Friday, 17 December 2010
Social Welfare Benefits
I start by wishing the Leas-Chathaoirleach a happy Christmas.
I thank the Minister for Social Protection, Deputy Ó Cuív, for taking his motion himself. It is a sad reality that jobseeker's benefit is not available to the self-employed. It is a significant issue for so many constituents who have contacted me. They all know that if one meets the required level of PRSI contributions, one can get certain benefits from the State such as maternity benefit, adoptive benefit, bereavement grant, widow's/widower's contributory pension, guardian contributory payment and the State pension contributory, but the key issue, as I mentioned at the start, is that a self-employed person is not entitled to receive any form of guaranteed jobseeker's benefit from the State.
In my constituency offices in Ardee in Drogheda, I have had numerous self-employed persons, from owners of bus companies to restaurateurs, small builders and driving instructors, who often have sacrificed their savings to keep their business going. If they had one member of staff, often they have sacrificed any savings and payment or money that they had to try to keep their business and their employees going. They often said to me that the employee is the only person taking a wage from the business. A real concern expressed to me at the Drogheda and District Chamber of Commerce budget breakfast last Wednesday, 8 December, the day after the budget, was the sense that there is a twin-track approach to the economy. We are actively helping the export sector of our economy but perhaps we are not doing enough to help our indigenous industry and business. That is something I would like the Minister to address.
I am sure the Minister will outline the differences in payment, with jobseeker's allowance being a means-tested payment and jobseeker's benefit a guaranteed payment based on PRSI contributions. As I have indicated, a self-employed person is not guaranteed any unemployment benefit from the Government and only receives a payment if income is at a low enough level to meet the requirement of a means test. Matters may have gone beyond the point of no return when the self-employed person reaches this stage and the significant concern is that businesses and the self-employed only get to that point when they have gone to the wall or much savings have been sacrificed.
The State and some people may feel that these people have some savings, money under the mattress or some other assets, and that is why the guaranteed jobseeker's benefit cannot be given. In the new reality of the past two or three years, we have gone beyond such a position to a point of no return. Businesses have often ended up selling assets just to stay afloat.
I look forward to the Minister's reply to this very significant issue, as coming to Christmas many shop owners have been in contact with me. They have been badly struck by the weather over the past two weeks but have hoped that this Christmas can get them to the new year. They are praying for good weather and a good Christmas period in order that they can look forward to 2011. Many such businesses are concerned about getting money in over the Christmas period because they may not see 2011.
I thank the Senator for raising this very valid question. I hope the answer will explain somewhat the challenges inherent in the matter raised. The social insurance system draws together a relationship between the employment or self-employment status and the rate of contribution payable and benefits or pensions receivable as a result of these contributions. In common with many social insurance systems throughout the world, the system is not actuarially based but funded through a pay as you go approach. Today's contributors support both past and current contributors while also ensuring their own future security by building up entitlement to later benefits and pensions and paying into a mechanism that redistributes income over one's lifetime.
In 2011, self-employed workers will be liable for PRSI at the class S rate of 4%, the same personal rate as is paid by ordinary employees. Employers also make a PRSI contribution of 10.75% in respect of their employees, resulting in the payment of a combined 14.75% rate per employee under full-rate PRSI class A. As a result, ordinary employees can build entitlement towards the full range of social welfare benefits. Class S contributions will continue to provide cover for long-term benefits such as the contributory State pension and widow's and widower's pension only.
PRSI coverage is related to the risks associated with employment or self-employed, the annualised system of contributions for self-employed people and the practicalities of administering and controlling access to short-term payment for the self-employed. A system of separate arrangements for employed and self-employed workers within a social insurance context is common in other European social protection systems. It may also be noted that the 2005 actuarial review of the social insurance fund indicated that the fund favours the self-employed over the employed when both employer and employee contributions are included in respect of the employed person. The analysis demonstrates that despite the fact that they are eligible for a narrower range of benefits, self-employed persons can gain substantially more from the fund than employees. This relates to cost of pensions and the length of time people draw down such pensions.
There are no plans to extend cover for short-term benefits to this group of insured workers. Any such measure would have significant financial implications and would have to be considered in the context of a much more significant rise in the contribution payable. In terms of current supports available to self-employed persons, it may be noted that in certain cases a self-employed person who had insurable employment in the relevant year, currently 2008, and had paid sufficient class A contributions may qualify for a jobseeker's benefit payment, provided all the conditions of the scheme are satisfied.
A self-employed person who has paid insufficient class A contributions may instead qualify for jobseeker's allowance. Jobseeker's allowance is a means-tested payment and in assessing a person's means for the purposes of this allowance, account is taken of all income which the person may reasonably expect to receive during the succeeding year. In general their means will take account of the level of earnings in the past 12 months in determining their expected income for the following year.
In the current climate account is taken of the downward trend in the economy and it is accepted that future earnings may be lower than those of previous years. The process also recognises the potential for significant upward or downward variations in income from one year to the next. If a self-employed person's position changes after making an initial claim for jobseeker's allowance, the person can apply to have his or her means reviewed in the light of these changed circumstances.
Self-employed people on jobseeker's allowance for 12 months or more will be eligible for the new Tús initiative of community work placement which will pay the full rate of jobseeker's allowance plus an extra €20 per week. This is key as someone who establishes any eligibility for jobseeker's allowance for a year will be able to get this payment, which is in lieu of work done and can be added to adult and child dependant allowances, etc. I often find schemes such as this and the rural social scheme are very attractive to self-employed people.