will commence in April. It is important we get this to work.

I am also very conscious that the Department must develop a service for employers. One constantly reads of situations in the newspapers whereby an employer has vacancies but finds it difficult to fill them. We must improve contact between the Department and employers. I am pleased to say I recently held the first stakeholder meeting between the various employers organisations and the Department to discuss how we can work together.

I am also examining a situation which many Senators have mentioned on occasion, which is the classic situation of people who obtain work for several days or weeks and are concerned about taking it up because they must sign off and feel they may return to the bottom of the queue. I believe it will be possible to work out a new system of suspending payments so if one obtains work for four weeks, one can e-mail or text the Department to suspend the claim and when one returns, one will not have to start all over again at the back of the queue for applications. This is something departmental staff have identified. I have visited quite a number of social welfare offices to speak to staff and meet people at the counters to find out what would help those on social welfare to get the jobs that are available and assist them and employers.