Wednesday, 29 April 2009
Social Welfare and Pensions Bill 2009: Second Stage
The Bill gives legislative effect to the social welfare elements of the supplementary budget of April 2009. In the context of the current economic circumstances it has been necessary for the Government to take steps to reduce overall public expenditure to restore order to and stability in the public finances. In the context of very tough decisions having to be made across the range of Government expenditure, social welfare was prioritised in the supplementary budget. Almost €21.3 billion is being provided for welfare services in 2009. This represents an increase of €1.7 billion, or 8.7%, on the amount originally provided for this year in the last budget and is €3.6 billion or approximately 20% higher than the actual amount spent in 2008. This additional expenditure arises mainly from increases in unemployment, with the expected average live register figure for 2009 having been adjusted upwards, unfortunately, from 290,000 to 440,000 between the October and April budgets at an extra cost of €1.97 billion.
Significant extra expenditure also arises from the cost of the improvements announced in the October budget which provided for increases of between 3% and 3.8% in the basic social welfare payment rates. At that point, the expected rate of inflation for 2009 was 2.5%. This inflation forecast has, however, not been realised and instead deflation of almost 4% is now anticipated. With social welfare recipients getting between 3% and 3.8% more in their weekly payments and with prices having fallen in recent months, their living standard therefore has been protected.
After this budget, total gross spending on social welfare is expected to account for 29% of gross total Government expenditure in 2009. Putting aside borrowing, the social welfare expenditure provided in this budget is expected to account for €6 out of every €10 of the anticipated Exchequer current revenue from tax and other sources. At a time when Government expenditure must be controlled as much as possible, this very significant investment in social welfare is a clear demonstration of the Government's commitment to protecting the vulnerable and helping those who rely on the State for their basic income.
The Bill provides for certain amendments to the social welfare code, as announced in the Minister for Finance's Supplementary Budget Statement of 7 April 2009. It also provides for amendments to the Pensions Act 1990, the Health Contributions Act 1979 and the Financial Emergency Measures in the Public Interest Act 2009. It does not contain any provisions regarding the Christmas bonus as the budget decision not to pay the bonus this year does not require legislation. As I indicated on the day of the budget, if there were to be a windfall of finances at any stage towards the end of the year, of course this would be the first issue the Government would like to restore. I understand, however, that Senators are concerned about the non-payment of the bonus and I assure them that if at all possible it is the aim of the Government to pay it. It would cost €223 million to pay the 100% Christmas bonus in December 2009. The Government faced very difficult decisions in the budget. We have had to increase taxes and borrowing to pay for the rising cost of welfare services. We did that and avoided welfare cuts as much as we could, but we were also conscious that if we did not make some cuts and savings in the welfare budget to try to keep it at a level that the State could afford, much bigger ones would have to be made later.
In deciding on how to achieve savings of €300 million in the welfare budget, there were no easy options. Everything had to be considered, including a cut in the weekly rates of payment to all welfare recipients. This would have meant taking money from everyone straight away, with little advance notice. It would also have involved the recall of all social welfare payment books, with the distress that would have caused, especially for older people. In the end, we felt that instead of doing this it would be fairer to give people almost nine months notice that the Christmas bonus would not be paid. In making this decision, we were aware that it would be difficult for people, but we felt that the alternative of cutting all weekly payments would have a much greater effect on households and on a greater number of people. It was not an easy decision nor a choice that any of us took lightly, but we felt it was the fairest option.
I will detail the main provisions of the Bill to the House. First, the Bill provides for the changes in the rent supplement scheme that were announced in the supplementary budget. The purpose of the rent supplement scheme is to deal with emergencies and short-term needs that arise when a person suffers a change in circumstances, for example, when a tenant becomes unemployed and can no longer afford his or her rent. There are currently almost 85,000 people in receipt of rent supplement, an increase of 42% since the end of December 2007. The supplementary budget provides for a net increase of €29 million in rent supplement. This consists of an increase of €77 million for additional claims arising from the increase in the live register and a saving of €48 million in 2009 - €75 million in 2010 - as a result of the following measures.
First, from the end of this month rent supplement will be restricted to individuals who have been existing tenants for six months. Individuals who have not been tenants for six months or who are forming new households must be placed on a local authority housing list following a full housing assessment before they are eligible for a rent supplement payment. These measures will apply to all new applicants for rent supplement. Exemptions will apply where a housing authority designates that a person is homeless or a person has already been identified by a housing authority as having a housing need, the person is a tenant of a voluntary housing body - capital assistance scheme tenants - or is aged over 65 or in receipt of a disability type payment. These exemptions will ensure that young people coming out of residential care, such as foster homes, will be protected. Rent supplement will continue to provide support where the housing authorities are not in a position to respond within a reasonable timeframe and where the person is at risk of experiencing homelessness and-or hardship.
The second change being made to the rent supplement scheme is an increase in the minimum contribution that individuals and families make towards their rent. This is being increased by €6 to €24 from 1 June 2009, which will align the rent supplement more closely with the rents that local authority tenants have to pay. In Dublin city this is a minimum of €25.80 a week and averages approximately €59 a week. One of the reported impediments to the transfer of rent supplement claimants to the rental accommodation scheme is the significant difference between the contribution which is required of the tenant under the rent supplement scheme and the contribution which they are required to pay through the differential rent scheme.
The third rent supplement change is a reduction in the maximum level of rent supplement payable by the State in respect of all new tenancies or on renewals of tenancies. The limits will be reduced by 6% to 7% on average, ranging up to 10%, depending on the geographical area and household size and by reference to an analysis of rent supplement and the Private Residential Tenancies Board rent data as well as downward trends in private rents as published by the CSO. As Senators will be aware, trends in the private rent sector indicate that rents have fallen considerably in the past 12 months. This is evident from data available from the Private Residential Tenancies Board and the Daft property website.
I am sure Senators will agree it is vital that taxpayers' money is not used to pay landlords inflated rental prices. This change will help to ensure that this is not the case in respect of new rent supplement tenancies. However, with more than €490 million being spent by the State on the rent supplement, we must ensure that landlords of existing tenants are also not charging too much. To this end, from 1 June 2009, the rent supplements for all existing tenancies will be reduced by €6 to reflect their additional contribution towards their rent and by a further 8% to reflect the impact of the new rent supplement limits. While tenants are contractually obliged to pay the rent agreed to in their lease, we expect landlords to decrease the rent in recognition of the fact that rents have fallen generally and that there are now a large number of vacant rental properties nationally. I urge all Senators to support this and help us to send a clear message out to landlords that tenants supported by the State will not be overcharged.
On a positive note, agreement has been reached with the Department of the Environment, Heritage and Local Government on 1,000 transfers from rent supplement to the longer-term rental accommodation scheme in 2009. This will bring the total number of such additional transfers to 9,000 this year.
The Bill also provides for the legislative changes required to the early child care supplement scheme announced in the budget. The Government appreciates that this scheme has been a significant support to families with young children and we were glad to have been able to introduce it when funding allowed in 2006. However, in the current economic climate, very difficult decisions had to be made in the budget and there were no easy options in reducing expenditure. The early child care supplement cost €480 million in 2008. We need to achieve better results with fewer resources. It was announced in the supplementary budget that the monthly early child care payment would be halved to €41.50 per child from 1 May 2009 and that it would be abolished in full at the end of 2009. However, it will be replaced in January 2010 with a free pre-school year of early childhood care and education for all children between the ages of three years and three months and four years and six months. As Senators know, evidence and research show that children who participate in early childhood education benefit significantly.
The Social Welfare Bill provides for changes to the jobseeker's allowance, which are designed to incentivise 18 and 19 year old jobseekers to avail of education and training opportunities and to try to avoid them becoming welfare dependent from a young age. The rate of jobseeker's allowance that will be paid to new claimants under the age of 20 will be reduced from €204.30 per week to €100 per week, with effect from the first week of May 2009. When jobseekers on the reduced rate of jobseeker's allowance reach the age of 20 but still qualify for the allowance, they will be entitled to the full adult rate.
The full adult rate of the relevant scheme will be paid to 18 and 19 year olds who participate in a full-time Youthreach course for young early school leavers or a full-time course in a senior Traveller training centre, qualify for the back to education allowance, BTEA, pursue a full-time second level course or post leaving certificate course or participate in a full-time FÁS training course. To qualify for the BTEA they must have been out of formal education for at least two years and been in receipt of a jobseeker's payment for at least three months. They can also participate on a PLC course or third level course on the same basis as any other young person and may qualify for a third level grant.
A wide range of opportunities is available. For example, the Youthreach programme for early school leavers provides approximately 3,700 places. Approximately 1,000 places are provided in senior Traveller training centres, 50,000 places are provided nationally on adult literacy training courses and 32,000 places on post leaving certificate courses. FÁS also offers a range of places, at various levels across a very wide range of disciplines, from sports and leisure to electronics and engineering. As announced on budget day, the Departments of Enterprise, Trade and Employment and Education and Science are also to provide an additional 23,435 places in education, training and employment opportunities and 18 and 19 year olds can be facilitated as part of that.
The reduction in payment rates will also apply to new claimants of supplementary welfare allowance who are under 20 years of age. The numbers affected will be small at first as it will only affect new applicants from the first week in May, but the numbers affected will rise on a weekly basis. Based on current figures and an expected overall live register average for 2009 of 440,000, we expect a weekly average of 5,000 18 and 19 year olds to be affected by this change in 2009 and a weekly average of 9,000 to be affected by it in 2010. These changes have the potential to generate savings of €12 million in 2009 and €26 million in 2010. If take-up of the education and training opportunities is high, less savings will be achieved in the short term, but the long-term savings generated by helping young people to avoid welfare dependency would be expected to be significant.
