Wednesday, 2 March 2005
Social Welfare and Pensions Bill 2005: Second Stage.
I am pleased to introduce this, the second of two Bills intended to implement the €874 million social welfare package announced in budget 2005. The sum represents a €244 million, or almost a 40%, increase on the 2004 package of €630 million. It brings the projected level of social welfare expenditure in 2005 to more than €12.25 billion. That represents an increase of €1 billion, or almost 9%, on the allocation for 2004.
This level of expenditure is the highest ever on social welfare. It is indicative of the Government's priority to protect and improve the living standards of social welfare recipients. It is a clear demonstration of the Government's commitment to addressing the needs of people with disabilities and their carers, children, the elderly, widowed persons, the unemployed, those who are parenting alone and many others who are disadvantaged, vulnerable or on the margins of society. It continues substantial year-on-year increases in social welfare spending, representing an increase of almost 60% in four years and a doubling of what was spent in 1997.
The budget for my Department, at more than €12 billion, is the largest spending allocation of any Department. I will spell out what that means in real terms. It means that for every €3 that will be spent by the Government in 2005, almost €1 will go in social welfare entitlements, benefits and supports. An estimated 970,000 people on average are expected to claim weekly social welfare payments this year. Overall, almost 1.5 million people, including dependants, will benefit from these payments. That is two out of every five people in the State who, one way or another, receive vital welfare supports.
Since the Government took office, Ireland has changed dramatically. The facts speak for themselves. The number of people at work has increased to almost 1.9 million. The rate of unemployment has fallen dramatically from 10% to 4.3% — the lowest in the European Union and among the lowest in the world. The number of low paid removed from the tax net has increased and, this year, all those on the minimum wage are taken out of the income tax net entirely, which is a very important step forward. Spending on social welfare has more than doubled from €5.74 billion in 1997 to an expected €12.2 billion in 2005. Over the past decade, while gross average industrial earnings increased by 71%, social welfare payments have improved by between 87% and 95%, and by even more for larger families. Substantial improvements in the conditions for entitlement to a range of social welfare schemes have been implemented. New social welfare benefits such as farm assist, carer's benefit, widowed parent grant and respite care grant have been introduced and enhanced. The social welfare increases in budget 2005 range from more than 7% to over 10%, while inflation is expected to come in at 2.5%.
I could spend a long time quoting many more facts and figures that confirm the pivotal role of my Department in the lives of so many people and the great strides that have been made in just a few years. However, the Department of Social and Family Affairs is about more than statistics. The payments, benefits and supports that go directly to almost one million people are a weekly lifeline for many struggling to make ends meet. More often than not, the Department is the final safety net for those descending towards poverty, marginalisation and economic and social distress. However, the Department is more than an efficient and effective administrative structure for processing and delivering State entitlements. It is above all about people and it must continue to be people-centred.
The response of the Department must always be to shape the welfare system to meet the individual's and family's needs. That must be, and I assure the House it will be, the guiding principle for the way my Department does its work. It will continue to react and respond speedily and sympathetically to all those who reach out to the welfare lifeline. It will not be guided only by rules and regulations that may sometimes blur the real purpose. Put simply, a one size welfare system does not necessarily fit all. The Department of Social and Family Affairs is about the welfare and overall well-being of those caught in the daily struggle to make ends meet, the children at risk of poverty, the carers who look after those unable to care for themselves, older people, the unemployed and many others who must be reached out to and supported.
I will now outline the main provisions of the Bill which amend both the Social Welfare (Consolidation) Act 1993 — the principal Act — and the Pensions Act 1990. I propose making the following amendments to the social welfare code. In the area of child income support, the Government's policy is to concentrate resources on enhancing the child benefit scheme. Child benefit now accounts for more than 66% of child income support, while in 1994 it constituted just 30%. There are sound reasons for this policy. Child benefit is both neutral vis-À-vis the employment status of the child's parents and it does not contribute to the poverty traps. As a near universal payment, child benefit is not taxable. It is not assessed as means for other secondary benefits and it is payable to the primary carer, usually the mother. When account is taken of these aspects of payment, child benefit is a most effective child income support mechanism.
