Thursday, 23 June 2011
Social Welfare and Pensions Bill 2011: Second Stage
Thank you, a Leas-Chathaoirligh, for your remarks. It gives me great pleasure to present the Bill to the Seanad.
Ba mhaith liom anois cur síos a dhéanamh ar chuid de phríomh ghnéithe an Bhille. I would now like to outline some of the main provisions of the Bill.
Getting people back to work is one of the key challenges facing the country. Fundamental to addressing this challenge is getting people into the best position to take advantage of a job opportunity when it arises and supporting them and their families while they are unemployed. Social welfare is a social contract between the citizen and the State. People are supported by the State when they are young and in education, they contribute to the social welfare system during their working lives or are supported if they have a specific disability or need. They are supported again when older and retired.
For those who are unable to support themselves through unemployment, social welfare should be, in the popular phrase, a hand-up and not simply a hand-out. It is important that, as a society, we do not accept or foster a situation where a young adult does not get an opportunity to get a job and drifts onto social welfare, and what should be a short-term help becomes a lifetime of support. As Minister, I want to emphasise the value of work and the value of opportunity. In every society being financially independent through employment is critically important for adults, particularly for young adults. We have been moving to a more active approach to helping people move into or back to employment. It is now time to put in place long-term structural and operational changes that consolidate these developments to ensure that social welfare is a short-term helping hand not a long-term hand-out. Our focus will be very much on the individual's access to an opportunity to engage in employment, training, education or up-skilling and responsibility to engage with such opportunities as they are provided, as well as a right to a payment.
That is why I am introducing a national internship scheme which offers qualifying people the opportunity to get valuable work experience and break the cycle where people who have found themselves unemployed as a result of the current economic situation cannot get a job because they have no experience and cannot get experience because they cannot get a job. This catch-22 leaves many people who have completed apprenticeships or education to the level of primary or higher degree or some other form of training unable to get work experience. The national internship scheme is designed to provide a quality work experience of six to nine months for such people. To qualify for the scheme a person must be three months on the live register but does not have to be in receipt of a payment.
This scheme will be introduced from the beginning of July and will provide 5,000 work experience opportunities for jobseekers in the private, public, community and voluntary sectors. Internships will range from six to nine months and during that time participants who are in receipt of a payment will receive a top-up allowance of €50 per week in addition to their existing social welfare entitlement. The national internship scheme will apply to people entering the labour market after education or training and unemployed workers whose existing skills are no longer in demand and who are, perhaps, focusing on a new area of work and career.
Providing pathways to employment or re-employment is vital. The national internship scheme will help young people to get the essential first step on the employment ladder and allow them to build a relationship with prospective employers. From the perspective of employers, the scheme allows them an opportunity to train and develop potential employees at low cost and bring in new skills to enhance their workforce. The scheme is already receiving strong support from the business community and potential participants. We will formally launch the scheme with a number of private sector companies next Wednesday. To facilitate the introduction of the national internship scheme, the Social Welfare and Pensions Bill provides for a number of amendments to social welfare and employment legislation. The scheme will be launched on 1 July 2011 and will be known as Job Bridge - the National Internship Scheme.
It will be the first action of the new national employment and entitlements service. After its various troubles, FÁS was transferred to the Department of Education and Skills. It has now been split into two sections. The education and training side of FÁS will remain with the Department of Education and Skills and the employment services and community employment side will come to the Department of Social Protection. The new national internship scheme will be the first joint action of the Department of Social Protection and the new national employment and entitlements service, the predecessor of which was FÁS.
Many employers have called for such a development to provide opportunities for people who are unemployed. This scheme provides an opportunity for everybody, whether in the private, public, voluntary or commercial sector, to give a chance to people who have qualified, be it a qualified apprentice, a graduate, a postgraduate or somebody who has done specific training, perhaps to change his or her career or to get vital job experience to enable them present a CV to an employer. The scheme will be an alternative option to immediate emigration, particularly in some parts of the country.
I have done a huge amount of work with a wide range of groups and bodies to ensure that this will be a valuable work experience for qualified people and to ensure in particular that people who have been unable to get any work experience in the current climate will be able to do this and that this will constitute the first step for them in getting a job. It will give people something to put on their CVs to show they have been working with an organisation or a private sector employer. Private sector employers, ranging from large multinational and international companies in the IT sector to small and medium-sized businesses, and various employers' organisations have indicated a strong and positive response to the scheme. When the scheme goes live it will be necessary for employers to step up to the plate and offer opportunities. I am confident that will happen. It will take a little time because a matching exercise will be required. Employers offering internship placements and people who are interested in taking such placements will have to be matched.
Developing an environment that encourages the retention and creation of sustainable jobs goes hand-in-hand with addressing job readiness. Keeping people in work as well as getting people into work through positive activation measures is essential. We also have to ensure that work does pay and that is why today's Bill provides for an increase of €1 per hour in the national minimum wage which restores it to its previous level of €8.65 an hour from 1 July. For people to stay in work there must be an incentive to do so in the form of adequate pay. Low-paid workers are most at risk of becoming unemployed and falling into poverty. Reducing the rate of the minimum wage was a cut that had the most impact on low-paid workers, specifically women and young people. It imposed hardship on households at greatest risk of poverty who could least afford it. As a result of the reversal of the €1 per hour cut, workers on the minimum wage stand to gain more than €40 a week, which is an important gain.
It must be remembered that this particularly affects many women and younger people. The restoration of the national minimum wage makes employment more attractive to people claiming jobseeker's allowance and provides a greater incentive to find work. The restoration of the national minimum wage is a pledge made by the Labour Party during our election campaign and one I am pleased to be able to honour. It constitutes a full reversal of the 2010 cut to the national minimum wage by the previous Fianna Fáil-Green Party Government.
The Government is conscious of the need to regain and enhance competitiveness within the economy if we are to be able to begin to create the levels of employment required to meet the challenges of the current economic crisis. With that aim in mind, we have indicated that any adverse effects on employment which may arise through the restoration of the national minimum wage to its previous level will be mitigated through targeted reductions in the level of PRSI contributions. Therefore, we are also introducing in this Bill as part of the jobs initiative the halving of the lower 8.5% rate of employer PRSIcontribution until the end of 2013 on jobs that pay up to €356 per week. This measure is focused on employers who are struggling to maintain jobs and the incentive will help to ensure existing jobs are retained and employment levels expanded. This measure will take effect from 2 July and we will be monitoring closely what happens as a result of the incentive, which is due to finish at the end of 2013. This is a substantial investment by the Government to support the retention of existing employment and the creation of new employment and I am hopeful we will see improvements in the attractiveness and competitiveness of Ireland in key sectors, such as tourism. It should be noted that the existing employer PRSI exemption scheme will remain in place until the end of this year for businesses that take on workers under that scheme.
The programme for Government provides for the establishment of a new national employment and entitlements service under the management of my Department, with the objective of integrating into a single service the employment support services currently being provided by my Department and FÁS. The integration of employment services and related benefit payment services within the Department of Social Protection will eventually provide a one-stop-shop for people wishing to establish their benefit entitlements, seek employment and obtain advice about their training and work experience options. A key objective of the new service is to offer users a high level of personalised employment support and prioritise the provision of more intensive support for those most at risk of long-term unemployment. I hope it will mean that the day a person signs on for a social welfare payment will be the day on which he or she starts on the road to find options and opportunities to return to work or enter training or education. This is critical to the reform of the system.
A number of pilot projects have begun to develop a case management approach to identify those people most at risk of slipping into long-term unemployment and provide appropriately tailored responses to their needs. These projects will be completed and evaluated in the coming months, after which approaches will be developed for their roll-out nationwide as part of the national employment and entitlements service.
This Bill extends the current requirements for new claimants to provide additional information for profilingpurposes to existing social welfare recipients. This information is used to target supports to help people return to work, education or training. It is planned to implement enhanced activation arrangements based on a profiling system developed in conjunction with the Economic and Social Research Institute, ESRI, which will facilitate early targeted interventions for those who need them most, resulting in better outcomes and potential programme savings.
Maintaining the confidence of citizens and taxpayers in the fairness and effectiveness of the social welfare system is vital. That includes ensuring that every euro of contributor's money goes to those who are legitimately entitled to claim it and genuinely in need of income support. There are a number of provisions in the Bill to strengthen procedures regarding the prevention, detection and deterrence of abuse and fraudof the social welfare system. They include the extension of the powers of social welfare inspectors, the cancellation and surrender of public services cards and the recovery of overpayments where the overpayments arose as a result of fraud. In future, where an overpayment arises from the fraudulent claiming of a social welfare payment, the person concerned will not be able to offset any other potential social welfare benefits for which they may have qualified during the period when the overpayment occurred against the amount of overpayment to be recovered. I emphasise that this will apply in the case of overpayments arising due to intentional defrauding of the social welfare system. It relates to claims where payment was made or continued on the basis of misrepresentation or fraud, including the wilful concealment of relevant facts. If somebody is claiming jobseeker's allowance while working they will not be able to offset the fraud they have committed and the recovery of the moneys against some other benefit to which they might have also been entitled.
I am introducing a number of amendments to both the State and occupational pensionprovisions in the Bill, the most significant of which is the phased increase in State pension age to 68 years and the implementation of Article 17 of the EU directive on the requirement of certain pension schemes to hold additional funding reserves, namely, the institutions for occupational retirement provision directive which is known as IORPS.
The challenges facing the Irish pension system are significant. The population share of those aged 65 years and over is expected to more than double by 2050 from 11% to 26%. Thankfully, people are living longer and healthier lives, with average life expectancy set to rise even further to 88 years for women and 83 years for men. In contrast, the share of the working age population is projected to decline gradually from 68% to 58%. There are currently six workers for every pensioner and this ratio is expected to decrease to less than 2:1 by the middle of this century. The task of financing increasing pension expenditure will therefore fall to a diminishing share of the population who are at work.