The qualified adult rate for a spouse or partner payable in these cases will also be reduced to €100 per week. This will mean that a couple, where the primary payment is to the 18 or 19 year old, will get a total of €200 per week, down from €339.90. This applies to new claimants. It is important to note that a number of people will not be affected, those being existing claimants, young people with dependent children, those who qualify for the jobseeker's benefit and people transferring to jobseeker's allowance immediately after exhausting their entitlement to jobseeker's benefit or those transferring from the disability allowance directly to jobseeker's allowance, thereby avoiding a large income drop. Vulnerable 18 and 19 year olds leaving the care of the Health Service Executive will also be exempt. Where an existing jobseeker's assistance claimant under 20 years of age who is being paid €204.30 gets a job and leaves the scheme but loses that job and ends up back on jobseeker's assistance within 12 months, he or she will get €204.30 per week rather than €100. Were this not done, there would be little incentive for those on jobseeker's assistance to take up offers of work.
Senators will be aware that the budget had a major focus on helping people to stay in employment and to return to work, with initiatives such as a €100 million enterprise stabilisation fund, a pilot training scheme for workers on a three-day week and increased training places through FÁS and in the education sector. These will be enhanced by improvements in welfare supports.
The back to education allowance, BTEA, scheme allows qualifying job seekers to return to education and maintain their welfare payments. The number of recipients increased significantly from 5,247 in 2004 to 7,952 in 2008. The Government is determined to maximise the scheme's potential and the Bill provides a number of improvements. Job seekers who have been out of formal education for at least two years will be able to access the second level back to education allowance once they have been in receipt of jobseeker's allowance or benefit for at least three months, down from six months. Earlier access is also being provided to the BTEA third level scheme. There is a general requirement that a person be in receipt of a jobseeker's payment for 12 months before being able to access the scheme. People can access it at nine months if recommended by a FÁS employment services officer. This is now being extended so that they will also be able to access it at nine months if recommended by one of the facilitators of the Department of Social and Family Affairs.
To respond effectively to the growing numbers on the live register, the changing profile of job seekers generally and the current employment situation, it has been decided to refocus the existing resources from the back to work schemes to helping people into self-employment. The intention is to support enterprises that will, in due course, create further employment opportunities. To this end, the employee strand of the back to work allowance will be closed to new applicants and the duration of the enterprise scheme will be two years, as distinct from four years. These resources will be used to support significant improvements in the back to work enterprise allowance, BTWEA.
Currently, to qualify for the BTWEA, a person must be in receipt of a jobseeker's payment for two years. Access will now be available much earlier under two distinct schemes. First, people who are entitled to jobseeker's benefit and have been awarded statutory redundancy or been employees paying full rate PRSI contributions for at least two years prior to their claims to jobseeker's benefit can access a shorter BTWEA scheme immediately. This new scheme will be payable for the duration of their jobseeker's benefit entitlement while they are establishing their enterprises, for example, for a maximum of either nine or 12 months. Second, access to the general BTWEA scheme is also being improved. It will now be possible to access the BTWEA at 12 months instead of two years provided a person has an underlying entitlement to jobseeker's allowance. Further flexibilities are being introduced into the scheme, including allowing a person who has availed of it previously and exhausted his or her entitlement to participate a second time after a period of at least five years has elapsed.
The overall purpose of the new arrangements is to assist those on the live register financially to set up a business almost immediately upon becoming unemployed, thereby ensuring their knowledge, skills and expertise are fully utilised at an early stage to promote enterprise and employment in the economy.
The Government has been working since the publication of the pensions Green Paper to table proposals to help the pensions industry. With the recent economic downturn and the significant losses in the equities markets in the past 18 months, it is important to put together a package of measures to underpin pensions provision. The Government's initiative started in December with the announcement of a number of short-term measures aimed at reducing the pressure on underfunded defined benefit schemes by allowing greater flexibility and time to recover funding positions.
In acknowledging the likelihood that some defined benefit schemes are likely to wind up owing to the current economic situation, the measures I am announcing are a timely next step in our response to the crisis. Furthermore, I expect to follow this in the near future by announcing details of the Government's national pensions framework which will set out the long-term future of pensions policy. People should be confident and secure about their retirement expectations. They should not arrive at pension age and find that their incomes are well below what has been promised to them. Our system must provide surety so that all of us can look forward to retirement, confident that our pensions are safe.
It is estimated that in excess of 90% of defined benefit schemes are in deficit, with estimates suggesting a shortfall of up to €30 billion. The Government is aware of the threat the current financial environment is presenting for some defined benefit schemes where the employer becomes insolvent, leading to a winding up of the scheme. The Government is conscious of the difficulties the global financial crisis is creating for Irish pension funds and the challenge it presents for the trustees of pension schemes. These amendments are the next logical step in the Government's approach to pensions provision. They will help to support the job of the pension fund trustees in addressing the challenges that they face.
I will table an amendment to enable the Minister for Finance to provide for a pensions insolvency payment scheme, PIPS. Currently, if a defined benefit scheme is in deficit and the sponsoring employer becomes insolvent, the trustees must first provide pensions for the retired members of the scheme, usually by buying annuities. Whatever is left is apportioned among the active and deferred members of the scheme. The more expensive the annuities, the less money available for those yet to retire. Annuities provided on the open market are priced to include certain costs such as commissions and expenses as well as a profit margin.
PIPS will provide an alternative for trustees of defined benefit schemes in deficit with an insolvent employer. In simple terms, trustees of participating schemes would pay to the Exchequer the amount necessary to cover the cost of providing pensions to its retired members. With ancillary costs distilled from the equation, PIPS should be able to provide these payments at less expense to the trustees. This should then free up extra money to go towards the pensions of those yet to retire. The scheme is not a bail-out of pension schemes in deficit and has been carefully designed to ensure that it will be cost neutral from an Exchequer point of view. We must be careful that our attempt to assist those in need is not misrepresented.
My amendment will set out the necessary enabling provisions to allow the Minister for Finance to introduce the scheme and to provide for the detailed arrangements to be set out in regulations. PIPS can commence once those regulations are in place and operate on a pilot basis subject to a review within three years of its establishment.
Employer insolvency will invariably lead to the winding up of pension schemes. In the event of such a wind-up, the Pensions Act stipulates the order in which the resources of the scheme must be disbursed. It gives priority to the liabilities accruing to pensioners before it distributes the remaining assets to other scheme members. The calculation of the liabilities includes provision for post-retirement increases in the third of schemes that provide for such increases. The Seanad will acknowledge that, with increases in pension costs, the liability for post-retirement increases can be substantial. Where a severely underfunded scheme is wound up, the allocation of assets for pensioners in payment can significantly reduce the assets available for other scheme members.
Therefore, I will table an amendment to re-order the wind-up priorities by moving the provision for post-retirement increase to a lower priority. This change will not impact on the current pension payments to pensioners, but it will enhance the level of resources available to other scheme members. Once the basic pension entitlements of all scheme members are covered, the distribution of scheme assets for post-retirement increases will then be applied. This is an important change in the priority order and will, without impacting on the pensions of those already retired, improve the situation for other scheme members.
It is desirable to ensure pensions legislation supports the viability of pension schemes and that nothing in current legislation should be considered restrictive in the ongoing maintenance and sustainability of a pension scheme. To ensure this, I will table an amendment to the scope of the Pensions Act regarding its provisions for the restructuring of a pension scheme. Current legislation provides for the restructuring of a defined benefit pension scheme, but only by adjusting the benefits of those currently employed by the employer sponsoring the scheme. This restructuring does not extend to the accrued benefits of scheme members who are no longer employed in the company or to post-retirement increases in benefits. This limitation in restructuring a scheme could give the trustee no option but to wind it up.
The proposed amendment will broaden the scope for the restructuring of a scheme to include those who have ceased and the provision of post-retirement increases as well as current employees. It must be stressed that this change will not impact on the pensions currently in payment to pensioners, merely to any post-retirement increases for which the scheme may provide. This amendment will help the trustees to maintain the ongoing viability of the pension scheme and hopefully to avoid the scenario of a scheme wind-up. It is important to point out again that the measures I have outlined will retain the current priority given to pensions in payment, which means employees who have retired and those who have reached normal retirement age will not see any diminution in their entitlement to a pension.
Members will agree it is crucially important that any moneys deducted from an employee for pension purposes are remitted to the trustees of the pension scheme. Difficulties are being experienced at present by the pension regulator in bringing successful prosecutions against employers who fail to remit employee contributions to the trustees of a pension scheme. This is due mainly to the standard of proof required, based on oral evidence, which often is required to be given by an employee of the employer in question.
In response to this, I am bringing forward an amendment to the Pensions Act to strengthen the role of the pensions regulator by establishing a separate offence for such a breach of the Act and by enhancing the admissibility of documentary evidence. While the main focus of the amendments I am bringing forward pertain to supporting the work of the trustees in situations that threaten the future of a pension scheme, it is important to ensure the legislation is strong when an employer fails to remit pension contributions to the trustees of a scheme. While I must acknowledge the vast majority of employers comply with this requirement, I must ensure that those who fail to comply are pursued. Finally, I have introduced an amendment to provide a court with the power to relieve a trustee from liability for a breach of trust. This proposal is aimed at protecting trustees who have acted honestly and reasonably in the performance of their duties.
To conclude, this Bill is necessary to implement some of the changes announced on budget day and to assist trustees of defined benefit pension schemes in meeting the challenges that confront them. There were no easy options when deciding on where to achieve savings in welfare expenditure but given the requirement to increase both borrowing and taxes to pay the rising welfare bill next year, which I have indicated will be €21,000 million, choices had to be made. It is important for each of the savings measures provided for in the Bill to be considered in the context of the overall economic situation and the need for immediate action to reduce the gap between public income and expenditure. The harsh reality is that unless some cuts are made now, much tougher ones will have to be made later. It is important for all public representatives to be up-front with the people about the stark choices that are required at this time, if the future prosperity of our young people is to be ensured. The changes in this Bill are necessary and I look forward to an informed debate about them today.
I welcome the Minister to the House. I appreciate the serious times in which we are and acknowledge that action, however belatedly, is being taken. I am greatly disappointed by the manner in which this legislation is being rushed through both Houses. I listened intently to the debate in the Dáil yesterday and ask the Minister directly the reason Members of this House were not invited to yesterday morning's briefing by the Department. This subject is new to me and I find the legislation relating to pensions to be highly complex. I would have appreciated time to enable me to get my head around it and to have consulted with the various partners and those whom this issue ultimately will affect. I fail to discern the reason for this non-invitation, which shows absolute disrespect for Members of this House, and am greatly disappointed by it.