Section 3 provides for increases in the monthly rates of child benefit as announced in budget 2005. The lower rate of benefit, payable in respect of each of the first two children, is being increased by €10 per month from €131.60 to €141.60. The rate for the third and each subsequent child is being increased by €12 per month, bringing the rate from €165.30 to €177.30. These increases come into effect from 1 April.
With respect to disability benefit, payment rates are in part determined by the level of the claimant's weekly earnings. Currently, where a person in receipt of long-term unemployment assistance becomes ill or unfit for work, he or she may qualify for a reduced rate disability benefit as a consequence of having low or no earnings during the governing contribution year.
Section 4 of the Bill provides that in such cases, a person may be eligible to receive disability benefit at the maximum rate where he or she satisfies the qualifying conditions and has a minimum of 260 paid social insurance contributions and 39 credited contributions in the governing contribution year. The section further provides that these customers are exempted from the requirements to have 13 of the required 39 contributions paid and to satisfy the prescribed earnings limit. These measures take effect from the beginning of May.
Currently, where a person in receipt of injury benefit suffers a second injury and establishes entitlement to disablement benefit, the total amount payable is restricted to 100% of the disablement benefit rate. Section 5 provides for the abolition of this limit, permitting payment of disablement benefit together with the appropriate injury benefit rate and this measure is effective from 2 May.
I am committed to the cause of carers. I set out through the budget to recognise and support the contribution carers make in society. They provide a valued and valuable service. Everyone in this House and in society in general, knows the commitments and sacrifices involved. The package of measures that I agreed with the Minister for Finance commits additional spending of nearly €35 million to enhance supports for carers and to allow more carers qualify for entitlements.
For example, the carer's allowance and carer's benefit payments have been increased by €14 per week, which is already in payment since January and for which I provided in last year's Social Welfare Act. Moreover, on Report Stage in the Dáil, I introduced an amendment to section 6 of the Bill. Currently, when applying for carer's benefit, a carer must have been in full-time employment for the three-month period immediately prior to the commencement of the benefit claim. Full-time employment in this context is defined as insurable employment for at least 17 hours per week or 34 hours per fortnight. Section 6 of the Bill now provides for an amendment to the qualification conditions for carer's benefit to facilitate certain seasonal and atypical workers who have difficulty meeting these employment related conditions. This amendment extends entitlement to carer's benefit to those who are in employment of 16 hours per week or 32 hours per fortnight for eight weeks within the six-month period prior to the claim. I anticipate that this more flexible arrangement will allow people who have atypical and seasonal work patterns to qualify for carer's benefit.
In addition, the annual respite care grant is being increased from €835 to €1,000. A total of almost 33,000 full-time carers are expected to receive this grant this year. The respite care grant is being extended to include all carers who are providing full-time care, subject to their not being employed for more than ten hours per week or in receipt of an unemployment payment or signing for unemployment credits. This will result in an estimated additional 9,200 full-time carers receiving the grant for the first time. Section 7 of the Bill provides for the implementation of all respite care grant enhancements with effect from June this year. In recognition of the particular challenges faced by those carers who are providing care for three or more people, the respite care grant will be paid in respect of each of their care recipients.
The carers' package this year also expands the income limits for the carer's allowance by increasing the weekly means test income disregard by €20 to €270 for a single person and by €40 to €540 for a couple so that all those on average industrial incomes can qualify. This means that a couple with two children can earn up to €30,700 and receive the maximum rate of carer's allowance, while the same couple can earn up to €49,200 and receive the minimum rate of carer's allowance, free travel, the household benefits package of free schemes and the respite care grant. These improvements will result in an additional 1,000 new carers qualifying for payment and 2,400 existing carers, who are currently in receipt of a reduced payment, receiving an increase in their weekly carer's allowance payment.