Spending on public pensions, that is, social welfare pensions and public service occupational pensions, is projected to increase from approximately 5.5% of GDP in 2008 to almost 15% by 2050. Growing numbers of people want to work or may need to work beyond the State pension age. People are starting their working lives later due to engaging in further education or are taking breaks from employment to travel, particularly to rear families or to care for aging parents. Increasing the State pension age is one of the ways in which we can sustain the pensions system, maintain the value of the State pension and support people to remain in the workforce.
In recent decades we have built up a system of credits here where people who take time out of paid employment to care for children or older relatives are entitled to register for credits and therefore maintain pension benefits. That is a very good feature of the Irish pension system but with the aging profile and the reductions in the number of people in work we must maintain a structure where we can continue to pay for pensions in an orderly way.
The approach I am legislating for today is for the gradual increase of the State pension age to 68 years. This will begin in 2014 with the standardisation of the State pension age at 66 years. The State pension age will be increased to 67 years in ten years time, 2021, and to 68 years in 17 years time, 2028.
It is worth noting that, until the early 1970s, the qualifying age for the State pension was 70 years.
The standardisation of the State pension age at 66 in 2014 and the abolition of the State pension transition also removes the retirement condition associated with the State pension transition, which acts as an incentive to leave the workforce and has been widely criticised as a barrier to older people remaining in employment. There is no retirement condition attached to the contributory State pension, which is currently payable from age 66. By gradually increasing the qualifying age for the State pension, people will be further encouraged to remain in employment beyond 65 years of age. The numbers currently at work drop dramatically at 65 years of age. The quarterly national household survey showed that 77.2% of people aged 45 to 54 years were at work. This drops to 64.3% for 55 to 64 year-olds and to just 8.7% for people aged 65 years or older.
For the future, arrangements are being examined which would enable people to postpone the receipt of a State pension and receive an actuarially increased pension at a later date. There are many people interested in that, particularly those who have taken time out of work for various reasons and resume later on in life and want to stay on longer in work. In addition, changes are also being considered which would allow people with a shortfall in their PRSI contribution record at pension age to continue to make contributions beyond the State pension age, if they continue in employment or self-employment.
The continued participation of older people in the labour market must be encouraged and facilitated to meet the challenge of an ageing society. Employees and employers need to be persuaded to change their attitudes to working longer. In the workplace, employers should try to retain older employees and create working conditions which make working longer both attractive and possible for the older worker. Where this is not possible and people leave paid employment before the State pension age, they may be entitled to apply for another social welfare payment until they become eligible for a State pension. Opportunities for older people to participate in education, employment and other aspects of economic and social life must be maximised.
Article 17 of the institutions for occupational retirement provisions directive, or IORPS directive, is designed to ensure a level regulatory playing field between insurance companies and pension schemes which offer similar pension products. Insurance companies that offer pension products which guarantee pension benefits are required under their regulatory framework to maintain additional funding reserves. Such additional funding reserve requirements do not currently apply to pension schemes. The purpose of Article 17 is to ensure that pension schemes are required to meet the same funding reserves as insurance companies offering the same products. Chapter 2 of Part 4 of the Bill makes the necessary amendments to the Pensions Act 1990 to implement Article 17 of the IORPS directive. However, it is expected that there will be few, if any, pension schemes in Ireland that function in the manner described in Article 17 of the directive.
The Bill contains a number of other changesto the Social Welfare Acts and to other enactments, some of which simply clarify existing legislative provisions. I would now like to outline the main changes involved. The occupational injury benefit scheme provides for a range of payments for people who are injured at work or who contract an occupational disease. Among the benefits available are pensions for the surviving dependants of a person who dies as a result of such an accident or disease, including pensions for surviving widows, widowers and civil partners, as well as for surviving dependent parents. However, with the development of the social welfare system over the years, the dependent parent's pension scheme has effectively become obsolete. There are now only five people receiving this pension, with no new applications having been received since 1987. In the circumstances, section 5 discontinues the dependent parent's pension scheme for new applicants. The five existing recipients will continue to be paid for the duration of their claims.
Sections 6 and 7 provide for the necessary amendments for a phased increase in the State pension age up to 68 years by 2028, in line with the national pensions framework. This involves the discontinuance of the State pension transition, which is paid at 65 years subject to a retirement condition, from 1 January 2014. The State pension age will be increased from 66 years to 67 years from 1 January 2021 and it will be further increased to 68 years from 1 January 2028. The legislative changes included in sections 6 and 7 also fulfil one of the commitments in the programme of financial support for Ireland that the previous Government agreed with the IMF. Discussions on moving the pension age have been ongoing since 2007. I presume that is why it was also included in the deal last November between the IMF and Fianna Fáil and the Green Party.
Section 9 makes a number of amendments to the one-parent family payment to clarify the operation of the revised qualifying criteria for that payment, following the change in the conditions to restrict the payment to families where the youngest child is under 14 years of age. The changes in section 9 ensure that the one-parent family payment will continue up to 16 years where the domiciliary care allowance is being paid in respect of the youngest child. They also ensure that the general qualification criteria will apply to cases where one-parent family payment is retained for limited periods under transitional measures and in the case of recent bereavements.
Section 11 amends certain means assessment provisions as a consequence of the abolition of the income levy and the health contribution. In addition, the provisions of the family income supplement scheme, which is calculated by reference to the net income of the family, are being amended to include the universal social charge in the list of deductions when determining the net income of the family. For some unknown reason, this was not done by the previous Government in the Social Welfare (Miscellaneous Provisions) (No.2) Bill 2010, so it constitutes a disincentive for families on FIS or seeking FIS.
Section 14 clarifies the provisions relating to the allocation of personal public service numbers so as to allow parents and guardians to apply for PPS numbers for children under 18 years, and to allow personal representatives to apply for PPS numbers on behalf of people who are unable to act, for example, because of a disability. Section 15 strengthens the provisions relating to the use of public services cards by providing for the cancellation and surrender of these cards where evidence becomes available that they are being misused. It will also be an offence to fail to surrender a public services card, without reasonable excuse, when requested to do so.
Section 16 makes a number of amendments to the social welfare code in order to facilitate the introduction of the national internship scheme. Provisions which deemed participants on the proposed skills development and internship programme not to be employees for the purposes of labour legislation generally, are extended to recipients of this new scheme. The provisions deeming participants on the new internship scheme not to be employees will not apply in the case of the Tax Acts.
Section 17 provides that where a person is required to repay an overpayment of any social welfare payment, the amount of that overpayment may be deferred, suspended, reduced or cancelled, subject to the conditions and circumstances that are specified in regulations. That is particularly the case where the overpayment arises as a consequence of fraud by the person claiming the payment. Section 18 provides that where an overpayment arises from the fraudulent claiming of a social welfare payment, the person concerned will not be able to offset any other potential social welfare benefits for which they may have been qualified during the period when the overpayment occurred against the amount of overpayment to be recovered.
Section 20 extends the list of bodies authorised to use the personal public service number for the purposes of carrying out transactions with members of the public to include the Probate Office and the Sustainable Energy Authority of Ireland. Section 21 amends the Comhairle Act 2000 so as to apply to the Citizens Information Board the standard provisions disqualifying people who have been nominated for or elected to the Oireachtas, the European Parliament or to a local authority from membership of State boards and agencies. This section also applies these standard disqualifications to staff members of the Citizens Information Board. These changes will apply to the Citizens Information Board in the case of anyone who is nominated for or elected to the Oireachtas, the European Parliament or to a local authority on or after 1 July 2011.
Section 24 provides that section 7 of the Official Languages Act 2003 does not apply to this Act. This will enable any necessary orders and regulations that need to be made under the Bill by early July, including the order to restore the national minimum wage to its former level, to be made without having to wait for the Irish translation of the Act to be made available.
Tá mórchuid altanna sa Bhille seo agus deirtear liom nach mbeidh leagan Gaeilge ar fáil le roinnt seachtainí. Dá bhrí sin, tá sé beartaithe againn Alt 24 a chuir chun cinn chun a bheith cinnte de go n-éireoidh linn an íosphá náisiúnta a árdú ó thosach na míosa. Ta aistriúcháin Gaeilge den Bhille a reachtáil faoi láthair agus beidh leagan Gaeilge den Acht ar fáil ar an Idirlíon agus i gcló go gairid. Ní bheidh aon mhoill ar sin. The text of this Act will be made electronically available in each of the official languages as soon as practicable after its enactment and it will be published in hard copy in both languages as soon as possible.
Part 4 provides for the necessary changes to the Pensions Act to implement Article 17 of the EU Directive on the Activities and Supervision of Institutions for Occupational Retirement Provision. This article applies to pension arrangements where the pension scheme and not the sponsoring employer guarantees pension benefits. It is anticipated that there are few if any schemes in Ireland where the scheme provides such a guarantee. So it is expected that the implementation of Article 17 will have little impact on existing occupational pension schemes.
The substantive elements of Article 17 of the directive are provided for in section 35 of this Bill. Defined benefit pension schemes are required under Part 4 of the Pensions Act to maintain sufficient assets in the scheme to enable them discharge their accrued liabilities in the event of the scheme winding up. Where schemes do not satisfy this requirement, the sponsors or trustees must submit a funding proposal to the Pensions Board to restore full funding within three years. This period can be extended at the discretion of the Pensions Board.