I perceive the manner in which the budget affects people on social welfare as the poor being obliged to pay for the mistakes of the high rollers. This is how I consider the non-payment of the Christmas bonus. I have been knocking on doors and canvassing and it probably is the single most cynical, cowardly and hurtful measure. It is what people such as grandparents use to buy toys for their grandchildren or what hard-pressed mothers use to pay an ESB bill at Christmas. It will force people back to moneylenders. It is paid at the end of the year when people might use the €200 to get themselves on an even keel and to start the new year afresh. The bonus certainly was not used for luxuries.
I refer to the idea of taxing those below the minimum wage. When one considers that 30% of those who already are in poverty have a job, bringing such people into the tax net and imposing a levy on them will make matters even worse. It is so hard for them and every second week, members of the Oireachtas Joint Committee on Social and Family Affairs discuss issues such as people trying to keep warm, to keep food on the table or to pay ESB bills. However, the Government has turned around and in not one budget but two, has added further to their heartache. People will go hungry in Ireland and this is evident from the food queues. I understand that one day approximately three weeks ago, 340 people queued for food and I shudder to think how many more people now are queuing for basics such as bread and milk. It is not the case that inflation will decline as people are unable to pay for basic necessities for their families, such as education, health and transport.
I wish to touch on a few of the points outlined by the Minister and will table amendments to some of them on later Stages. Cutting by half, or by €100, the jobseeker's allowance for young people is quite extraordinary. I understand the Minister's motivation and overheard her interview on "News at One" about people coming across the Border, fraud etc. I realise she was obliged to take action but to reduce the allowance by €100 in one fell swoop is difficult to bear.
While I do not wish to sound fanatical or dramatic, I believe people will go hungry. This is not about luxuries but about how young people will try to sustain themselves because they will not survive. In addition, in the last budget the Minister removed child benefit for those who are in college and are over 18 and this sector is being hit quite hard. While I welcome the 25,000 places in training and education, it will not be enough to deal with this group of vulnerable young people. The Minister stated she did not wish to create a welfare culture or to give such people a taste of welfare. While I agree with the Minister that some families exist in which the third generation is in receipt of welfare, cutting the allowance by €100 in one fell swoop will not achieve what the Minister sets out to do.
As for rent supplement, fewer and fewer houses are being supplied by my local authority. Consequently, far more people depend on the private sector and on private landlords. While there are a great number of private houses available for rent, landlords certainly are not trying to accommodate the unfortunate person whose rent allowance has been reduced. As the Minister is aware, the landlords' purpose is to pay their mortgages and to try to support their investments. In this context, €11 is a huge amount of money. I also am aware of people who already must supplement their rent allowance because their landlords have set the rent at such extraordinarily high levels, as the ceiling is so low. The Minister is attacking the vulnerable and not the landlord. As the landlord still will get his or her money at the end of the day, I do not believe this was the right way to have gone about this issue. Moreover, organisations such as the Society of St. Vincent de Paul have been inundated while trying to help people to pay rent supplement top-ups and this certainly will continue because of this measure. I acknowledge the highly positive rental accommodation scheme, RAS, and believe it shows a way we must go, that is, a differential rent should be put in place by the local authorities that could accommodate those who find themselves without houses.
The early child care and preschool measures are welcome. How will parents pay for crèches? This has not been addressed. Perhaps the Minister can comment on this.
There was discussion of enterprise schemes on the radio this morning. The Minister said people would start looking for jobs if the payment of €100 was reduced but there are no jobs. We must be cognisant of this. How can one get a job if there is none? We must consider the successful schemes in the 1980s. Some community employment schemes were successful, some were not. In this way we can figure out what works and what does not. This was suggested on "Morning Ireland" and we can hark back to that time because it is not such a long time since we were in recession.
The back to work allowance will apply for two years rather than four years. This is not long enough and does not allow people to establish a business. According to ESRI figures released this morning, it does not look like we will get out of this dreadful recession in the short term. Two years is not long enough for a business to become established when banks are not very free with credit. This period is not sufficient to allow people to get off their feet. These start a business and back to work schemes were successful in the 1980s and we still see the fruits of those in businesses that are still thriving as a result of these measures in the 1980s.
The first I heard of the pension measures was on Sunday night. Even in infancy as an Oireachtas Member, I know the idea that something can be mooted on Sunday evening without briefings or discussions with partners is not the way to do business. We suddenly have serious legislation, some of which is positive, that will affect our country for a long time to come. Why did the Minister decide on three years rather than one year? We have read about Bord na Móna, ESB, SR Technics and Waterford Crystal, companies that are solvent but whose pension funds have dried up. People have no recourse. How will they be accommodated?
What galls me and makes me angry is that Mr. Fingleton's pension stands at €27.6 million. How will the Minister affect the likes of him, CEOs and people who have ripped off our country? It is a disgrace that they call themselves Irish when people who have worked for semi-State companies such as ESB or Bord na Móna or solvent companies like SR Technics for 30 years may have no benefit at the end. I acknowledge the necessity to take action on pensions but the Minister is not hitting the high rollers. This is based on a brief examination of the Bill over the past 24 hours. I ask the Minister to explain this in more detail.
I will table amendments and elaborate on these later.
I propose to share time with Senator Walsh. I welcome the Minister. I welcome the improvements in the back to education allowance scheme, which allows jobseekers to return to education and maintain welfare payments. Senator McFadden referred to cuts. We would prefer if there were no cuts but one cannot give what one has not got. We must be upfront with people.
Senator McFadden also referred to pension funds, many of which are in trouble. I was involved in a pension fund and one of the main reasons they are in trouble is that pension funds are invested and once shares slip, pension funds slip. The Eircom pension fund and others are in trouble. People are left in the lurch but I do not have the answer to how we get around it. Senator McFadden's point is taken. Investments in property have dipped. The pension fund in Eircom is €6 million in debt. The problem is widespread.
Another element in the Bill concerns welfare fraud. I congratulate the Minister for tackling this, which was widespread, particularly in Border areas. Surveillance on that is ongoing and these measures in the Bill are positive.
I ask for clarification on the belief held by many people that immigrants get free hairdos, free mobile phones and cheques to buy cars from social welfare. People believe this and I hear it every day. I would like this cleared up. A garage man told me an immigrant had given him a cheque for €3,000 to buy a car. I assume that was arrears due but I ask the Minister to clarify so that I can speak with some authority on these matters.
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.
I wish to sound a note of caution regarding the Minister's assertion that the post-retirement element of people's pension entitlements will attract a lower priority under this scheme. That is fine and no one would argue with what is proposed, especially in circumstances where there is deflation or extremely low inflation. However, some economists are predicting that following this serious recession, and as a result of the stimulus packages that have been put in place in the United States and elsewhere, there could be a period of significant inflation or even hyper-inflation. In the 1970s, people who retired on private sector pensions which did not take account of inflation discovered that the value of their pensions was quickly eroded because inflation rose to between 14% and 16%. Over a period of four or five years, the value of the pensions to which I refer fell by a half or two thirds. In the context of the change being introduced in the Bill, the Minister must take account of the example I have outlined and ensure that people are protected.
Everyone acknowledges that we are facing into an unprecedented economic crisis. The ESRI published a report earlier today which states that we are set for the sharpest fall in economic growth experienced by any industrialised country since the Great Depression. In light of this extraordinary and deeply depressing prognosis, we all acknowledge the need to make savings. I wish to be fair-minded in assessing the Bill. In that context, there are some aspects of it which I welcome, particularly the move that will herald the introduction of a new provision in respect of child care. The latter is overdue. However, there are many aspects of the Bill which are deeply regrettable. In that regard, there are certain savings that could be made elsewhere and I am sure that imaginative solutions could have been found to deal with particular matters.
The Minister stated that there will be an increase of 8.7% on the amount originally provided in respect of welfare services for this year. However, she proceeded to state that this additional expenditure arises mainly as a result of increases in unemployment and indicated that the expected average live register figure for 2009 will be adjusted upwards. From what the ESRI is predicting and from what we know from members of our families and our friends who are receiving news of redundancies on a daily basis, we are aware that the figure for unemployment will increase by even more than the Minister is projecting. As a result, spending on social welfare will increase accordingly. We must, therefore, consider the introduction of more radical adjustments to the social welfare system.
The decision not to pay the Christmas bonus is deeply regrettable, particularly as those who need this money will be most affected. There will also be a severe knock-on effect on the retail sector in that people's spending power will be reduced at a time of the year when a large number of businesses rely on increased spending. This decision will have an unwelcome effect in that it will ensure that the market for consumer goods will contract even further. We will see evidence of this when people make adjustments to their spending in the run-up to Christmas.
Imaginative approaches have been taken in other jurisdictions in respect of social welfare. I refer, in particular, to Germany, where the system has been adjusted to take account of the needs of people who live in regions that have a major reliance on the automobile industry. In light of the decline in consumer demand for new cars, that industry has taken a huge hit. With the change to the social welfare system in Germany - I am sure the Minister is aware of this - the state now pays automobile companies to top up the wages of workers who would otherwise be made redundant. Effectively, those workers have been placed on short-term work. Something similar is happening in the private sector in this country. Rather than making two out of ten employees redundant, employers are placing all ten on short-term work. This is being done in a low-key way and it is an extremely creative solution. Most people take the hit on their wages so that their colleagues can remain in work.
In Germany, however, the state is stepping in on a larger scale and is topping up the pay that employees receive from their private sector employers. This means that businesses can remain solvent and that they will still have highly skilled labour available to them when the upturn occurs, which one hopes will happen quickly. The idea is that people can be kept off the live register. While the state essentially subsidises the private sector under this model, there is potential for it to make great savings. A mechanism of that imaginative nature would have been of great assistance in a Bill such as the one we are discussing. Instead, we have been presented with a slash-and-burn approach.