The earnings threshold for carer's benefit recipients who work for up to ten hours per week outside the home is being increased by €120 to €270 per week. The revised earnings disregard, which will be provided for in regulations, will be effective from April. The measures announced in budget 2005, which I have outlined, along with previous initiatives, will go some way to responding to the specific needs of carers. There will be further opportunities to address the carers' issues. I will continue to meet and listen to carers in order to further develop the entitlements and supports that will best assist them in the valuable work they do. A lot has been done but we must also acknowledge that there is a lot more that should, and I assure Senators, will be done in recognising and rewarding carers.
With some exceptions, disability allowance is not generally payable to a person who is residing in an institution. Section 8 of the Bill provides for the introduction of a means-tested payment of up to €35 per week for persons currently excluded from the disability allowance scheme by virtue of their residence in an institution. It is estimated that some 2,400 people will benefit from this provision, which is effective from 1 June.
Section 9 of the Bill provides that the amount of capital disregarded for means test purposes for all schemes except supplementary welfare allowance, will be increased from €12,694.38 to €20,000 — an increase of over €7,300, This significant improvement is being introduced following an examination of the current arrangements for the assessment of capital and property, particularly in so far as they apply to special savings investment accounts, SSIAs. The enhanced disregard applies to all capital regardless of where it is held, be it in an SSIA, a credit union, with An Post or in any other account with a bank or other financial institution.
This significantly increased disregard will mean, for example, that a single non-contributory pensioner, with no other means, can have capital of up to €28,000 and still qualify for a pension at the maximum rate. A single pensioner can have capital of up to €76,000 and still qualify for a minimum pension. These figures are doubled in the case of a pensioner couple.
The SSIAs were introduced in 2001 as part of an overall Government strategy to encourage a regular savings culture among the population in general. These new measures are consistent with this strategy and are designed to ensure that social welfare means testing procedures do not act as a disincentive to claimants to become savers or to harshly penalise those who have been regular savers in the past. The provisions take effect from early April for carer's allowance and from early June for the other relevant means-tested schemes. The increase from €12,000 to €20,000, an increase of over €7,000, is a very significant measure in the budget.
Section 10 provides for an entitlement to island allowance to those in receipt of certain payments from other EU member states that correspond to the social welfare payments with which the island allowance is normally payable. This measure takes effect with the enactment of this Bill.
Section 11 standardises the transitional arrangements that were introduced following the alignment of the income tax and calendar years in 2001 for determining entitlement to certain insurance based social welfare schemes. The section confirms that the second last complete contribution year continues to be used to determine entitlement to the short-term benefit schemes such as unemployment benefit and disability benefit.
Sections 12 and 13 provide for the same treatment of the community employment scheme for the purposes of employment under the rural social scheme, which operates under the aegis of the Minister for Community, Rural and Gaeltacht Affairs, regarding unemployment benefit, unemployment assistance and farm assist.
As I mentioned at the outset, this Bill provides for a number of miscellaneous amendments to the social welfare code. These amendments are contained in sections 14 to 22 of this Bill and they include the following: a technical amendment which provides that only one carer's benefit or carer's allowance payment will be made in any one week in respect of the full-time care of a care recipient; the addition of the Mental Health Commission to the list of specified bodies authorised by legislation to use the personal public service number as a unique public service identifier; the awarding of bereavement grant and the application of the "six weeks after death" payment arrangements, in certain defined circumstances, without the necessity for referral to a deciding officer; an amendment to the timeframe for initiating summary prosecution proceedings in cases of fraud and abuse; amending payment arrangements to allow the orphan's payment to be made directly to an orphan aged over 18 years where he or she is not residing with a guardian; providing for the definition in regulations of the types of employment from which a portion of earnings may be disregarded in the assessment of entitlement either to rent or mortgage interest supplements; providing that the approach to recovery of social welfare overpayments will be prescribed in regulations; and the alignment of the residency conditions attached to the homemaker's scheme, in so far as that scheme applies to people providing care to ill or elderly persons, with those that apply to the carer's allowance, carer's benefit and respite care grant schemes.
This Bill also provides for amendments to the text of certain provisions of the principal Act in advance of the publication of the social welfare (consolidation) Bill 2005 which is currently being prepared. These include amendments to reflect the changes effected by the Health Act 2004, by providing in section 23 and Schedule 1 for the changes consequent on the dissolution of the health boards and the establishment of the Health Service Executive.