Section 35 builds on these funding requirements to secure the additional reserves required to implement Article 17 by inserting a new Part 4B into the Pensions Act. This new part provides for the application of the provisions of Article 17 to regulatory own funds schemes and to regulatory own funds trust retirement annuity contracts. A regulatory own funds scheme is a pension arrangement where the scheme and not the sponsoring employer guarantees pension benefits. Similarly a regulatory own funds trust is a pension arrangement where the trust of the retirement annuity contract guarantees the pension benefit. The other measures contained in Chapter 2 of Part 4 make consequential amendments to the Pensions Act to embed the new Part 4B into the Pensions Act. These amendments include, for example, the exemption of regulatory own funds schemes from the requirement to submit funding proposals or to restructure scheme benefits where a scheme fails to satisfy the funding standard under Part 4 of the Pensions Act. The requirement to submit funding proposals and to restructure scheme benefits is set out in a new part of the Pensions Act, which is being introduced by section 35.
In addition, Chapter 3 of Part 4 clarifies the responsibility of the Pensions Board in regard to the certification by the board of certain policies or contracts of assurance as being suitable for pension purposes. Sections 40 to 43 amend the Pensions Act to provide that such policies or contracts of assurance will now require to be certified by the Pensions Boards instead of getting the approval of the board. While it is anticipated that this article will apply to very few, if any, pensions schemes in Ireland, the Pensions Board will publish guidelines on the application of Article 17 in the coming weeks.
The Social Welfare and Pensions Bill 2011 provides for changes to the social welfare code, to the Pensions Act and to a number of other enactments. The measures contained in this Bill are in four categories - changes to give effect to three of the measures announced in the jobs initiative; a phased increase in the State pension age to 68 years by 2028 in line with the national pensions framework; implementation of Article 17 of Directive 2003/41/EC on the Activities and Supervision of Institutions for Occupational Retirement Provision; and a number of other changes to the social welfare code and to the Comhairle Act 2000.
This Bill is about providing opportunities to the unemployed and low-paid. We are making work more worthwhile by the €1 per hour increase in the national minimum wage, we are putting supports in place to help people get back to work and get work experience through the national internship scheme, and we are providing a better environment for the creation and retention of jobs through PRSI measures. We are focusing on the challenges of getting people back to work and keeping them in work.
We are restoring the minimum wage and there will be a 50% reduction in employers PRSI for those earning up to €356 a week. There will also be a cut in the lower rate of VAT from 1 July, targeted at the tourism and personal services industries. It is as important to retain jobs as it is to create new jobs. It is my hope that the measures contained in this Bill, particularly those concerning employers and social welfare contributions and their reduction by up to 50% until 2013, will offer incentives for employers to retain workers and take on additional workers, along with the VAT reduction announced by the Minister for Finance in the jobs initiative. The national internship scheme will provide a serious incentive to those who have been unable to gain work experience. With the co-operation of host employers, they will be in a position to get meaningful work experience. This will also involve a top-up if they are in receipt of social welfare payments of €50 a week. This would constitute a further incentive for them. I am optimistic that the measures announced in the Bill will help to contribute to economic recovery. We are in a difficult place economically but the internationally traded goods and services sector is positive in respect of exports. The difficulty across the country is retaining local, indigenous jobs in areas such as tourism. I am optimistic that the measures before the Seanad will assist in returning the country to prosperity. Molaim an Bille don Teach agus tá me ag súil le bhur gcuid tuaraimi a chloisteail maidir leis na míreanna atá ann. I commend the Bill to the House and I look forward to an informed debate and to hearing Senators' views on the measures contained in the Bill.
Cuirim fáilte roimh an Aire. Her final flourish is indicative of the manner in which the Government has set out its stall. It is important that it injects confidence into the economy. I hope the measures contained in the Bill will realise the objectives she has outlined but that remains to be seen. I do not want to be churlish but perhaps it would be useful to set out the background to the legislation. The long-term unemployment figures remain stubbornly high. Growth is sluggish, although we heard a piece of good news this morning regarding the switch in GDP from negative to positive. Admittedly the change is small but these small steps are hopeful for the economy.
There is a need to reduce and, ultimately, eliminate social welfare fraud. I pay tribute to the former Ministers for Social Protection, Deputy Ó Cuív and Mary Hanafin, for the positive initiatives they took in this regard. Their efforts over the three years since this economic tsunami crashed into the economy have saved hundreds of millions of euro. I do not doubt the Minister, Deputy Burton, will follow the precedent set by her predecessors in that regard. I also welcome the effort to give legal effect in the social welfare code to civil partnership.
The main challenge facing the Government is the growing gap between income and expenditure, which will be €8 billion this year. Mr. Peter Sutherland, who is to be congratulated on the award he received from the Irish Exporters Association, has identified exports as a key area in our economic fight back but also described the budget deficit as being more important than bank debt. Given the monopoly money involved, it was inevitable that we would get hung up on the bank debt. I cannot see how we will ever repay €160 billion in debts without enormous economic growth. Given the ambitions of this Government as outlined by the Minister for Finance, it is important that Ireland returns to the bond markets at the earliest opportunity. We may hate the international investors to whom we traditionally looked to for borrowings but they will ultimately make the decision as to whether they should risk their money in particular countries. As a result of the Greek crisis, Ireland, Portugal and, increasingly, Spain and Italy are facing interest rates of 12% compared to the 6% offered under the IMF-EU deal.
The Government is aware of the need to bridge the gap between income and expenditure to ensure the economy is put back on the right track and we can go the bond markets sooner rather than later. An article in last week's The Irish Times reported that in November, when the controversy over the EU-IMF bailout was at its height, the world and its wife knew Ireland did not need to borrow because we had sufficient reserves to last until July. If the Government had decided against accepting the terms of the EU-IMF bailout, we would now be looking for a bailout because the alternative would be to pay an unsustainable 12% on the international markets. The evil day would have been delayed but that is the reality of how the Government is being funded and this is why we must bridge the gap.
This Bill contributes to that objective in respect of expenditure that is within the Minister's remit. The question arises of where the money will be found to implement the €3.5 billion in cuts expected under the 2012 budget. In recent weeks, the Taoiseach and the Tánaiste stood shoulder to shoulder in front of Government Buildings to assure the nation there will be no income tax increase or reduction in social welfare benefits. As a result of the Croke Park agreement, public servants cannot be fired or lose their jobs until 2013 at the earliest. If one adds up the bills from the social welfare budget, the income tax take and public sector pay one arrives at a figure that is 75% to 80% of public expenditure. Where will this money be found? The nation awaits with great interest the spending review that is about to commence and the publication of the Estimates for next year. I hope the Government has a good answer considering the restrictions it has imposed upon itself.
When Deputy Cowen put a similar question to the Minister in respect of her Department's budget, she was not in position to answer. I acknowledge that Ministers would be reluctant to reply to such questions at this point in the year given that the spending review is only now commencing. She has to fight her case around the Cabinet table and, knowing her social conscience and background, I do not doubt she will fight the good fight in that regard. I wish her well but I am posing the question in the context of the restrictions that the Government has imposed on itself. I would be straying into another area if I suggested other avenues for finding the money but it will almost certainly come from a reduction in public expenditure.
The key elements of the Bill have been outlined. I shall address the issues arising that I believe will generate debate in this House. I welcome the reduction in employer PRSI for the majority of workers in tourism and service industries who are paid at the lower end of the pay scale. However, it is interesting that the Minister referred specifically to the tourism sector, while at the same time, as we are all aware, there is continuing controversy surrounding the future of JLCs. The Minister's Cabinet colleague, Deputy Bruton, is bringing forward proposals which, according to the debate I have heard so far, will have a further adverse impact on lower paid workers - the very workers whose jobs the Minister herself is attempting to protect in this initiative, and hopefully to increase jobs in the sector. On the other hand another Minister is talking about dismantling procedures and while his proposals have not yet come forward, the suggestion is that they will have an adverse effect on such workers. In that regard, the Fianna Fáil position is quite well known in that the Duffy Walsh report, on which all of the Minister's deliberations so far are based, concluded that lowering the basic JLC rates is unlikely to have a substantial effect on employment. Naturally enough we believe that this House should be consulted on the Duffy Walsh report, although it looks like the proposals will be presented to the Government as a done deal by the Minister for Jobs, Enterprise and Innovation. I only raise the matter because it appears to be a contradiction. Perhaps the Minister will have a comment to make in that regard.
I do not wish to go into all of the other details in this regard other than to make one concession. The previous Government reduced the minimum wage by €1 on the basis of intensive and consistent lobbying by the sector about which we are talking. It did it by promising the then Government that by reducing the minimum wage it would generate extra employment. That was the key issue. The Government got it wrong. Evidence indicated in the subsequent months that the promises made by the industry were not going to be realised. If the previous Government had continued it would be talking now about reversing the cut. I hold my hands up and say unequivocally that the Government got it wrong. I hope what the Minister has outlined will mean not only the protection of jobs, but the generation of additional jobs. We will have an opportunity to look at the other sections of the Bill, including the controversial ones, but they were the areas I wished to deal with primarily. My colleague, Senator Power, will deal with other aspects of the Bill.
There is a local business in my home county, which is part of the service industry. It started some years ago and has proven to be quite successful. I spoke with one of the partners a few weeks ago when this initiative was being proposed. He employs approximately six people. He had estimated that he would save approximately €60,000 per year on his costs as a result. If that is true of one particular small business, if one multiplies it across the country there is real hope that this initiative will work. In the interests of the country, of lower paid workers and those out of work we will applaud it if it works.
I welcome the Minister to the House and wish her success in her key national brief. I also welcome the advancement of the Bill in the Seanad. As the new Seanad spokesperson on social protection for Fine Gael, I have followed the debate on the passage of the legislation through the Dáil and I have been impressed by the Minister's cogent and comprehensive rationale on each of the proposed changes.
I find the area of social protection complex. We are constantly challenged by working out what is fair and reasonable in terms of providing for fellow citizens who have a valid and legitimate requirement while avoiding the creation of welfare dependency. We must remember we are talking about the largest departmental budget in the country, more than €20 billion. Given that the intake is approximately €32 billion in income, this is a key Department and every Bill needs to be watched carefully. No brief has such a deep impact on the lives of young people, families, the sick and those of advanced years who require a helping hand - a hand up rather than a hand out, as the Minister outlined, in order to strike a dignified standard of living and ensure people are poverty-proofed. In that sense, the social protection system fulfils a social contract between the individual and the State. I wish to return to the concept of a social contract during my contribution.