During the debate in the Dáil, Deputy Burton pointed out that people who need to make savings in the context of their household incomes do not merely cut everything, they target their cuts. Those of us in opposition want the Government to take a more targeted approach in respect of cutting public spending. The consequences of such an approach must be thought through. We must ensure that what we do does not have an extremely negative impact on the entire economy.
With regard to pensions, I welcome any changes that make people more secure in their retirement. In that context, the fact that there will be some protection for workers who are members of pension schemes is a good development. However, the Bill does not go far enough in the context of providing sufficient protection. The future for workers at Waterford Glass is dreadfully uncertain because their pension schemes are insolvent and they do not know whether they will receive the payments they are due upon retirement. This has a knock-on effect on the economy because it stops people from spending. People who are five or ten years from retirement are looking to the future with uncertainty and, as a result, are less likely to spend.
We require further information on what will replace child care supplement. The supplement, which involves the payment of €1,000 per year, was always a blunt instrument. I have a personal interest in this regard because I am in receipt of the payment. As stated, it is a blunt instrument which comes nowhere near offsetting the real cost of paying for private crèche care. To remind those who are not aware, out of one's net income it costs at least €1,000 per month per child to secure such crèche care or to place one's child in a pre-school group.
I welcome the idea that there will be a better targeted and more thoughtful way of providing child care support to parents. However, I am alarmed that payment will be made in the form of a capitation grant to child care providers who will then be expected to pass on the discount to parents. The Minister must provide more information in respect of this matter. To whom will the grant be paid? Will it be paid to every child care provider or to a select few? If the latter is the case, how will those providers be selected? Will it apply in respect of the parents of all children and will we be obliged to move our children out of existing facilities to avail of the grant? Further information is required, but I broadly welcome this move.
I thank Focus Ireland for providing many Members with a useful briefing on its concerns about the changes to jobseeker's allowance, supplementary welfare allowance and rent and mortgage supplement. Focus Ireland made a number of points that are worth reiterating and asked that the Minister for Social and Family Affairs provide a public assurance that no person will become homeless as a result of the changes that will be made to these allowances. Will the Minister provide such an assurance? She appeared to suggest that landlords should pass on reduced rents because the rent and mortgage supplement is being reduced. Where is the prescriptive element in that regard? We must ensure that rents are reduced. If we do not do so, tenants will be made homeless.
I thank Senator Bacik for sharing time and I welcome the Minister. I am going to break one of my rules, I am going to read a letter that appeared in the Irish Independent two weeks ago.
I recently had a long conversation with a friend of mine who lost his job. He was in a reasonably good job and after a little bit of overtime was earning a gross salary of €35,000 per year.
So I asked him the obvious question of how he was going to cope now with four children to feed and I have to be honest the answer startled me, he was actually a lot better off and now in a position to go out golfing every day when his children are at school.
Frankly I did not believe him until I sat down and did the sums.
On a salary of €35,000 his annual net income after the mini budget was €28,854, after all deductions.
Now he is on the supplementary welfare allowance which, with a wife and four children, gives you €443.90 per week or €23,083 annually.
As he also has a mortgage he is entitled to mortgage interest supplement which pays all the interest on your mortgage so in his case €1,200 per month of his €1,500 mortgage or €14,400 per annum.
He is also entitled to back to school and footwear payment of €905 per year for four children, a medical card which we will say is worth on average say €500 per year (probably more) and a heating supplement which I cannot quantify.
In total he now therefore has tax free income of €38,888, an increase in his net income of €10,034 per year working on his handicap.
Based on the calculations after the mini Budget you would need to earn more than €47,000 per year if you have four children to justify continuing to work. Now this is even before the costs of working like petrol, car maintenance, tolls, lunches etc.
Now in any civilised society and especially a society in a deep recession with a huge welfare bill surely the Government must give people an incentive to go out and work.
Making the child benefit taxable or means for golf tested later this year is just going to make the situation far worse and encourage more people to give up work and rely on the state to live.
It could even drive our small economy to collapse as the welfare bill gets bigger and bigger as more people, including myself, say why should I bother to go out to work when it is basically costing me money to work?
Unless something radically changes I will be joining my mate on the golf course very soon.
The letter is signed by Mr. Andy McNamara, Drogheda, County Louth.
That letter startled me. If we are to get out of the financial crisis we must make Ireland more competitive and find ways to encourage people to work. This may be a freak situation but if it is an example of the current system, we will not become more competitive or correct the economy, we will get deeper into trouble.
I spoke to a number of people in Dundalk who had been made unemployed when a Superquinn shop closed. I asked two of them where they would find work and they replied that they did not know. I mentioned that Newry is only 15 minutes away and there is work there. They said that the would not go to Newry because pay rates there are only a third of those in Dundalk.
We have a problem with the competitiveness of our economy and while we cannot solve it at the stroke of a pen, we will not solve it if we create incentives to stop work and rely on the State so those who are working pay for those who do not work. We must try to get out of the financial crisis and while I am not sure how we go about this, if we are going to succeed we must make some changes, one of which is to ensure there is no incentive to stop working and to rely on the State.
I say this in the knowledge that things were going the other way in other years when I have spoken on this. I did not realise until I read the Irish Independent two weeks ago that such a situation could exist. If it is so, it acts as a disincentive to work and might act to encourage people to give up work to have the State pay for them.
The scale of the social welfare system can be measured by the fact that its current budget is some €21 billion, two thirds of the money we will collect in all taxes next year. The decisions we make, therefore, will have serious consequences. There is no doubt the scale of that budget is justified because many of those relying on social welfare do so on the basis of income maintenance. The deteriorating economic situation means there are ever more people becoming unemployed and their needs must be met, especially in the short term.
We must ask, however, whether the money is being spent effectively, producing the ends desired by those depending on such income. The room for manoeuvre is painfully small. Most social welfare benefits, such as unemployment benefits, pensions, disability payments and payments to lone parents, go directly to people who need them. The amount of discretionary funding available is small in terms of the overall budget.
It has come to a stage now, however, given the scale of spending and the resources available to meet that budget, that we must look at its wider aspects. The extent to which people receive income from social welfare when they have sufficient means themselves means payments from the social welfare budget do not benefit those in need but third parties. The Bill also highlights the extent to which abuse occurs within the system, diverting resources from those who need them.
In that context and in the current difficult situation, these proposals are all that could have been done. The alternatives were unpalatable. One of the social partners indicated that the 3% increase in October could have been rolled back. Even though we are now in a deflationary situation, resulting in a net benefit increase in October of 7% in terms of income, we should not try to take that money back.
An unfortunate but unavoidable decision was made on the Christmas bonus. Even that decision, however, constitutes little more than 1.5% of the overall budget. That shows the impact these changes have had on the overall budget. We all hope that if the programme to address fraud in the system is successful it will open up an avenue by which the Christmas bonus might be partially addressed.
The other decisions were made in the context that if it was not a matter of income maintenance, it had to be examined. The decision on the early child care supplement, one of the more recent decisions, was made in the context that we cannot give out money to everyone, particularly those who have sufficient income, that will not have an impact on the effective spending of resources. The decision to replace it with a guaranteed, targeted preschool place will be a more beneficial use of resources.
The decision to cut the jobseeker's allowance for 18 and 19 year olds seems harsh on the surface but where we are trying to avoid the introduction of a dependency culture in terms of families and communities, it is the right decision. People should not start their working lives with an expectation that payments will be made directly with no incentive to seek whatever work is available.
The other decisions relating to how contributions could be more fairly distributed are right, and in future budgets they must be addressed further. With regard to how we contribute to the social welfare fund, I and my party are of the belief there must be greater equity and greater contribution from those on higher incomes, even if that goes against the principle of the fund in that such individuals are unlikely to benefit directly from it. It is a principle of solidarity and I welcome the moves towards achieving that in this and previous Bills in recent years.
The difficulty is where we go from here and what is likely to happen. I believe it is unlikely, given the current economic situation and deflation figures, that social welfare will have the capacity to increase in the short term. However, there must be clear markers that there are elements of social welfare spending that cannot be affected and that there are people within the social welfare system who should not have a fear that such decisions will be made. The Minister has made those principles a part of her decision making, both in October and in this Bill, in the decisions relating to pensioners and carers, taking account of the impact of ever-growing numbers of unemployed and how the scant resources, which are decreasing, can be distributed over such a huge budget.
In future legislation, particularly relating to unemployment, we must examine the six month and one year periods of unemployment and how people who find themselves in that position can avoid a situation of enforced entropy. We do not wish for a return to the 1980s. I had two periods of three months unemployment and three periods of six months unemployment in the 1980s. It is one of the most soul destroying experiences of a person's life. The responsibility of the Government and Department is to ensure that when people find themselves at these benchmarks, there are opportunities for them to remove themselves from unemployment through incentives to employers to take people on either on a training or employment basis, if necessary using the resources being made available through the jobseeker's allowance to offer such incentives.
The Social Welfare Bill that will follow the December budget will need to consider this, given the scale of the problems facing the country. I am confident the Minister has the resources to deal imaginatively with the decisions that must be made to ensure this difficult period can be made less difficult, if possible.
I welcome the Minister and thank her for her attendance. The Government has a track record of not understanding the theory of unintended consequences, and that is being charitable. Each time the Government introduces a budget, there are implications it fails to consider. This has disastrous results for the Government's accounting and, more importantly, for the people who are affected. In due course I will refer to the weaknesses in the Bill and propose amendments. With regard to how people are affected, I read the letter in the Irish Independent a couple of weeks ago in which a gentleman outlined in clear detail how he was better off being supported by the State due to the effects of the budget.
First, however, I will reflect on the effects of this Bill for the wider economy. The Bill is part of a wide range of policies introduced in response to the recession. There must be economic activity to get out of the recession. The Government appears to have overlooked the fact that the people targeted by this Bill are spenders. All their income goes into shop tills and to commercial service providers. The measures in the Bill are aimed at saving approximately €150 million but they will make more people unemployed and reduce the spending power of recipients of welfare payments. That fact appears to have been overlooked.