Section 24 and Schedule 2 provide for the substitution of the Third Schedule to the principal Act with a reorganised, accessible version of the text. This schedule contains the rules governing the calculation of means. Section 25 and Schedule 3 provide for further amendments which are required on foot of the revised Third Schedule.
Section 26 and Schedules 4 and 5 to this Bill provide for a number of technical and textual amendments to the text of the principal Act, which are required in advance of consolidation of the Social Welfare Acts.
I now turn to the other aspect of this Bill, occupational and supplementary pensions, an area I regard as one of the key challenges of my Ministry. We had a very constructive debate about occupational pensions in this House in November and I listened very carefully to Members' concerns. As I said then, I am also concerned that the statistics are not encouraging — only 59% of workers over 30 have supplementary pensions; only 43% of women in the State have pensions and people in their 20s generally make no pension provision.
Since I addressed the House in November, I have asked the pensions board to bring forward from the original date of September 2006 to mid-year the completion of the review of the current strategy. I am hoping the review will identify specific and targeted proposals to address the current situation. However, I am only too aware that getting a balanced strategy will not be easy and I will continue to keep the House informed of developments.
The measures outlined in the Bill provide for the implementation of a major EU directive on pensions and also measures to address the very real problems being experienced by defined benefit occupational pension schemes.
The EU Directive, EC Council Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision, otherwise known as IORP, is generally referred to as the IORPs directive. This directive sets out a framework for the operation and supervision of occupational pension schemes in all member states and will facilitate pan-European pension plans. In Ireland, the Pensions Act 1990 already provides for much of that framework and requires only a small number of amendments to ensure compliance, including the insertion of a section regulating cross-border activity.
However, there are three areas of change I want to bring to Senators' attention. The first relates to emerging opportunities for Ireland in the context of pan-European pensions under this directive. A task force, on which my Department was represented, was established under the auspices of the Irish Financial Services Centre Clearinghouse Group to consider how Ireland might best respond to these emerging opportunities. That group recommended that Ireland position itself as a domicile of choice for such pan-European pensions schemes while recognising that this is a medium-term objective. One of my overriding concerns in transposing this directive is to ensure it is transposed in a way that facilitates that aim and I recently had discussions with the chairperson of that group as to how best we progress this agenda. In Ireland, occupational pension schemes have traditionally been trust-based vehicles and, in the months following enactment of this Bill, I intend to engage with interested parties to establish whether there are other suitable pension arrangements which may facilitate those considering pan-European schemes. For the short term, institutions establishing in Ireland will have to be on a trust basis.
The second area relates to Article 18 of the directive which deals with investment rules and these rules will be set out in regulations. Article 18 also prohibits borrowing by pension schemes other than for liquidity purposes and on a temporary basis. Section 36 of the Bill implements this requirement. On Report Stage in the Dáil, I introduced an amendment to this section which would allow me, by regulations, to exempt certain types of schemes form this prohibition. I introduced that amendment as I have decided that the implementation of the borrowing and investment requirements must be examined together and will require very careful consideration as will the application of the exemption rules allowed under the directive. A working group, comprising my Department, the Department of Finance, the Revenue Commissioners, the pensions board and the Irish Financial Services Regulatory Authority will be established to consider the prudential and tax related issues involved prior to the making of the regulations.
The third issue relates to the requirement that those who run pension schemes must be of good repute and must possess appropriate qualifications and experience. To deal with this aspect of the directive, section 34 sets out the circumstances under which a person must not act as trustee of a scheme, such as having a conviction for dishonesty or being prohibited from acting as a director of a company. The requirements with regard to qualifications and experience will be set out in regulations. The pensions board will be empowered to make a determination as to whether a trustee satisfies these requirements. A determination that a trustee does not satisfy these requirements will have the effect of removing that person as a trustee. The section includes appropriate appeal mechanisms.