In the context of the administration of Government and public services, social protection is inextricably linked to other Departments such as Education and Skills, Jobs, Enterprise and Innovation, the Environment, Community and Local Government and Finance. Social protection is a bridge at one level between education and work and sometimes it is a bridge to education and work. I find social welfare complex, married with the eternal dilemma of trying to be fair. Each case tells its own story. I am reminded of the string of welfare problems that visit my constituency office on a weekly basis. I met no one who was happy on social welfare. Some were in receipt of social welfare through no fault of their own due to sudden job losses and rightly saw social welfare as a temporary measure to keep the wolf from the door while they sourced something better in terms of education or work, but others have grown hugely reliant on social welfare and live in fear of any cut. They made inquiries about further entitlements such was their mindset of dependency. We have lost the battle with those people. The mindset is wrong and needs to be tweaked. Every citizen must be asked for a contribution. It need not be a monetary one but it could be in work, civic duty or a requirement to up-skill or re-enter training.
Before considering the provisions of the Bill we must not forget the context from which the Bill has emerged. To a large extent it can be attributed to the mismanagement and negligence of the previous Government. We are discussing the Bill today in some part due to the requirement of outside entities such as the ECB and the IMF. I fundamentally disagree with what Senator Mooney said, that we should not be hung up on the bank debt. Fianna Fáil should be hung up on the bank debt. Why is the IMF in this country? The ridiculous decisions made by the previous Government on private bank debt literally made that private bank debt our sovereign debt. It is completely unforgivable. We are going to take up to 100 years to get out of the situation that Fianna Fáil has put upon us in terms of bank debt.
I accept there is a key issue between bridging the gap between expenditure and income. Why does Senator Mooney think the Minister for Finance, Deputy Noonan, is spending every waking hour working on the issue, if not for that very reason?
Before we consider the provisions of the Bill, the Fine Gael and Labour programme for Government is dealing with this appalling vista head-on. It has grasped the nettle. However, the challenge for the Government partners is to promote policies that will achieve a more socially just country where the principles I would like to see embodied is what we put in place. The Minister has addressed many of them. First, work is always more valuable than welfare. Second, welfare would not become a lifestyle choice and that the system would not perpetuate that. Third, that the vulnerable must always be protected. Fourth, that education would be seen as a key passport or bridge out of welfare. I would like to see those principles underpinning our work in social protection.
Having regard to the specific provisions, the jobs initiative was announced by the Government on 10 May. It was timely and was produced within a short space of time. As the Minister indicated, provisions for the initiative are contained within the Bill. The expediency of the Government partners in this regard must be congratulated and acknowledged by all sides of the House.
I wish to deal with a few specific provisions. Section 3 is concerned with the PRSI reduction for employers. I welcome that. Employment creation and sustaining existing employment are the key cornerstones of this country's recovery. The impact of the provision in halving the PRSI rate until the end of 2013 for employees earning less than €356 weekly will be immensely effective in creating more flexibility for employers, for example, to open up for longer hours or take on other employees. If one looks, for example, at how that will benefit the tourism sector - the café in Clarinbridge or the co-op in Belmullet which might be a main employer in an area where there is no Intel or Google - that is a fair distributor of wealth. I like the argument that the Minister and Deputy Bruton have made in the past in this regard. The arguments proffered against this provision on Committee Stage in the Dáil held that the Exchequer would suffer from reduced funds being paid by employers and that it would incentivise a race to the bottom. I fundamentally disagree with that because employers are multipliers. Previously, I was an employer of six people, and I definitely saw PRSI as a tax on employment and a disincentive to taking on more people. Therefore, a reduction in PRSI is to be welcomed.
I acknowledge what Senator Mooney said in this regard. Having spoken to employers, I know they do not see this measure as a means to reduce the wages of existing workers but rather as an incentive to take on new ones. Will the Minister be monitoring the impact of this new reduction in PRSI in terms of employment gain and lower costs of services? For example, will we see a cheaper cup of coffee? This would be really useful. The measure will be in place until the end of 2013, and we are now midway through 2011, so it will continue for another two and half years. It would be good if there was an interim review in mid-2012.
Section 16 deals with the national internship scheme, which is a positive development. I welcome the section, which will establish 5,000 new internship positions. I also welcome the fact that the scheme will not displace existing workers, and I am happy to note there is no upper age limit. This scheme will be of major benefit to young people, as unemployment is highest for those under 30. Is 5,000 the maximum number over the term of the Government, or will 5,000 new places be rolled out after the end of each internship period of, for example, nine months? Five thousand is not a high number in light of the high levels of youth unemployment. Has the Minister examined the willingness of employers to offer internship places, bearing in mind the cost and responsibility of taking on interns, including insurance costs? Will multinationals engage in this?
Section 22 deals with the raising of the minimum wage to €8.65 per hour, which I welcome. My colleagues will recall that in the midst of chaos and panic, Fianna Fáil sought to penalise those who were most vulnerable, the lower paid. The current Government promised to reverse this cut and has now delivered on that promise. This reversal will benefit households who are increasingly navigating the poverty line on a daily basis. In some cases, this includes the coping middle classes, who have seen their employment and career prospects gradually reduced over the past number of years. It is another incentive to work - an extra €40 per week is not to be sniffed at. I am also happy to see that this measure will be introduced in seven days' time. Has the Minister established a minimum baseline figure above which it is more valuable to work rather than stay on welfare for various categories of people, including single, married, single with children and married with children? Has the Minister explored the option of a family welfare income cap, a maximum amount of welfare that should go into any house, depending on the category it is in?
I have a real-life case I would like to share with the Minister. A young man with a young family was offered a job with a salary of €40,000 in a midlands town. Despite repeated offers, the young man declined the job offer because, in his own words, it took him so long to get on the dole that he was not going to risk coming off it, and with a young family, he was better off on welfare because of all the attendant benefits such as medical cards, back-to-school allowance, washing machine allowance and so on. All of this needs to be examined. It is through this type of detail that we will work out the difference between promoting a lifestyle of welfare dependency and creating an incentive to work. We must poverty-proof any measures we implement, avoid creating welfare dependency and ensure there is always an incentive to work. This is an exercise in which the Department should engage.
One of the more contentious provisions in the Bill is the extension of the State retirement age to 68 by 2028. I was shocked to learn that we now have six workers for every pensioner and that by 2050 this will be reduced to two workers for every pensioner. Clearly, we had to do something. I welcome this as a reforming move, although I am not looking to work until 68, because I will fall into that category. Does this relate only to the State pension? How will this age increase affect those on public service pensions?
There is one interesting section I would like to discuss, which is the section on profiling. Profiling is being introduced as a deterrent to welfare fraud and as a means of finding the best match for people's needs. This is related to the paying of child benefit for non-resident children, that is, where one member of the family is working in this country but his or her children are in another EU country. It is a controversial measure. We are paying child benefit to such children in other countries at the moment. I understand this is an EU requirement for Ireland, but why can Ireland not pay child benefit to those children in their home countries according to the home country rate and not at Irish rates? We know our financial situation. What is the rationale behind this and can it be reformed so that, for example, we pay child benefit only in respect of children who are attending Irish schools?
There are many other issues I would like to discuss, but I will ask the Minister finally whether she has considered decoupling welfare from other benefits to ensure that people are on welfare only because they need to be and not because it is attractive or a disincentive to work.
I wish the Minister well as she has a big job to do. I am keen that we distinguish between those who will not work and those who cannot work, and I am keen to see that everyone in the State is required to make a contribution. That is what citizenship must be about.
I welcome the Minister to the Chamber. As she knows, I was appointed only recently to the Seanad. When the Minister was in the Chamber a couple of weeks ago I was not actually here, but I saw her on the television, so I hurried to the Chamber to hear what she had to say. On that day, although I had not yet found my voice for this room, I left feeling heartened by the ways in which the Minister was working to implement her vision, her commitments and her values within the huge and complex brief that is the Department of Social Protection. I congratulate her on the ways in which she is exercising her leadership within this fairly new ministry.
When I did find my voice, one of the points I made was that I wanted to bring a social justice lens to the current financial and welfare challenges facing our country. I was heartened to hear Senator Healy Eames using a similar lens in her comments. I am fervently committed to doing this for at least two reasons. The first is that I do not believe we will find recovery and sustainability if our sole focus is on the economy, with a view that once that is fixed, we can turn our attention to social and welfare issues. Rather, we should plot for economic and social recovery simultaneously. It is this that will lead to ongoing sustainability. The second reason I bring a social justice lens to our work today is that it is the only way I can be true to the people I have worked with for so many years in Tallaght west, in view of the ways they have inspired me with their resilience and their desire to build an entrepreneurial and civically active culture, and also with their commitment to carve out an adequate and full standard of living, not only for themselves but especially for their children - and they are gorgeous children.
I trust that these values resonate with the Minister's own in light of her work on the Bill to date and also her opening remarks to us. However, I will offer a couple of comments because, like the Minister, I am committed to reforming the welfare system in the many ways she has outlined. In particular, I welcome the national internship scheme for all the reasons we have discussed. I also welcome the establishment of the national employment and entitlement service, particularly with its stated objective of integration. Given the potential this holds, it is critical to get it right.
In light of my work, I also welcome the restoration of the national minimum wage.
I have, however, several concerns which I will put to the Minister to ensure the Bill offers fairness and is effective in its objectives. Regarding the halving of the employer PRSI rate, I have already welcomed the jobs initiative which was debated in the House last week with the Minister of State, Deputy Brian Hayes. I favour the lowering of the cost of PRSI and, thereby, the cost of employing people, which is good for business. It will be critical to review if this measure leads to the hiring of more people and, thereby, reducing the unemployment rate.