In fact, it is not even understood when one considers the remarks of the Minister for Finance in the Dáil last week. He said that when one takes the 3% increase provided for this year with the 5% drop in the cost of living, it is a real increase in social welfare provision of 8%. It is alarming that the Minister should think that way. He betrays a lack of understanding of low income family budgeting. These households have differing spending requirements and the consumer price index does not reflect that. It does not know the make-up of households. Many people on social welfare, for example, do not have a car or a mortgage so falling fuel costs and mortgage repayments are not relevant to them. Most of their money goes on food, which has been increasing in price.
The Minister, Deputy Brian Lenihan, is correct in one sense about real increases but they are not in spending power but in costs. This Bill increases the cost of putting a roof over one's head if one is on rent allowance. There is no deflation in accommodation costs for those people. I refer to Focus Ireland's comment in that regard. It stated that young people in transitional accommodation currently contribute €18 per week to their rent, but under changes to the rent supplement scheme this will increase to €24 per week. The reduction in jobseeker's allowance means these young people will experience a combined weekly reduction of at least €110, leaving them with €76 per week after paying rent. This will create serious financial difficulty for those people. There is a similar impact on people on rent allowance.
Rents might be falling in Dublin but not in places such as Clonmel. For people on rent supplement living in accommodation in Clonmel there is no change in rent. In fact, rents are increasing because landlords' costs are increasing. Additional pressure is being put on people on rent allowance and it is definitely having a very serious effect. I recently received a telephone call from a distressed single gentleman of 68 years of age. He is very happy in his rental accommodation. He is getting on extraordinarily well in so far as he knows his neighbours and the locality and he lives near the church and the shop. All his needs are being met in the rent supplement scheme. He is frequently called in to have his needs reassessed in the context of offering him a house that he does not want. He is very happy where he is. Now he is worried the increases will affect him and that he will not be able to afford them. This reflects the worry of thousands of people in this situation.
Thousands have fallen on hard times and this Bill brings no comfort for them. The cut in rent allowance was based on the premise that landlords would accordingly reduce the rent charged. That might not be the reality. I do not wish to tar all landlords with the same brush because some are genuinely delighted with their tenants and will not use this as an opportunity to put them further into hardship. However, there are others who are, in a business sense, suffering "the pain" and they would have no qualms about increasing the top-up that people might have to pay.
Where is the basis for the claim of an 8% real increase for those relying on social welfare? It is an illusion or delusion; it is not real, as the Minister, Deputy Brian Lenihan, claims. The people who will be victims of this deluded thinking are not those who caused the recession but those who were victims of the Celtic tiger. Many of the people who paid market rates for houses in 2007 could find themselves homeless. This will cause an increase in costs for the Department. That is an example of how the Bill represents false economy. The Bill reflects a Government that is not in touch. It does not target the people who gained most during the boom but has a very negative effect on the people who were floating along nicely but are really hurting now. The negative effect of reducing mortgage interest supplement to seven years will affect thousands of families and will be a significant additional hardship.
The era of Government under Deputy Bertie Ahern and Deputy Brian Cowen saw hyper inflation in the housing market. That was well flagged by all sides of the House. Many people were encouraged to buy houses for huge sums, yet there were massive tax incentives for landlords. Ordinary people were offered mortgages beyond their wildest dreams and were encouraged to buy into the dream of having it all and having it now. I accept that this says something about ourselves, our willingness to listen to the advertisements and fall into the cosy idea that we could have everything now and pay in the long term. As a result, the recession is having a far worse effect. They were given mortgages without any plan or conditions attached that could have offered solace when this major spiral began. We are still in that spiral. The struggle to pay those mortgages has been made even more difficult because the banks, which the Government guaranteed on behalf of this country, are not passing on all the interest rate cuts.
I am delighted with the provision in the Bill of one year's free child care because that was one of our policies but it should not be a back door to cutting the early child care supplement.
Cutting the Christmas bonus to all social welfare recipients, for whatever reason, is a dreadful act at a time of high expense. In some cases Christmas starts here before Hallowe'en, which is appalling. If shops did not display Christmas decorations until 1 December it would make far more sense economically and might reduce the long lead in and the associated hype that goes with Christmas and the worry people experience. It might also restore some semblance of the meaning of Christmas. Taking this bonus from people at a time of greatly increased need is a callous act and will considerably increase the hardship of older people. As the Labour Party spokesperson on older people I am already getting a great deal of contact from worried older people.
Cutting the jobseeker's allowance for those under 20 is another unwelcome decision as opportunities for graduates diminish and places become scarcer. Will those who wish to continue to stay in training or education be able to do so?
The Bill does not offer much hope to many people and I am interested in hearing the Minister's responses. I have tabled some amendments which will be dealt with later. I thank the Minister for the offer of a briefing on pensions.
I welcome the Minister to the House. The task that befell her to make a saving of €300 million in the social welfare budget in 2009 in difficult times is no mean feat. I commend her on not making a general cut in the weekly social welfare payment.
I note the concerted effort that will be made to deal with social welfare fraud. There are cuts in the Bill that are unavoidable but social welfare fraud is the most serious issue that must be tackled in terms of finding areas in which savings can be made. The Minister must be very strong on that issue. I accept that she is being strong. I note there are people who may be doing nixers who were employed originally by people still doing the same work but on a day on, day off basis. That must be examined.
Issues arise also concerning people spending abroad and social welfare payments being made into banks. Now that we have additional people on the boards of the six Irish banks there might be some form of liaison in the area of social welfare fraud to track payments.
Regarding house visits by inspectors, more staff are needed in the Minister's Department in this time of need. Some Departments do not need some of the staff they have but I accept that the Department of Social and Family Affairs needs more house inspectors.
I believe the public would welcome a crackdown on social welfare fraud because it is one of the main questions that arises on the doorsteps in the lead up to the local elections. There is no denying it is an area where savings can be made, and I welcome that. The Minister has said that if the crackdown on social welfare fraud is successful she will, if possible, bring in some form of Christmas bonus. No one can deny the Minister's bona fides in this area, which is welcome. If we can make savings in this area the people who deserve a Christmas bonus can have one.
There has been a mixed response to the Christmas bonus issue on the doorsteps. Some people say it was better to lose the bonus rather than have a cut in their weekly rate because they can now plan. Also, toys in shops are much cheaper now than they will be at Christmas.
People have been using Christmas bonuses, child care allowances and the early child care supplement for purposes for which they were not intended. Social welfare benefits should be used for the purposes for which they were intended and not the way they are sometimes used, as the Senator is well aware.
Unfortunately, there are people who will be under pressure at Christmas. Last year the Minister brought in a widely welcomed money advice and budgeting service, MABS, advertising scheme. That may need to be widened this year to assist people under pressure who, instead of turning to loan sharks, will be able to get the support required to plan for Christmas which is, as Senator Prendergast said, a time when because of advertising and so on, they can go off on a tangent and spend too much money. We must guard against that. The Minister made an effort in that regard last year and I would welcome a similar measure this year.
I welcome the fact that the early child care supplement scheme has been abolished. It did not provide for incentivising mothers to go back to work. The provision of a preschool place for every child of four or five years of age will give them some form of equality in entering the primary school system. My concern is that the current establishments will not be in a position to provide for that in 2010. We need to examine the private sector to determine what is available in that regard. The community child care schemes are run very well and some of the private establishments, unfortunately, have had to close recently. We must examine the issue of placements, etc. I am aware the Minister for children is examining that issue but it will be a matter for this Minister in terms of providing the funding, etc.
This measure must be used to incentivise mothers to retrain. If we examine that, and this is the point Senator Bacik was making, it will achieve the desired purpose. There are those with two or three children and providing a preschool crèche place for a child of four when the mother is at home with two or three other children will not assist in that area. That is something we can build on for the future but this measure is an excellent first step. When the early child care supplement was introduced I would have preferred to see the provision of a preschool place for children than the way it was done initially.
At some stage, and I accept it is not in the social welfare brief, we must examine the question of giving tax incentives to parents who are paying crèche fees, but that is a matter for another day.
I welcome the reduction in rent supplement. I listened to some of the debate on landlords not reducing rent but the market dictates the level of the rent. If a landlord does not reduce the rent tenants should threaten to move. I have advised people in my constituency to do that and it has worked. With the amount of money being provided few people will not want to assist in bringing down rent that typically was €700 a month or, as is the case in my own constituency, €600 a week. That has happened across the board. The landlords who are not co-operating must be told by their tenants that they are moving to another area.
On that, we have a major bank of empty houses and apartments throughout the country. We must examine house ownership because it is my experience that people who have a house provided by the county council tend to have pride in their own back garden and keeping it maintained but that is not always the case among those on rent supplement. If these house banks are available, we need to adopt an imaginative approach as to how we can provide a long-term housing solution in respect of perhaps letting tenant purchase schemes be applied to the private sector. That would take some of the housing out of the big bank that is, unfortunately, accruing.
I note Senator Quinn's letter in the Irish Independent on the incentive to work. This is an important area that needs to be looked at - persons on €40,000 a year who are under pressure.
Unfortunately, I have run out of time. I also welcome the cut in the jobseeker's allowance for 18 to 20 year olds. There was a generous welfare system over the Celtic tiger years and we need to look at system reform in general in order to provide incentives for training and work. The Minister is moving in the right direction. This was, we must remember, an emergency budget. I look forward to more change in the system in the autumn budget.
I welcome the Minister and thank her for being here because that is important. Whenever she has been in the House she has stayed, unlike some of her colleagues. That is a good sign.
Senator McDonald, in her passionate speech, made reference to the Minister's task as no mean feat, and she was correct. What the Minister has done is no mean feat. It is extraordinary that the Bill before us is a far cry from the manifesto of two years ago, and from the promises that were made-----
-----and the big announcements made by Government. If the Members on the Government benches had listened to our proposals on savings that could be made that would not affect those on social welfare and the vulnerable, perhaps we would not be doing this.
It is an extraordinary time. If one goes into social welfare offices and speaks to community welfare officers, one hears of the queues. Sometimes Government speak refers to outcomes and statistics, and we see the figures released this morning. In the Bill we are talking about people, not figures or statistics.
People are looking for hope. Today is President Obama's 100th day in office. Whatever else one may say about him, he has given people hope. His approval ratings are extraordinary for a man who is president in the middle of this economic recession.