The other aspect of the Pensions Act amendments relates to recommendations made to me by the pensions board on foot of a review of the funding standard for defined benefit schemes. As Senators are aware, in 2003, my predecessor, Deputy Mary Coughlan, introduced short-term measures designed to alleviate the funding crisis in pension schemes. The review recommends retention of these provisions which it found were largely successful. However, what has emerged clearly since these provisions were introduced is that the liability side of pension funds is also under severe pressure. Improved longevity and lower interest rates are just some of the trends increasing these liabilities. I have, therefore, provided that an extension may also be granted regarding difficulties on the liability side and details of this measure will be specified in regulations. I believe these measures, which are being introduced after extensive consultation, achieve the required balance between member protection and encouraging continued pension provision.
Other amendments to the Pensions Act include a change to section 7A to ensure that, where guidance issued by the Society of Actuaries in Ireland is specified in regulations made under that section, it may not be altered by the society without ministerial consent; an amendment to section 18 to allowed the pensions board to require certain documents or seek certain information in the context of an investigation of a scheme; a requirement that trustee consent should always be required where early retirement is being granted in the case of a defined benefit scheme which is under-funded; an increase, from €4,000 to €10,000, in the transfer value in respect of which a certificate comparing potential benefits from the occupational pension scheme to those from the PRSA will not be required and an increase from 15 days to 30 days in the cooling off period required when taking out a PRSA contract, which is in line with the period provided for in distance marketing of consumer financial services. I would like formally to ask the Cathaoirleach to request the Clerk of the Seanad, under Standing Order 121, to substitute the word "of" for the word "or" in page 3, line 3, of the Bill. This is to correct a typographical error.
The Social Welfare and Pensions Bill builds further on the development of social inclusion measures adopted by this Government over recent years. It safeguards the living standards of those who rely on social welfare income and other supports and prioritises the allocation of resources in favour of those most in need.
My priority in this Bill is to make significant progress in delivering on the social welfare commitments contained in the programme for Government, Sustaining Progress and the national action plan against poverty and social exclusion.
Resources will be targeted on helping those most in need in order, not alone to raise their standard of living, but to ensure that everyone is a valued citizen who can make his or her own contribution to society regardless of his or her particular circumstances.
I thank the House for its time, commend the Bill to Senators and look forward to listening to a very constructive debate. Molaim an Bille seo don Teach.
I welcome the Minister back into the House to discuss this important Bill. While I feel it is a continuation of a debate we had previously, I now want to address some of the points raised in this Bill. I must acknowledge that matters have improved for many people and that is only fair. Given our economic growth, we would expect that everybody should benefit from it. While I accept that many people in many areas have seen improvements, I must also acknowledge that some people have not benefited from the growth in our economy. Ireland is one of the EU member states with the greatest rich-poor divide. There are aspects of this Bill that will increase the difference, which I will address when I speak on the topic of pensions.
A recent CSO report estimated that approximately 120,000 children and more than 23,000 lone parent households are living in consistent poverty. We should not be proud of this. While I accept that improvements have been made, we are still falling short of what we should be doing. In light of a recent debate on lone parents, I recognise that the Minister wishes to address the issue and improve the lot of many such struggling individuals. They would appreciate the opportunity to work if provision were made for the difficulties they face, such as child care costs. I await the Minister's proposals to ensure that lone parents and their children do not have to live in consistent poverty.
A Combat Poverty Agency study launched in 2001 shows a clear link between low income, poverty and ill health. The poor are more likely to be ill and to visit a doctor more often than people on higher incomes who take care of themselves better. The Government has failed in its promise to increase child benefit payments for the third year in a row. I acknowledge that improvements have been made but a commitment was given that has not been lived up to. The child dependant allowance, a payment for families struggling on social welfare, has been frozen since 1994. The back-to-school clothing and footwear allowance was not increased for a second year in a row.
I draw the Minister's attention to the shortage of education welfare officers. Teachers are struggling with the problem of children missing for longer than the 20 days allowed before an education welfare officer is alerted. Some children miss up to 80 days, even more in some circumstances. There are nine counties that do not have such an officer. If we could help children with problems in primary school and their parents we would save them heartache in the future and would save the country the cost of dealing with the difficulties experienced by these children in later life. This is an issue we must tackle. The correct number of education welfare officers must be in place in order to cope with the present large backlog.