When lowering unit labour costs, however, we must remember Ireland has one of the lowest employer PRSI rates in Europe. It is also an important contribution to the social insurance fund. The fund ran dry and had to be supplemented this year from other sources. With this change in the Bill, will the Minister ensure this does not happen again?
Another concern about the halving of the rate, one already expressed by several Deputies in the Dáil debate and by the Irish National Organisation of the Unemployed, INOU, is that some employers will reduce employees' hours per week so their reckonable earnings will drop under the €356 threshold. Some employers could potentially benefit without the intended impact of empowering them to hire more people. How will the Minister ensure this is not the unintended consequence? I agree with Senator Healy Eames about monitoring the provision's impact.
Sections 6 and 7 relate to the raising of the State pension age. Increasing the pensionable age from 65 years to 67 years in 2021 and to 68 years in 2028 and eliminating the State pension transition payment have been well flagged in the Dáil and the media. I share the concerns already expressed in the Dáil. According to briefings from Age Action and the Older and Bolder advocacy groups, the Bill, in its current form, may lead to many older workers being forced out of full-time employment at 65 who will then have to sign on the dole for 12 months.
I am particularly concerned about manual workers, usually in lower paid employment, who often are at a higher risk of disability or physical fatigue and, thereby, need to retire before reaching 65. How will this change impact them? As demonstrated in research documents from TASC, the think-tank organisation for progressive economics, those in the top 20% income bracket are already much healthier than those born into the bottom 20%. Accordingly, the raising of the retirement age will disproportionately affect those born into poor areas or who have not found their way towards social mobility in light of their social and economic conditions. It will also affect those forced to retire in light of physical difficulties or poor health before they reach the State pension retirement age. Will this have a disproportionate impact on people at risk of poverty? Is this fair?
What will be the effect of the increased pension age on the poverty of our people? I am aware of critical comments made in the Dáil that the Government is rushing through this legislation, so much so that the Library and Research Service was unable to produce a digest because of the short timespan between publication and debate. I must point out, however, that the Library and Research Service has worked with me on the possible link between increasing pension age and poverty, for which I am very grateful.
The current bicameral structure leads to an increased scrutiny of law that is supported by an innovative approach to researching the issue I have raised.
What is the likelihood of people falling into poverty due to the increased age to qualify for a State pension? The Library & Research Service quickly produced a short paper that outlines the examples of two people to answer this question. Ms A retires at 60 years of age with 40 years of full PRSI contributions; Mr. B retires at 65 years of age with 40 years of full PRSI contributions. The research paper compares how they would fare if they retire in 2011 when the retirement age is 65 and in 2028 when it is 68 with reference to their incomes and that they are fully reliant on the State contributory pension. Based on a poverty line of earnings of €192 a week, the initial investigative comparison piece shows that if Ms A retires in 2011, she will probably spend five years in poverty. However, if she retires in 2028, she will spend nine years in poverty until the State contributory pension kicks in when she reaches 68 years.
For Mr. B, lucky enough to work until he was 65, if he retires in 2011 he does not slip below the poverty line because the rate for State pensions has been set to keep most retired people out of poverty. If he retires in 2028, he will spend four years in poverty, however. As the Minister knows, the question of pensions is such a complicated area that nearly every individual is a unique case with unique entitlements. Care must be taken not to make sweeping generalisations. I am providing some evidence that there is a need to fully poverty-proof the implications of increasing the pension age before it is enshrined in law.
All Members are aware of the country's financial state and how much we are tied up with the EU-IMF deal. Job creation and getting people back to work is paramount for the Government. Our esteemed colleagues on the Opposition benches agree with this and will support many of the initiatives that we will introduce which will bring about job creation.
Social welfare deals mainly with the unemployed, people with illnesses and disabilities and State pensions. While a large percentage of its budget goes on providing for these areas, part of it goes towards creating employment, getting people back into the working environment and towards the retention of existing jobs. I welcome the lower 8.5% rate of employer PRSI contribution being halved to 4.25% from 2 July 2011 which will continue to apply until the end of 2013. Many employers are struggling to keep afloat at this time and every business has been affected one way or the other by the recession, except maybe undertakers. I hope that by the end of 2013 the Minister will be in a position to revisit this with a view to extending the reduction for a further period, provided as Senator Healy Eames said earlier, that the benefits of the reduction are monitored.
We must make being in employment incentive-driven rather than having a situation where people are happy to remain unemployed. It should never be the case that people can be better off being unemployed. Unfortunately, this appears to be the mindset adopted by some individuals at present. Many state that they are better off on social welfare because they can avail of secondary benefits such as medical cards, rent or mortgage supplement, reduced local authority rent and the back to school allowance. A distinction must be made between people who genuinely cannot work and those who quite simply do not want to work.
It would be desirable if measures were introduced whereby those in receipt of long-term unemployment could perhaps give something back to the community. Many of those who are unemployed have various levels of skills and they would be more than willing to put those skills to good use. They could, for example, work in their local communities for one day per week or per fortnight. What a difference this would make for local communities, Tidy Towns associations and elderly people who might have some odd jobs which need to be done in their homes but who are not physically capable of doing them. Some people detest being regarded as a statistic on the live register. They would feel a sense of purpose and would, for as long as they are unemployed, have a reason to get up each morning if they were given the opportunity to put their skills to use in the way I have outlined. Many of those who are unemployed take pride in their communities and would have no difficulty "mucking in".
I had hoped the Minister would have considered the possibility of reintroducing the back to work allowance. The back to work enterprise allowance is proving to be extremely successful and over 10,000 employers have availed of it to date. When the economy improves, perhaps the Minister might be in a position to consider reintroducing the back to work allowance.
I welcome the amendment which allows the universal social charge, USC, to be disregarded for the purpose of calculating the family income supplement, FIS. This will be a major help to families on low incomes.
It is good that legislative provision designed to solidify the position of those in civil partnerships is being made. This will give people the right to a pension on the death of their partners. In that context, I welcome the introduction of the surviving civil partners contributory pension scheme.
I am absolutely delighted the Minister has honoured the commitment we gave during the general election campaign to the effect that the National Minimum Wage Act 2000 would be amended to restore the national minimum wage to its previous level of €8.65 per hour from 1 July. This change will come into effect from next week.
I have no interest in engaging in the blame game. I refer to the tendency to blame the previous Government for everything that has happened. Everyone in the country knows what happened and the requisite punishment has been dished out. It is time to move on. However, there is one dastardly act for which I cannot forgive the previous Administration, namely, the reduction in the minimum wage. I accept that those involved will argue that this reduction was introduced to benefit employers and to assist job creation. However, did these individuals not stop to consider the effect what they were doing would have on the lives of people who are trying to survive on the minimum wage? I ask those opposite whose party was previously in power whether they could survive on €306 per week. Could they feed, clothe and educate their children, run a car and heat their homes on that amount? I would find it extremely difficult to do so. I commend the Minister on giving this matter priority and on restoring the minimum wage to its previous level. I thank Senator Mooney for agreeing that the previous Government made a mistake in respect of this matter. It is very honourable of him to admit that.
During the general election campaign I met large numbers of unemployed people, many of whom are graduates. These individuals often indicated that they would be willing to work for nothing. I refer to young solicitors who are willing to do anything, even work free of charge, in order to gain access to an internship.
That is why I welcome the provision of a number of measures to facilitate the introduction of the new national internship scheme. The latter is a fundamental part of the Government's job creation initiative and is due to commence in July. I would appreciate it if the Minister might elaborate on the current position with regard to the scheme. For example, how should a person go about locating an internship? Should he or she apply to the Department of Social Protection or will it contact him or her? Are the sponsors already in place or will people be obliged to find their own sponsors?
This new initiative will be hugely successful in providing jobseekers on the live register with valuable and meaningful work experience. It is both my hope and my belief that this initiative will go a long way towards breaking the cycle of jobseekers being unable to gain employment by virtue of the fact that they do not possess adequate experience. It will allow them to obtain work experience with potential prospective employers. Parents will welcome this measure because it is a matter of major concern to them to see their sons and daughters leaving college without the prospect of obtaining employment and being obliged to claim social welfare immediately. What parents must endure in respect of their children in these circumstances is heartbreaking.
I disagree with Senator Healy Eames in respect of sections 6 and 7. Most Members will be gravely concerned that the pension age is due to increase from 66 to 67 from 2021 and to 68 from 2028. I fully understand that this is in line with the Government's national pensions framework, as set out in the EU-IMF programme. However, I hope the IMF will have long left the country by 2021. I also hope that what is being done in this Bill will not be cast in stone and that, once the economy has been restored, we can revisit the matter prior to that date with a view to restoring the age to 66.
I am also disappointed with regard to the complete abolition of the transition pension. I do not understand why this did not just move in line with the increase in the pension age. Ireland has one of the highest qualification ages for state pensions in Europe. However, I understand that we also have one of the most generous credit systems. What will happen to the many people who signed work contracts which stipulate a retirement age of 66? What will happen in respect of the social welfare payments that are increased when recipients reach that age? Will the position in that regard change as well?
There has been a great deal of publicity in recent days in respect of social welfare fraud. I welcome the Minister's initiatives to stamp out such fraud through the introduction of legislative provisions to extend the powers of social welfare inspectors. Furthermore, I welcome the fact that the provisions relating to the use of public service cards will be strengthened. I suggest that in the future all such cards should include photo IDs. This would certainly deter people from using them in a fraudulent manner.
Given that responsibility for disbursing supplementary welfare has been transferred to the Department of Social Protection, will the Minister outline the remit under which community welfare officers, CWOs, will be operating within the Department and will she indicate what will be their brief? This is a matter of some concern to the officers in question.