People want leadership and vision and nobody is fooled anymore by this Government. Senator McDonald spoke of going out to the local election campaign. I invite her to come out with me any night of the week to experience the venom and hostility out there.
I can tell Senator O'Malley that the people are waiting. Former Taoiseach, the late Charles J. Haughey, once said of a Fine Gael/Labour budget that it was a cold calculated computer print out, and I say this is part two. This is a budget that attempts to tackle a broken economy but fails miserably. It is devoid of humanity and is lacking compassion and understanding of the modern Irish family. There is no appreciation whatsoever of families and young people who have been forced to buy houses, as Senator Prendergast stated, at inflated prices and who are stuck with mortgages. The Bill does not take cognisance of the fact that today's Irish families are struggling. I challenge the Members on the Government benches to come to any of the four corners of this country to see that it is not the rich who are struggling. Everybody in middle-income and low-income Ireland is struggling.
Senator Prendergast is correct in stating there is no account taken whatever of the different spending requirements of families and individuals. This is best exemplified by the fact that Ministers took a percentage decrease in their salaries but that was it. They have the entourage with them always and they have the all the different apparatus of State around them, and it sends the wrong message. Senators and Deputies should not receive ministerial pensions along with their salaries. It is wrong. The Minister and I were in the same position on our teaching salaries, where we did not take the money for those jobs. That provision is wrong and should not apply. One should forget about the journalists who are trying to drive this campaign. We did not take it, not because of a journalist but because we felt it was wrong. We need leadership in this House.
People are distressed and upset. This is not make-up and it is not populism. The Irish people are looking for change and inspiration and it is no wonder the political class is getting it in the neck because we have not seen leadership. There was a botched attempt at a budget last month. The Minister for Finance outlined the measure in the House and three weeks later it is changed. One cannot blame the people for being angry.
The golden egg is rotten. It is no more. As the Minister will be aware, we go out knocking on doors every night and the people say they have bailed out the banks, bailed out the Government and the Government has let them down. I am out four days a week talking to people and knocking on doors and that is what they are telling us. That is a fact. They feel let down and they read in the newspapers where developers do not turn up in court to pay their debts. What are we saying to people?
Undoubtedly, this debate is taking place in difficult times. As the Minister will be aware, people are on social welfare for a reason. Thousands of them do not want to be on social welfare. The ESRI report today shows we are in big trouble, much of it of our own making due to over reliance on construction and property. Unemployment is at 11.84% and the ESRI is predicting 17%. With 17% of our workforce unemployed, forget about what former Taoiseach, the late Jack Lynch, said about 100,000. Look at the 17% as people devoid of work, devoid of hope and looking for help. Are we real in this House at all? We are talking about people.
On a positive note, there is a willingness among people to take some pain. They will take some pain but they have been asked to take a great deal. As the Minister will be aware, there is significant pressure on the staff in social welfare offices and I thank them for doing great work dealing with an inordinate amount of people. They do not get credit.
The live register is only here to be talked about.
I want to hear the Minister's views on how the Department will implement the early child care education. Child care is important and we have not planned for it properly up to now.
We must provide incentives for people to go to work. Senator Quinn eloquently put it on the record. People have not got that so far and we need to do that. We need to be creative regarding community employment schemes and we need to allow people the opportunity to go back to work.
The black economy is thriving, whether Senator McDonald likes it or not. I agree with the Minister that we must tackle social welfare fraud. I will give her every support to tackle fairly and properly the people who are abusing social welfare. The black economy is alive and well, and it is well Senator McDonald knows it. It is back in action because of this Government. People do not want to go to work now because it costs them money and that is not right.
Senator Boyle speaks about the dependancy culture, but where are the places for the young people? We are cutting LCA classes. The Minister, Deputy Hanafin, is a former Minister for Education and Science. The most innovative measure brought into schools was the leaving certificate applied, which I taught for eight years. The resources of that great programme have been reduced, and that is daft. In the Gallery this morning during the Order of Business there was a group of leaving certificate applied students who had a new lease of life because they had no dread of being at school. Will we return to the bad old days?
I agree there is a need to modify rent supplement but we need to look at how the PRTB operates and who will negotiate on behalf of the tenant on the big issue of landlords not passing on the reduction in the cost of living.
I welcome the Minister to the House. It is amusing to listen to Senator Buttimer's single transferable speech. At the end of it all he realised he had no time left to make the points he genuinely wanted to make about the Bill because of this rant about whether we were being real and whether the Minister had any idea of the challenges of families and people who are forced to exist on social welfare. The Minister knows the challenges these people and families face. I was amused listening to Senator Buttimer calling for more in social welfare benefits and then asking if the Government was for real while he quoted this morning's ESRI report. Is Senator Buttimer for real? Does he have any idea what it is like to run a country on a limited budget? Time and again he comes into the Chamber demanding that more moneys be spent on this, that and the other but with no real debate on what needs to be prioritised. I perish the thought of Senator Buttimer finding himself in government - it would be an awful peril. He would then find out that government means prioritising and taking unpalatable decisions when economic times are hard.
I commend the Social Welfare and Pensions Bill for those reasons. The Minister did not have it easy in deciding to make certain cuts but she achieved fairness and a balance. She made an important choice in not cutting social welfare rates. Had she done so, she would have been deafened by the howls from the Opposition. She, instead, made the savings through cutting the Christmas bonus, the fairest choice because not every welfare recipient receives it. The Minister has indicated that if economic circumstances allow in the future, she will seek to have it restored.
Hopefully, economic circumstances will change. The reality, however, is the Minister must manage her budget in the face of the shocking growth in the unemployment rate and the predictions of this morning's ESRI report. On the child care supplement changes, she stated we need to achieve better results with fewer resources. These changes are to be welcomed. As Senator McDonald pointed out, the supplement was available to parents facing challenges at a time when we had the money to do so. However, with the replacement scheme investing in a child's education will yield much more. It is also an investment in the schools infrastructure and teachers, a wise decision by the Minister. While no one likes to have money taken from them, parents of young children in receipt of the scheme have told me this is a much better investment.
The Minister's priority when framing the Bill was to protect the vulnerable while avoiding the creation of a welfare dependency, a task she has achieved. Naturally, we all wish more money were available to support those who face the challenges of living on social welfare but one must operate within a budget.
Experience of the recession in the 1980s is reflected in the Bill. I welcome the refocus on the back to work scheme which will encourage people to become self-employed. Opening up access to funds sooner rather than later is also a good development. Senator Boyle eloquently spoke of his personal experience of unemployment. Thankfully, I have never been unemployed so I have no idea of the personal trauma that it causes. The Minister has recognised how unemployed people must keep themselves upskilled. I welcome this change in the terms of various welfare allowances to include this.
Regarding rent supplements, some Members are not living in the real world if they believe rents are not going down. I welcome the changes to rent supplement which reflect this reality. The Minister is the protector of these precious resources of the State which are becoming ever more precious as the amounts of moneys coming into the coffers decrease while the numbers on social welfare and dependent on the State rise. We must ensure these resources are allocated appropriately and to the people who need them most. That is why I welcome the changes in the qualification for rent supplement. It is never easy to make it more difficult for people to qualify for a supplement but the criteria must be made appropriate.
The pensions area is a complex and difficult issue. The circumstances in this area have changed so much over the past five years that it has become a challenge to encourage people to invest in their own pensions. Support is needed for those who spent a lifetime working and supporting a pension scheme only to discover it may be insolvent. I am glad a framework scheme to deal with this critical area will be launched soon. Yesterday the Opposition was annoyed about how quickly this scheme will be introduced. However, it is necessary for many companies that are becoming insolvent. I wish the Minister well in tackling this complex situation.
The Minister has a challenging brief which will become even more so. I welcome the fairness and flexibility with which she has framed the social welfare budget. I look forward to the Bill's passage in the House.
When I heard Senator O'Malley lecturing Senator Buttimer on budgets, the words, "kettle", "pot" and "black" came to mind. Unfortunately, we are in the middle of one hell of a budget buster, the worst ever seen in the State's history. This has been a disastrous budget for the people. There is a need for more honesty from the Government as to what exactly will happen in the coming months. When the Minister for Social and Family Affairs, Deputy Mary Hanafin, delivered her original social welfare budget in October, she could not have expected the massive and rapid increase in unemployment. It must throw the figures worked out for the budget. Will she inform us what considerations have been given to further possible large increases in the unemployment rate for this and future budgets?
How much groundwork has been prepared by the Minister with the Department of Education and Science with the early school places scheme? Will there be a smooth transition between its introduction and the phasing out of the current child care supplement? It is important people are informed exactly what these changes will entail.
The take-home pay for every single family has been slashed by this new budget. If there are to be changes to child benefit, we need to know now what they will be. Families are trying to work out how much money they have now and how much they will have in six or 12 months so they can plan their budgets. There is no point telling them child benefit might be means tested or changed completely. Families deserve to know what the Government intends in this regard because it is a major issue.
A comment was made during the budget debate that some families would only suffer a €7 change in their weekly income following the budget. The early child supplement is a significant part of the family income where there are three or four young children in a family. These are the same households that are being hit with negative equity and the biggest mortgages because they are the young who got married recently. They will also suffer the most from the changes being made to child benefit.
The Minister must be honest with these families and tell them what is coming down the tracks. There is no point hitting them over the head with a hammer next November. The Government must give the people some idea what is happening due to the changes in the economy, some of which have been radical and have had a disproportionate psychological and financial effect on individuals.
The Minister has given her reasons as to why people on social welfare will not get the Christmas bonus and the Minister's colleagues in Fianna Fáil and the Green Party are adamant they will not get it. There is a need to revisit this measure, however. Christmas is an important time of the year for families and to play Scrooge with them in these difficult times is wrong. The Government should not be so harsh on the most vulnerable in society with this sort of sledgehammer approach to making savings, which results from the dire financial circumstances the Government finds itself in.
I was disappointed Ministers did not feel the need to take on much pain in the budget but they expect the rest of the people to suffer. As someone who still does a certain amount of general practice work, I find that people are having difficulty getting their claims processed, not just social welfare claims but also with regard to medical cards and a number of other services for which they must apply. There has been no reduction in the number of civil servants working for Ministers, however, and many of the civil servants working for the Minister, Deputy Hanafin, and for other Ministers are literally doing constituency work.