There was a constructive debate on the pensions aspect of this Bill in November 2004 to which the Minister gave consideration. There is, however, a difference between listening and taking on board the suggestions made. The Minister did not take a blind bit of notice and I wonder whether we were wasting our time putting forward suggestions on behalf of our electorates. As his predecessors did, the Minister listens to the pension industry and vested interest groups more carefully than to us.
I am disappointed to see that the Minister has given in to these groups through the amendment introduced on Report Stage in the Dáil on 1 March 2005. I refer to the EU directive on the activities and supervision of institutions for occupational retirement provision which sets out a framework for the operation and supervision of occupational pension schemes. Article 18 of the directive deals with investment rules, whereby "borrowing by pension schemes is prohibited other than for liquidity purposes and on a temporary basis". We have known for some time that this directive was in the melting pot but why did Ireland breach it? We did so when the former Minister for Finance, Charlie McCreevy, introduced this provision to allow people to borrow money to invest in property. We know this provision was abused, particularly by individuals with larger pension schemes, and we know that the pensions board was opposed to this scheme because of such abuses. While there is a provision in the directive to allow for exemptions for smaller schemes, the Minister said in the Dáil on Second Stage that, if the scheme was not working well for the larger schemes, it would be prudent not to allow it for the smaller schemes. The Minister will correct me if I am wrong in this.
Someone has now influenced the Minister into making exemptions in certain cases. I do not know what these cases will be but it was stated that they will be smaller schemes. Through this legislative loophole, fat cats in larger schemes will transfer to smaller schemes. Why is the Minister doing this, who has bent his ear and who is he helping? It is not the ordinary PAYE worker who will benefit. He should introduce regulations that will help to protect existing pensions and encourage the creation of new ones. The Minister claims he wants people to take out pensions but they will not do so. There is no protection for them and the eventual worth of their pensions will be lower than expected. Under this Bill we will be looking after the fat cats and not the ordinary man on the street. I am disappointed that the Minister has given in to industry pressure as I did not believe he would. Once again we are helping the pensions industry. The Minister listens to it but not to the ordinary man in the street who wants his pension protected.
The pension schemes of the top ten companies in this country are underfunded to the tune of €3 billion. The pensions fund deficit was €1.9 billion in 2003 and is now over €3 billion at a time when the stock market grew by 10.4%. Those figures do not add up. How can those pension funds lose so much money and be underfunded by such an amount while, at the same time, the stock market is going up? What are they doing with the funds they are getting from the hard-pressed worker? Who is raiding the fund and what are they doing with the money with which they are entrusted? What rules is the Minister putting in place to ensure they manage those funds properly?
The Minister is making it easier for them to continue losing money. If a scheme is underfunded, the Minister proposes to extend the funding period for ten years. What evidence is there that this will be effective? If in the good economic climate of the past two years the pensions industry lost money, how do we know its funding will be any better in ten years' time? Companies are winding up their pension schemes or changing from defined benefit schemes to defined contribution schemes, another fudge. People will not know what they will get when they retire but the pensions industry knows what they are putting in. We are not protecting these people and I ask the Minister to offer them some protection.
If such a friendly hand is being extended to the pensions industry, what is it being asked for in return? Could it not be asked to put in place a bonding scheme so that if a company goes bust or has to wind up its scheme, some protection would exist for the workers? Why can it not give something back? No pensions industry company is losing money; they are all earning large profits.
IFSRA should be put in charge of the pensions industry. It is doing a fine job. The Pensions Board, while doing a good job, exists to promote pensions not to protect them. IFSRA should investigate the value for money the Government is getting because the tax incentives the pensions industry gets do not offer value for money to the Government or the taxpayer.
I will vote against this Bill. I am disappointed that the Minister is helping the pensions industry which is not delivering to its members. It is time it was shaken up and I hope IFSRA will get the opportunity to do it.