Section 20 could have been broadened further. A great deal of money could be saved within the public sector by streamlining different agencies through the establishment of a one-centre-of-assessment board. Responsibility for means testing for social welfare, supplementary welfare allowance, social housing and medical cards could be dealt with by such an entity and information would be more easily and readily available. This would speed up applications and reduce the need for separate assessments for individual applications. I welcome the fact that the domiciliary care allowance is not assessable as means in respect of the supplementary allowance scheme.
I do not know whether to welcome the fact that the Minister did not refer to carers. Perhaps her failure to do so means that she is not making any amendments to the carer's allowance scheme. In addition, I do not know whether to be disappointed by the fact that she did not refer to a strategy in respect of carers. The latter are the only recipients of social welfare who actually work for their payment. These people work on a 24-7 basis. They cannot retire for the evening and be guaranteed a full night's sleep. Taking into account the hours they work, what they receive - when all of their benefits have been taken into account - equates to a payment of approximately €1.50 per hour. I urge the Minister to bring forward a carers strategy as quickly as possible.
I also urge the Minister to address the issue of the self-employed. Perhaps she might consider giving them the option to pay a full PRSI contribution if they so wish. This might assist in alleviating the huge problems they face. When those who are self-employed find themselves without a week's work, there is nowhere for them to turn. It appears there are no benefits available for these people. They are caught up in a sea of red tape and massive financial and personal strain is placed upon them. In the context of future budgets, perhaps the Government might give consideration to the self-employed.
I welcome the Minister to the House. Fianna Fáil is supporting the Bill in a general sense. I strongly support the restoration of the minimum wage. I was opposed to its reduction and made that opposition known within our party at the time but was unfortunately unable to stop it happening. Unfortunately we have tended not to pay enough attention to the working poor and we tend to talk a lot about people on welfare. The worst off can often be the people, particularly those in disadvantaged areas where most of their neighbours may be on benefits and on long-term support, who make the decision to walk out the door and go to work usually for very little more than they would get on the dole and often for less than they would get on the dole, but they still decide to do so. We need to pay more attention to those people, particularly during the current crisis.
The reduction in the minimum wage was based on a flawed analysis. There was much discussion of the wage rates in France, Spain and elsewhere. The only relevant metric is welfare and how much somebody gets paid to work versus how much he or she will be paid to stay at home. The reality is that we have a quite generous welfare system in European terms. We already have too much of a disincentive to work in the current system. While there are arguments regarding competitiveness, if somebody is better of staying at home does not go to work, the cost to the State is many multiples of any saving that employers might make. Unfortunately that point was lost in the debate for some time.
While I welcome the change being made in the Bill, I accept other business costs need to be addressed. Small businesses in particular are under major pressure. I have friends who are self-employed running small restaurants and other businesses. They are struggling and losing money, but do not want to let people go. It is heartbreaking to see people such as those who are doing their best to keep on staff, particularly loyal staff whom they have employed for a long time, and they are heartbroken at the thought of having to let them go.
We need greater emphasis across Government in addressing other costs. While I welcome the decrease in VAT, other areas need to be considered, including energy costs, professional fees and the inflexibility of the JLC system. The recommendations in the Duffy-Walsh report are good in addressing the rigidity of the system. It is good to have protection for lower-paid workers, but it needs to be sensible and the same rules should apply across the country.
I agree with the Minister's philosophy on the long-term effects of people being on welfare and she has been quite positive in this regard since she took over the job. Welfare should be seen as a short-term option for people. It is incredibly negative if it is regarded - particularly in disadvantaged areas - as a career option. I support the steps the previous Government took to discourage young people from going on the dole at a young age and remaining on it for a long time. We must nourish their ambitions and encourage them to believe they can have a role in the workplace. We must not tolerate allowing them to go to the dole office on their birthday in the belief that that is where their life ambitions lie.
I grew up in a council estate. I read with interest a profile of the Minister in the Sunday Independent a few weeks ago and I share her view on the employed working class. I have been working since I was 15, and I worked through school and college. That is my idea of working class; it implies work and I share that determination. In addition to the impact on an adult's self-esteem of having a job, going out to work every day, interacting with other people and having confidence, the best thing for a child is to be brought up in a home where somebody works. Many of my friends in the neighbourhood where I grew up lived in households where nobody worked, which limits their ambitions. In the longer term it is a limiting factor not to have anybody in their home or on their street who works. The best thing we can do is to break the cycle of intergenerational welfare dependency and encourage people to go out and work.
We all accept some people cannot work. Those who cannot work because of illness, disability or because of caring responsibilities in the home should be looked after, but anybody who is fit to work should do so and should regard it as his or her job as a citizen. While knowing the fallback of welfare is there if ever genuinely needed, the rest of the time they should contribute to the system. I agree with other speakers who talked about the need to overhaul the welfare system, which needs a radical shake-up. I believe the Minister's heart is in the right place and I hope she can get support from her Cabinet colleagues to carry out serious welfare reform.
I welcome the Bill's provision for a national internship scheme, which is largely built upon the skills development and internship programme the Fianna Fáil-led Government announced in the last budget. I am concerned that the scheme outlined in the Bill provides for less favourable terms. When we set out our programme in the previous Government, we proposed that participants would be able to work in an internship for 12 months, which has now been reduced to between six months and nine months. We had also provided for participants to get €100, which has now been halved to €50. I am concerned about that because the key thing is that it is worth people's while - particularly younger people - to take up an opportunity. It should also be for a duration that allows them to pick up really meaningful experience, which is why I believe 12 months to be appropriate.
The tús initiative had great potential to allow unemployed people to get work experience and gain skills, while also being of great benefit to community, sports and other environmental groups locally. I understand the uptake has been poor and I wonder whether the system as set up was too rigid. I hope the Minister will revisit the issue and change the mechanisms if necessary to ensure it can work because I believe it has considerable potential.
Some Members mentioned fraud. The previous Government made good progress in that area. We initiated the public service card. There were very proactive campaigns to encourage the public to report fraud and the number of anonymous reports increased dramatically. It should always have a strong emphasis because every euro taken by someone not entitled to it is a euro taken from the pot for everybody else.
In the newspaper article I mentioned, the Minister also referred to parental leave, which I hope she will progress. The matter can be cost-neutral. Other countries do not require the woman to take all the parental leave after the child is born - she takes the first month after the child is born and the rest of the leave can be taken by either parent. That would not be a cost on the Exchequer but would provide greater choice. The Minister should be able to progress the matter even in the current economic environment and I hope she will.
I welcome the Minister to the House and I welcome the opportunity to speak on the Bill. Having listened to some of the previous speakers and also having listened to the Dáil debate on recent social welfare Bills, there seems to be a departure in thinking on social welfare. Given the extent of the social welfare budget, the numbers of people claiming it and that the country is in a very distraught financial state, a significant number of people are concerned about how the social welfare budget is being spent and that a number of people who are not entitled to do so are claiming social welfare. In our attempts to regulate the system, stamp out fraud and bring a degree of realism to the social welfare code, we need to be careful not to penalise those who genuinely depend on social welfare. We cannot ignore the fact that the majority of the unemployed are genuinely unemployed, and that the majority in receipt of social welfare payments genuinely need them. We need to reflect upon this when we go on a mission to make savings and detect fraud in the social welfare system.
Many now speak of the social welfare industry. Given that the Department of Social Protection is spending in excess of €20 billion, we must concede it is almost an industry. We must determine how the money can be used most effectively. Old-age pension payments and other such payments have a set purpose but the moneys we are spending on supporting the unemployed, disabled and recipients of child benefit may sometimes be spent in more flexible ways.
The Government has made a commitment that there would be no cuts to social welfare in the next budget. Most have very much welcomed that statement. We must differentiate between cutbacks and savings, however. A lot of money can be saved on administration and the Bill contains measures that will be helpful in this regard, including measures on the transfer of information across various sectors.
We need to examine means testing. There is a plethora of means-testing agencies and we should be able to prevent duplication, thus saving money.
I have always found the plethora of social welfare schemes a little confusing. As practising politicians, we nearly need to carry around our social welfare guides. There is a social welfare Bill and budget every 12 months but the very useful social welfare guide is published only every two years approximately. Generally, six months into the two-year period the Department runs out of copies. Perhaps this could be addressed because the guide is very useful. When one notes the great number of social welfare benefits available, one realises there must be room for streamlining the number of payments, but not the amounts being paid.
These smaller measures could be helpful in saving money. Money saved on one side of the social welfare budget could be put to good use assisting those who genuinely need further assistance. While I am a believer in spending very cautiously, I recognise a very significant number of people are finding it exceptionally difficult to make ends meet. If we could keep the money in their pockets, or put more money therein, if possible, it would be welcome. To do this, we need to make savings throughout the Department. Administrative costs must be examined.
The purpose of the Bill, namely, the restoration of the national minimum wage, was debated many times before and after the election. The Minister is present today to fulfil the Government's election commitment. Let us hope it will work. While the cut to the minimum wage did not put tens of thousands of people back to work and its restoration may not prevent tens of thousands of people from going back to work, a political promise was made in this regard and it is now part of the legislation. We will see how it works out.
The Government's jobs initiative was regarded as modest when all was conceded but was certainly a step in the right direction. The Government is now introducing the social welfare legislation to provide for it. We hope the initiative will begin to make an impact on the jobless total. We must accept that progress will be slow. It has taken us almost a decade to get the country into the mess in which it is now. We will not solve all the problems overnight but the jobs initiative is only a small step in the right direction.