Across all Departments, the Government should seek to put staff into those sectors of Government where backlogs are building up at a tremendous rate. It is amazing how long people must wait to get medical cards, which is causing serious hardship for families. I do not see a sense of urgency from any of the Departments that they must do something to transfer staff from one Department to another. There are many Departments where staff are under-utilised because of the changes in our economy. There is not the sort of radical approach and response to needs that would be the case in a normal business.
With regard to changes to the Pensions Act, there is a sense - perhaps I am wrong in this - that the Minister must do this, that she is obliged under EU legislation to make some of these changes to protect private pension funds and that she is left with no recourse but to move in the direction in which she is moving. It is important that the Minister would again make her plans for the scheme as clear as possible so we can assess its full cost and decide whether it would be the most beneficial approach for everybody involved.
The Minister has probably dealt with many of these issues during the debate on the Bill in the Lower House. What we are looking for here, more than anything else, is clarity. We want to see exactly what the Minister is doing and to know she has a plan for the future and that, if the situation gets worse, she will explain her plan for dealing with that eventuality. Most of all, we want the Minister to let the people know what she is considering so they can make changes in their own lives. People out there are reeling at present because of the massive financial hits they are taking and are about to take. There needs to be honesty and straightforwardness when dealing with the people of Ireland.
I welcome the Minister for this important discussion. The Government's decision in the mini-budget to remove the Christmas bonus is very short-sighted and there is a great level of anger about it. I was on the campaign trail in Senator Twomey's home area of Wexford over the weekend and it was an issue that was continuously raised with me by people who were directly affected. It is short-sighted in the sense that the Christmas bonus was not money that was put in people's pockets and kept there; it was money that was spent in the economy in the run-up to Christmas. The cut will remove a great deal of spending capability for the people who receive such bonuses. It is also downright mean-spirited for that time of year.
I am particularly struck by the number of pensioners who have raised the issue with me. They used to spend the money at Christmas but it will no longer be available to them. The fact that this is a direct cash injection into the economy at Christmas time and not money that would be saved or kept in any other way highlights the short-sightedness of the move by the Government. I deeply regret the decision to remove the Christmas bonus as announced in the mini-budget two weeks ago.
I also wish to refer to the issue of pensions. In my area of the south east, the big issue with regard to pensions in recent months has been the case of Waterford Crystal. Many workers, having given a lifetime of service to that company, find that the pension fund contains no funds and that after perhaps more than 40 years of service, they have no pension provision. I was disappointed with the Minister's remarks in a television interview that they could fall back on the State pension. It is not good enough that people would pay into a pension scheme such as that at Waterford Crystal over a lifetime's work and then, when the company gets into financial difficulty, find that the pension scheme as instituted no longer exists.
This results from a complete failure of the Government to implement EU directives and goes back to the early 1980s, when an EU directive specifically dealt with the area of pensions and pensions protection but was never fully transposed into Irish law. As a result of the Government failure to transpose the directive, these workers in Waterford Crystal and other bodies across the country find themselves with no pensions.
It is interesting to look across the water to Britain, which has protected similar pension schemes up to, I understand, a total of £30,000, depending on years of service. The British Government has produced a programme where those pensions would be protected. A similar programme should have been introduced in this country and should still be introduced to protect those people who find themselves in that unenviable situation.
It is particularly galling for people in that situation when they read about the lavish pay-offs to the Ministers of State who were removed from their positions last week by the Taoiseach and received €53,000 in a golden handshake. The Minister and some of her colleagues have featured in the media recently on the level of pension provision they will receive, which is particularly galling for people who find themselves after a lifetime's work without any hope of the pension scheme they believed would support them in their retirement years.
The Bill is a bit of a smokescreen. The Government has delayed tackling the serious obligations towards workers' pension entitlements that we have discussed on the Opposition benches for many months. The Government ignored the EU insolvency directive by failing to transcribe it into Irish law. That directive has been on the books for approximately 30 years. The Government continually tells people why they should vote in a particular way on the Lisbon treaty, but it is difficult to square that message with the failure of Government to transcribe a European directive that would have directly improved the lives of retired workers if it were implemented here.
I am also disappointed at the time allowed for the Bill. I do not know why Second Stage could not have been taken today with Committee and Remaining Stages taken tomorrow or next week. I believe it could have been taken next week.
The provisions of the Bill make it clear that the Minister has an ear to listen to the pensions industry rather than those people who are losing their long-term pension entitlements, such as those who worked for Waterford Crystal. In recent years the Government has granted additional tax write-offs up to, I believe, approximately €50 billion for people who want to pay into private pension schemes. That money is directly foregone by the Revenue Commissioners because the Government has decided to go down that route. I am sad that policy is being continued in the Bill.
I remind the Minister of a meeting of the Oireachtas Joint Committee on Social and Family Affairs in November 2005 where Patrick Burke, then vice-chairperson of the Irish Association of Pension Funds, said:
There is cause for the Oireachtas and the State to support the defined benefit system. We have made some recommendations in that regard, which the joint committee will see in the material provided, one of which relates to the State annuity fund.
In response Liam Murphy, principal officer in the Department of Finance, said:
In administering this fund, the State is faced with the same factors as private sector providers, namely, demographic factors, longevity, interest rates and investment returns. There is no reason to suggest that the State could deliver any real cost reductions compared to private sector providers. The State would also be forced to establish a new administrative apparatus and pay for appropriate skills. As an official in the Department of Finance, I must state that there is a danger that the State annuity fund could end up putting a new and indeterminate liability on the Exchequer and general body of taxpayers.
I ask the Minister to outline what has changed since 2005. I stated that we have written off approximately €50 billion. We have given a €50 billion Government subsidy directly to those who have invested privately in pension provision.
I welcome the Minister to the House once again. Dealing with the Social Welfare and Pensions Bill usually gives the opportunity not simply to reflect on the matters contained in the Bill but also to discuss some of the issues affecting the Department of Social and Family Affairs that need urgent consideration. I appreciate the very difficult economic times in which we find ourselves. The ESRI report published today shows the challenges the Department will face in the next 12 months or two years. The level of social welfare spending that will be necessary to respond to the economic crisis will be huge. It will be a challenge for the Minister to secure sufficient funding from the Department of Finance. There is also a challenge to society to respond to the stresses and pressures that will come in particular on families who are experiencing poverty perhaps for the first time.
The non-payment of the Christmas bonus has been the cause of much public debate and concern. We are all aware that for many, particularly the elderly, the Christmas bonus was seen as integral to their financial package for the year and there is upset, disappointment and concern at its removal. The Minister indicated that should sufficient savings be made under other headings within her Department's budget she would be in a position to review the matter. I hope those savings can be made and she will be in a position to reinstate the bonus, which would be very much welcomed by the majority of people not just here in the Oireachtas but also in the wider population.
On the previous occasion the Minister was in the House I spoke about the carer's allowance schemes operated by the Department of Social and Family Affairs. I expressed my disappointment that the progress the Department made for a number of years under the stewardship of the late Séamus Brennan appears to have come to a halt. The late Minister was very generous in his response to carers. He made significant improvements to means testing by increasing the income disregard. He certainly ensured that a significant number of additional people qualified for carer's allowance. I appreciate where the Minister is coming from financially, but we need to continue to work to improve carer's allowance. We need to reflect further on what the former Minister was working on. Certainly he indicated here on a few occasions that he was sympathetic to the possibility of removing the financial means test for carers and providing the full carer's allowance for full-time carers of people in need of full-time care. The figures presented here some years ago by Mr. Brennan were relatively modest. I hope this is a matter the Minister will consider. While I appreciate the financial position in which the Government finds itself, there are certain sectors in which we must continue to make efforts to improve society and care of the elderly is very much towards the top of my agenda in that regard. The carer's allowance scheme, which works very well, needs to be reviewed and expanded.
I presume the Minister for Health and Children will finalise the fair deal nursing home scheme at some stage in the near future. Under that scheme the taxpayer will still foot a considerable proportion of the bill. Under the carer's allowance there is a much better equation financially and from a societal point of view. We can allow the maximum number of people to remain in their own homes and communities if we can expand on the carer's allowance scheme. I hope the Minister will give some policy consideration to the matter. At the kernel of improving the carer's allowance would be the abolition of the means test, making a bold statement of where we stand as a society, that we are willing to support those people who support the elderly in their own homes and communities. I hope we can return to that debate again.
I appreciate the changes in the rent supplement scheme are causing some confusion and concern to people. However, I accept that rents in the current economic climate should be reducing substantially and therefore the Department would hope that less rent allowance per applicant would be sufficient. It is important to ensure rent allowance is paid as quickly as possible. I came across a few cases recently where people on rent allowance had to change accommodation. They found it difficult to move seamlessly from accommodation A to accommodation B without their rent allowance being cut off and having to reapply for it. They then had to get the arrears sorted out. The State does not gain, but the applicant suffers over a month or six weeks without receiving the supplement. We must try to resolve those anomalies.
I am aware the Minister is attempting to address the need for sufficient staff in local offices to deal with claims. Sadly, unemployment benefit claims will go through the roof over the course of the next two years, but we must try to ensure that those claims are processed and paid as quickly as possible. That will require staffing improvements.
I thank Senators for their contributions and for the informed debate we have had. Everybody recognises this has been the most difficult budget for many years. The decisions made were not taken lightly as we were very conscious of their impact on people and their families throughout the country. However, we have had to increase taxes and borrowing to pay for social welfare. It is sad that because of the large numbers of people losing their jobs, we needed to increase the provision for the social welfare budget, which is now over €21 billion.
The best way to reduce the need for this is to get people back into work, remove them from social welfare and ensure they are contributing again to the economy through work and taxes. However, until that happens, we need to make provision for them. It is not sustainable for us to spend €6 out of every €10 on social welfare when demand is so great on health, education, infrastructure and across all sections of society. For that reason, it was important when making provision in the budget to increase social welfare to examine how money could be saved in the Department and we did that at the absolute minimum.
Reference has been made to the ESRI. The ESRI recognises that the Government is taking measures to deal with the deterioration in the public finances and acknowledges that the measures taken are appropriate. Until we get the public finances in order, we will not be in a position to improve services and financial provision for those on welfare. Our overall aim is to keep people at work and to support them and their families. I accept that this is a difficult time for people. It is difficult for people who lose jobs or take a drop in income and for young people who cannot find jobs. As politicians, we know how distressing it is in our clinics to hear the despair of people who come in for advice. When we get our public finances back in order through the measures we have taken - the guarantee to the banks, capitalisation, nationalisation of Anglo Irish Bank, the agreements reached with the banks, the setting up of NAMA and removal of toxic assets so that the banks can free up money to professionals and businesses and offer credit and loans - it will help regenerate the economy. I understand it is difficult to see the link between the big banks and the small businessman, but the big banks are currently so busy servicing their big debts that they are not looking after small businesses. That is the reason the Government has taken the measures it has taken.
In the meantime, we have had to take decisions that have impacted severely on people. I know how difficult that is for them. One of the most difficult decisions we made related to the Christmas bonus. It would have been unthinkable to cut the weekly rates of assistance because far more people are being paid social welfare every week than receive the Christmas bonus. It is bad enough for people to lose their jobs and to be told they will only receive €204.30 a week without suddenly turning to them and telling them that will be cut also. That would have been extremely difficult for far too many people. Out of all the cuts, the Christmas bonus is the one the Government would most like to be able to restore. That will depend on whether we have some windfall or whether we are able to make additional savings. However, the full benefit of the Christmas bonus costs €223 million, and that amount is not found easily. Notwithstanding the fact that cutting the Christmas bonus was a difficult decision and is very tough on people, every effort will be made to try to restore it. However, the warning must go out that it is a significant amount of money.
The introduction of the early child care pre-school provision has been generally welcomed. It is, undoubtedly, a far better way of utilising the money than by making direct payments. Ultimately, the children will benefit most. Children who go into early child care and education will gain long-term benefits for their education and future lives. Senators have asked how the scheme will work. It will operate under the Office of the Minister for Children and will ensure equality of opportunity for all children. Community and private pre-school services that meet the requirements of the scheme will be invited to register by the end of May 2009. Then parents will choose a facility in their local area to which they want to send their child.
The children enrolled in playschools will receive free pre-school provision of three hours per day, five days a week over a 38-week year. This equates to a weekly capitation grant of €64.50 and there will be no charge to the parent. Where children are enrolled in full-time or part-time child care services, which receive free pre-school provision of two hours and 15 minutes per day five days a week over a 50-week period, the weekly capitation grant will be €48.50, with parents paying for their child care net of that amount. The financial benefit of the scheme for a single child is worth over €2,400. All children aged between three years and three months and four years and six months in September each year will be eligible and parents can enrol their child in the participating service of their choice. The provision comes into effect in January 2010. It is a very good example of how, with fewer resources, we can make better use of the money available.
Senators have also raised the issue of clamping down on fraud, which has been a priority for me since I took up my position. Senators will be well aware of the initiatives we took last July to ensure people collect their money every week at the post office. This is a control measure as the money does not automatically go into accounts through electronic transfer. This measure has been strengthened further by requiring that claimants have photo ID when collecting payments because there was evidence - not only anecdotal evidence - that the wrong people were collecting payments or that people were returning to the country to collect them. To counteract this, we have officers working with the immigration bureau at the airport so as to catch people who are solely welfare tourists. We have also made a serious attempt to clamp down on cross-Border welfare tourism and fraud and our multi-agency checks on the Border have been very successful. Our inspectors have also increased the number of house visits made. In some cases they found people at an address who were not resident there or sometimes far too many people who claimed to be resident, all of whom were claiming social welfare.
Our child benefit controls are very strict. We made significant savings in that area last year. The European wide situation is that people working in one country whose children are in another can receive child benefit - in Ireland this applies to the early child care supplement also even though the children are not resident here. However, in recent months, because of the downturn in the economy, many people who had been making a very good contribution to this economy have lost their jobs and gone home. We must ensure they do not still claim the child benefit and we have been successful in clamping down on that.
There is evidence, as mentioned by Senators, of an increase in the black economy. It is just as important that we clamp down on people who are claiming jobseeker's benefit when they are not genuinely seeking work. We must also clamp down on people who are claiming other benefits under false pretences, such as disability allowance. There is huge pressure on our staff to ensure we investigate these areas.
The public has been especially helpful, given the 500% increase in the number of notifications by the public last year. Each instance is investigated without any reference to the complainant who does not need to give information on him or herself. We investigate irrespective of how or to whom the complaint is made. As it is a serious and time-consuming element of the Department's work, staffing is an issue in that we must ensure there are no undue delays in processing jobseeker's payment applications. Through the public service system, we have been able to get approximately 260 additional staff but we have requested and expect more. They must be trained and placed to protect the processing side of the applications, which must be dealt with speedily, while handling fraud matters.
People have mentioned the Bill's rent supplement provisions. Rents are decreasing throughout the country. People in private accommodation who are still working and are not in receipt of rent supplement payments are negotiating reductions with their landlords. It would be unthinkable that a State client could determine the limit on rent. Landlords have become realistic because they know that the rent supplement is a regular income from the State via tenants. Elsewhere, many people who have lost their jobs or accepted income cuts are finding it difficult to meet their payments. As such, it is important we make these reductions.
Regarding 18 and 19 year olds, it is welcome that Senators recognise the importance of the incentives in the Bill. The number of places in courses in the Department of Education and Science and FÁS has been increased. There are sufficient places but young people must be given incentives to take them up. In a number of pilot projects, young people were sent on training courses instead of being given their jobseeker's payments. The projects did not work because the young people knew they did not need to do them and could get the money while sitting at home. I am not implying that every 18 or 19 year old who is signing on does so willingly but there is a cohort of intergenerational welfare dependants who must be guided in the right direction early. This is the best incentive to do so.
The other major consideration in the Bill is the pensions provision which is complex and important. The number of insolvent companies has doubled in the past year and the number of pension funds winding up has increased significantly in recent months. The Bill tries to give an added benefit to the workers involved. It is unfair that someone who retired last month can not only get a guaranteed pension, but an increase as well, whereas the worker who is still contributing to the fund might not get any entitlement owing to its being in deficit.
The industry has been making a good profit on the purchase of annuities. Where a fund is in deficit, the money in question could be going to the workers. The relevant provisions in the Bill, namely, those that change the order of priorities on post-retirement increases where a fund is being restructured or wound up and those regarding the new pensions insolvency payment scheme, PIPS, as opposed to market annuities, will give workers extra money. We were anxious to include these provisions as quickly as possible since companies are becoming insolvent or, having already taken the decision to wind up their funds, are working to meet their liabilities. The provision is limited to pension funds in deficit where a company is insolvent because we must be conscious of state aid and competition issues. We cannot be seen to be distorting the market or favouring certain undertakings, goods or supports.
It is correct to have a three-year review period if we are to determine how the scheme works. We will keep a close eye on how it benefits workers and supports companies. I appreciate that these significant and complex changes are being made late in the consideration of the Bill but they are intended to support as many workers as possible while protecting current pensions.
The Department's overall aim is to support families and people. Today's debate saw a conflict. On the one hand, we were saying that we should be more generous and do more to look after carers and the unemployed, which I accept. On the other, an example was provided in a letter which outlined that a family's members were better off on welfare than at work. We can never allow a situation to develop in which someone is better off not working.
As public representatives, we cannot ask that social welfare payments be protected while people's incomes are decreasing. There must be a correlation between the two. I would rather be a Minister for Social and Family Affairs who could give significant increases, but those were the days in which people's incomes were increasing and the Exchequer received considerable tax revenue. It is no longer the case that money is available to the State. We must be cognisant of the fact that those workers who are supporting their families despite wage cuts and large mortgage repayments should be better off than people on social welfare. It is an issue of competitiveness.
I would have viewed the figure supplied in the letter to be an underestimate. If I remember correctly, a medical card has a value of €500, but its value to a couple with four children would be higher, given initial pharmacy bills of €100 per month. Devising our budgets to protect the most vulnerable while encouraging people into the workforce is challenging. The Bill tries to provide for the €21 billion that is required to pay for social welfare and to protect the vulnerable who are dependent on it. It also takes new initiatives, namely, the early child care scheme, encouraging people into enterprise and education, ensuring rent supplement does not dictate the market and protecting workers in defined benefit schemes to some degree. As with everything the Government does, it is a balancing act and a matter of difficult choices. While it is difficult to make decisions in these times, the situation is more difficult for families who are suffering and the more than 384,000 people on the live register. They are my prime concern and are the reason for this Bill. I thank Senators for their consideration.
The Dail Divided:
For the motion: 27 (Dan Boyle, Martin Brady, Larry Butler, Peter Callanan, John Carty, Donie Cassidy, Maria Corrigan, Mark Daly, Déirdre de Búrca, John Ellis, Geraldine Feeney, Camillus Glynn, John Gerard Hanafin, Marc MacSharry, Lisa McDonald, Brian Ó Domhnaill, Labhrás Ó Murchú, Francis O'Brien, Denis O'Donovan, Fiona O'Malley, Ned O'Sullivan, Ann Ormonde, Kieran Phelan, Feargal Quinn, Jim Walsh, Mary White, Diarmuid Wilson)
Against the motion: 20 (Ivana Bacik, Paul Bradford, Paddy Burke, Jerry Buttimer, Ciarán Cannon, Paudie Coffey, Paul Coghlan, Maurice Cummins, Paschal Donohoe, Frances Fitzgerald, Dominic Hannigan, Fidelma Healy Eames, Nicky McFadden, Joe O'Toole, John Paul Phelan, Eugene Regan, Shane Ross, Brendan Ryan, Liam Twomey, Alex White)
Tellers: Tá, Senators Camillus Glynn and Diarmuid Wilson; Níl, Senators Maurice Cummins and Nicky McFadden.
Question declared carried.