Senator Moloney, who is on the Government side, spoke about carers. This matter, which may be beyond the confines of the Bill, is one about which I speak very often in the House and feel very strongly. The Minister has a very eclectic and broad view of politics. Members of both Houses have spent considerable time discussing the difficulties affecting nursing homes. As I stated in this House last week, €100 million that appeared to have been lost from the nursing homes scheme was found again. I asked the Minister of State who was present, Deputy Kathleen Lynch, to reflect on the fact that if 10,000 additional people had the full carer's allowance to assist them in looking after elderly individuals, it would make up the missing €100 million. One of the Minister's predecessors, the late Séamus Brennan, discussed with me during debates on various social welfare Bills the concept of removing the means test for the carers allowance to allow the full allowance to be paid for those genuinely providing full-time care to those genuinely in need thereof. His estimate of the cost of doing so was quite modest by comparison with social welfare expenditure in general.
I ask the Minister, in conjunction with the Minister for Health, to consider carefully over the coming months the carer's allowance and carer's benefit schemes not just in terms of cost but also in terms of the broader common good. Do we really believe that sorting out the fair deal problem in the nursing homes and nursing homes regulation is all we must do for the elderly? Should we not try to see the bigger picture and satisfy the needs of the tens of thousands of elderly people who want to remain in their own homes with their families and in their communities? The carer's allowance and benefit have a major role to play in this regard. I ask the Minister to do the calculations in this regard. There is considerable value, not just economic but also social, to be obtained from being generous with the carer's allowance by way of radically improving the criteria associated with the means test. I concede the means test was improved a number of years ago and that there is a genuinely impressive income disregard. This matter is not directly related to the purpose of the Bill but I hope the Minister will give it consideration.
I welcome the Bill and the presence of the Minister in the House. She has a major job to do and a huge budget to spend. She should try to spend that budget carefully and put it to good use. I wish her well in planning for the next budget and social welfare Bill, which I suppose will be the next big step forward.
I welcome the Minister to the House. This is my first time to address her in her new role. I met her in her previous capacity as Labour Party finance spokesperson. I congratulate her on her appointment.
Sinn Féin will not be supporting this Bill. It does not want to be misrepresented as being opposed to the restoration of the minimum wage. The Bill, as originally drafted, had two main purposes, namely, to reduce the PRSI contribution on low wages and to raise the pension age to 68. At the 11th hour, however, the minimum wage restoration was inappropriately included. Its inclusion can be seen as a contemptuous effort to cover up the Government's attack on older people. I hope people can see through the spin and that they know the Bill is more about the 16% reduction in pension entitlements. This is the single biggest cut in pensions that has ever been contemplated. This Bill is supposed to be about social welfare and pensions, not the minimum wage. The clue is in the Title to the Bill.
The minimum wage should be restored immediately. I will not deny that and we are all in agreement on it. It was fundamentally wrong to cut the minimum wage in the first instance. Its restoration is not an act of progressive policy but essentially the undoing of a wrong. It is not a quid pro quo for attacking another vulnerable sector of society. We have been presented not with a choice but an ultimatum - the working poor or pensioners. It is a game we in this House should not allow ourselves to play. A pension is a worker's fundamental right and cuts to pension entitlements should not be introduced to pay for the failures, incompetence or corruption of a small discredited elite. The Bill will put in train a framework to raise the age of all State pensioners to 66 initially, then 67 and finally 68. The proposal to raise the pension age will have a worse effect on those on low incomes who do not have the option of an occupational or private pension or savings. These older people are often in more physically demanding jobs and will have no choice but to continue working until a later age regardless of the impact on their health. This in itself will have a negative impact on the labour market. It will force older people to remain in employment and will result in less employment for the younger generation.
The latest CSO figures show unemployment at 14.8% and recent figures from the Department for Work and Pensions in Britain show that Irish people moving to Britain increased by 25% to 13,920 last year. Senator Healy Eames mentioned the future 2:1 worker to pensioner ratio. However, if we export our workers there will be no benefit.
The Bill will abolish the State pension transition in 2014. When asked what is being done to support those whose contract of employment ceases at the age of 65, the response should not be that the person should join the dole queue like everybody else. Sinn Féin has argued that the State pension would be affordable for many years to come if the Government was willing to target the nation's wealth in a fair and progressive manner. For example, standardising all tax reliefs on private pension contributions could save €1 billion annually and lowering the cap on pension-earning contributions to €75,000 would save €100 million annually. We should not be speaking about making a single older person work a day longer in the absence of these two vital reforms.
Since Fianna Fáil proposed raising the pension age in 2010, a range of organisations and voices has expressed concern and opposition. Age Action is particularly concerned that raising the pension age will introduce poverty traps for those aged 65. Older and Bolder highlights the danger of the extremely short lead-in time. It is not only lobby groups which have raised concerns. The Minister of State, Deputy Róisín Shortall, when she was the Labour Party spokesperson on social protection in opposition was very vocal on the issue. She stated the proposal to raise the State pension age to 66 years in 2014 "should be abandoned". She also stated:
The move is particularly crude on those who have worked for nearly 50 years and have paid almost 50 years of social insurance. In such cases they have already met the qualifying conditions for the State pension and will, in effect, be making worthless contributions in their remaining years in the workforce.
As Senator Zappone also mentioned, we need to examine poverty rates. Poverty among older people, particularly those living alone and who do not own their own home, is unacceptably high. A pension and its associated benefits is the single most effective tool in reducing poverty among this group. If older people are forced to go on jobseeker payments instead of receiving a pension they will be hit with a cut of €40 per week. Jobseeker payments are below the poverty line and the Bill will condemn swathes of older people to poverty, something we should not condone in any way.
Like other speakers I wish to express the need to be wary of the proposal in the Bill to halve the rate of employer PRSI on jobs which pay up to €356 per week. We need to examine whether it is likely to create many new jobs and whether it is more likely to precipitate extensive wage cuts because employers will be strongly incentivised to reduce wages of approximately €400 to this level. The wage cuts which will inevitably ensue will have a serious and negative impact on finances. The revenue raised through employer PRSI contributions and taxes on employees will be reduced and the State will end up spending more on in-work benefits such as family income supplement.
Already, 90,000 workers live in relative poverty and it is madness to risk adding substantially more to this number because €356 is well below the poverty line for many family sizes. The current employer PRSI rate is not the reason there are so few jobs; the collapse in domestic consumer purchasing power is a far greater culprit. By incentivising lower wages, the Bill will compound this collapse and, in turn, the job crisis. We can see it in figures published today on the domestic economy which show a contraction in GNP of 4.3%. High energy costs and rent are two more significant factors which prevent employers from creating jobs, as we can see in the report of the National Competitiveness Council on costs and competitiveness.
The legislation seems to be following the depressing trend of the Government. To present the only choices as being which vulnerable group to target is unacceptable. The hope invested in the Government should not be squandered. Other options are available to deal with the economic crisis and they need to be effective and just.
I welcome the Minister for Social Protection, Deputy Joan Burton, to the House. It is great to see she is not afraid to address us and listen to our gripes. The Minister has the most important job of anyone in Cabinet in dealing with our social welfare crisis. She has the largest budget and, unfortunately, everything negative that happens in the economy lands on her lap. There is a case to be made for Ministers knocking heads together and realising that whatever is done wrong in one Department costs in another, and it always costs the Department of Social Protection. Many examples of this exist and I will give one. I have raised the issue of commercial rates with the Minister of State, Deputy Perry. They are crippling small businesses which might employ one or two people. They could be closed down because of an amount of €4,000 or €6,000 per year. However, it would cost the Minister for Social Protection €21,000 if one employee is made redundant and €42,000 if two employees lose their jobs. We must come together and formulate a policy whereby we seek common sense. As I stated to Deputy Perry, we are dealing with one pot of money. It does not matter what Department has €20 billion and what other Department has €5 billion; it is one pot of money. If we come together we will be able to work our way through it.
I have great respect for Senator Mooney and he asked where it will all end with regard to the social welfare budget. Only the Lord himself knows that but I know when it started, which was many general elections ago when a previous Taoiseach bought elections by promising to increase social welfare in all its guises-----
Promises were made to increase unemployment assistance to more than €200 per week, to increase the pension to €300 per week and to give medical cards to millionaires aged over 70. Unfortunately this must now be addressed.
Many things were done wrong in the past. People on social welfare benefit from free schemes attached to social welfare and do not have to make certain payments. We may have another impending crisis with regard to water rates and a property tax. An argument might be made that people on social welfare should not have to pay these. This will make it twice as difficult for a person on social welfare to be motivated to go to work. The same person on social welfare is probably better off than somebody on the minimum wage.
Fraud in social welfare is rife. Senator Moloney mentioned photo ID, which is a great idea but I do not know why we do not consider fingerprinting all of the citizens of the country. Any law-abiding citizen would be quite willing to be fingerprinted with regard to claiming social welfare. If a person is law-abiding there will be no issue with this. We should consider it.
Other Senators mentioned the self-employed and I have campaigned rigorously for the self-employed. The Minister is probably working on this issue at present. We need to return to how it was number of years ago when the self-employed could make a voluntary contribution. I hope she will fast-track this. I am convinced the small self-employed persons of years ago who are now unemployed will be those who will employ people and take them off the live register. Senator Power raised the issue of the State paying people to stay at home, one on which I have campaigned. Our generous social welfare system does not entice people to return to work. Given that it costs €21,000 per annum to keep someone on social welfare, why does the Government not introduce a new version of the back-to-work scheme and offer employers €10,000 per annum to take someone off the live register? If this mechanism created 100,000 jobs, it would save €1.1 billion each year, a figure that does not take account of additional revenue from taxation, PRSI and so forth.
Senator Moloney referred to the transfer of community welfare officers. The system is in crisis because the Department has asked community welfare officers, the most loyal and hardworking employees in the public service, to transfer to a Department about which they know very little. Moreover, they do not know what is in store for them in future. The Minister should meet a delegation of community welfare officers to discuss their future because they are not being kept informed by the Department.
I do not know the reason people who earn more than €100,000 per annum continue to receive child benefit. The payment should be taxed. I appreciate the Minister's efforts to have child benefit paid at the same rate as in other countries. This would be of considerable benefit.
On domiciliary care allowance, I do not believe the medical section of the Department of Social Protection fully understands the hard work being done by parents of children with ADHD and other conditions. Applications for the allowance are being refused much too frequently and many of those denied it should be entitled to receive it.
Senator Moloney referred to carer's allowance. We would save a great deal of money if we invested in this payment. Given that all expenditure comes from the same pot, we should spend money on keeping people out of hospitals and other institutions.
I cannot understand the reason some people are making an issue of the decision to increase the age of retirement to 66, 67 and, ultimately, 68 years. My father and mother who are 82 and 83 years old, respectively, run a petrol station. They are well able to do so and do not want to be unemployed or redundant. Most people aged 66, 67 or 68 years want to continue working. When one is 20 years old one believes a 50 year old is elderly and when one is 66 years old one believes people in their 90s are old. Let us take a common sense approach to this issue. If someone is in poor health at the age of 65 or 66 years, he or she should be entitled to a pension.
I will allow Senators Kelly and Hayden to resolve their internal dispute later. Rather than speaking now, Senator Hayden may make a contribution following the next two slots. She can pick a private row with Senator Kelly afterwards. We have socialism everywhere except in the Chamber.
I welcome the Minister and commend her on the vigour with which is she is tackling her new role. I also welcome the Bill before us.
The evolution of our social welfare system has been haphazard and ad hoc. Over many decades, successive Fianna Fáil Party Governments preferred to link new welfare entitlements to imminent elections rather than implementing a coherent welfare system. Accordingly, the new Government inherited a mess in many areas, the roots of which lie in the past. The Minister faces a formidable task as she seeks to reform the social welfare system. I am confident, however, that she will use her skills and experience to deliver real and lasting change to reform the system in a manner that makes it fair while removing loopholes which facilitate exploitation.
Reports of exploitation of the social welfare system, to which the media frequently refer, have undermined taxpayers' confidence in the social welfare system. People question whether the system is fair, transparent or equitable. This week, the Minister spoke of her efforts to eliminate the practice of prisoners claiming social welfare. I commend the Minister on her efforts in this regard. For how long has this loophole existed and why has none of the Minister's predecessors seen fit to tackle it? It is an affront to the victims of crime and community in general that a person put behind bars for a criminal offence should be able to draw social welfare benefits while in prison. I hope the Minister succeeds in stamping out this practice as a matter of urgency.
The social welfare system must be geared towards supporting the most vulnerable members of society. When the system is exploited less money is available to support the vulnerable, for instance, people with serious illnesses and those who cannot work to support themselves. In the context of unemployment, the Minister has spoken of social welfare being a hand up rather than a hand out. This philosophy must underpin our unemployment benefit system. The Government has put its money where its mouth is in respect of changing the social welfare culture from a hand out to a hand up mentality.
I commend the Minister on her decision to introduce a national internship scheme which offers qualified persons the opportunity to obtain valuable work experience for between six and nine months. She indicated she expects the scheme to help remove the catch-22 whereby people who have unexpectedly found themselves unemployed as a result of the financial crash and collapse of the construction sector cannot secure employment because they do not have any experience and cannot gain experience because they cannot secure employment.
Yesterday, I spoke about the Government's jobs initiative. The Bill gives effect to many of the measures in the jobs initiative. When enacted, it will restore the national minimum wage to its previous level of €8.65 per hour from 1 July. Contrary to Senator Reilly's view on the issue, lowering PRSI will have a positive economic effect as it will halve the lower rate of employer PRSI from 8.5% to 4.2%. This measure is important from an employer's point of view. The Government has engaged with employers, especially those whose businesses are struggling. This is an excellent example of joined up thinking among the Departments of Finance, Jobs, Enterprise and Innovation and Social Protection, all of which have co-operated to deliver total solutions for businesses.
The Bill also provides for a range of activation incentives, including a new national internship scheme which will provide 5,000 places nationwide. Work placement will last for periods of between six and nine months and payments will be provided of €50 per week in addition to social welfare entitlements. Significantly, the scheme will operate in the private, public and voluntary sectors. As one who comes from a small village in County Kilkenny, I have been struck by the plight of young people, many of whom cannot find work and believe they have no option other than to emigrate. Accordingly, I am pleased with the various initiatives proposed by the Government in respect of training, education and upskilling for the unemployed.
As with other measures, the Bill, which forms an important component of the Government's overall strategy to kickstart the economy, is underpinned by evidence-based research and joined up thinking. I am pleased to support the proposed legislation.
I join other Senators in welcoming the Minister and Bill to the House. The legislation is designed to make the adjustments required as a result of the economic position in which we find ourselves. It also seeks to be fair to people who are dependent on social welfare. The most important sentiment expressed in a press statement issued by the Minister is that getting people back to work is one of the key challenges facing us. The Government must focus its energies on enabling people to return to work and reducing the number of those dependent on social welfare.
As previous speakers have said, the Minister has a huge budget. I see the Minister, Deputy Burton, as a reforming Minister. There is an opportunity to re-engineer the whole social welfare system. Given the number of schemes, there is probably an element of duplication. In the coming years I would like the Minister to look at the various schemes with a view to making them more efficient and make significant savings by targeting them in a more direct way towards the people who need them.
Many Senators have referred to the incentive to work. We must provide a real incentive to people to return to the workplace and make a positive contribution to society. That is what every person wants. Restoring the minimum wage to €8.65 is a first step as is the lowering of the PRSI rate. Hopefully those will have a positive impact on employment and will ensure that people who, up to now, may not have considered looking for a job will be given the incentive to do so. We all have anecdotal evidence and we know from our work as politicians that many people ask whether it is worth their while to go out to work. They ask if they will lose the medical card and other benefits if they take up a job. We must remove that disincentive and get people into the workforce.
The issue of social welfare fraud has been raised by many people. In this day and age, with modern technology, we must have in place a system where there can be no abuses of social welfare and double claiming. We have all heard of people claiming allowances for more children than they have. A story was relayed to me some time ago by a lady who registered births in my home town. At one stage she received applications from 14 different people for a copy of a birth certificate. Those certificates were not requested for the purpose of framing. Certainly there are major abuses in social welfare and they must be tackled. The Minister has an opportunity to do that. As suggested by Senator Kelly, it may appear to the Minister to be a little over the top but perhaps the fingerprint route is the way to proceed.
There has been much discussion about raising the retirement age. The Minister is correct when she says that people are living longer. While none of us likes to see the pension age increased, hopefully when the economic situation improves in a few years time we can review the issue again.
In regard to the clawing back of moneys that have been claimed illegally, the Minister said she does not intend to take the moneys overpaid out of other payments to which people may be entitled. I do not know how the Minister proposes to get it back from some, unless it is done that way.
I welcome the Minister, Deputy Burton, to the House and congratulate her on her appointment. We have crossed swords many times in my previous life but I genuinely wish her well in her portfolio which is very crucial, given the level of spending, if we are to bridge the budget deficit. I watched with interest some of the debate earlier which was misconstrued when Senator Mooney said the issue of the banking debt is overplayed. Many economists and I believe that, and it is an important point.
The fundamental issue, however, is bridging the current budget deficit. Within her portfolio, the Minister will have a major role to play. Given the comments made by the Taoiseach and the Tánaiste with regard to no income tax increases and no social welfare cuts in the coming budget, it will be very difficult to find savings of €3.6 billion. The Minister will find support from this side of the House in areas where we agree with proposed savings. After listening to the Minister's civil libertarian colleagues in the Labour Party speak about fingerprinting social welfare recipients-----
-----I assume Senator John Kelly is firmly on the right wing of the Labour Party in that regard.
I wish to raise the issue of how we are paying for some of these initiatives, such as the cut in employers' PRSI. In the debate on the Finance (No. 2) Bill we discussed the introduction of the pensions levy of 0.6% on some pension funds but not all. The members of my party and I regard this as inequitable. I note with interest that the Minister made her views known to the Minister for Finance in writing. I note also that the Government has not published the advice it received from various Departments on the introduction of the pensions levy. Perhaps the Minister would enlighten the House of her concerns and those of her Department on the negative impact the levy will have on pension provisions and on existing pension funds, which she has rightly stated are under ferocious pressure. Some 75% of defined benefit schemes are underfunded. As part of the pensions aspect of the Bill, the Minister mentioned earlier in the week that the Government is committed to pensions reform.
The Government has reformed pensions in a negative way by putting further pressure on schemes that do not have funds to pay the levy. The Minister is in receipt of a letter, a copy of which I received, from the retired aviation staff association but I do not know if she or her Department has yet responded. There are 45,000 members in the scheme. The letter stated that the scheme has 15,000 current members, 15,000 members with retained benefits and 15,000 annuitants, and underlines clearly the pressures that the scheme is under. The letter, which is also addressed to the Minister for Finance, states that it will be necessary to sell assets and reduce benefits to meet the levy. Has that letter been responded to? This scheme is an example of thousands of schemes across the country. It has assets in the region of €50 million which is not substantial for a scheme which has been in place for some time and an annual additional bill of €250,000. Where there is no surplus of cash assets in the scheme, that will simply be met by selling assets at a particularly difficult time in the market.
While certain aspects of the jobs initiative, which was previously to be a budget, are welcome the manner in which the Government is paying for it leaves much to be desired. As it is inequitable, it does not affect many of the self-employed schemes, proprietary directors, it has exempted ARFs and it does not include public sector pensions. If the Minister wished to introduce a levy it should have been imposed on all tax free cash payments at retirement across the board, whether one is in the public or private sector, a PAYE worker, or self-employed proprietary director. We have let many people off hook on this issue.
We are supportive of the Bill in the main because the Minister's job is to get people back to work. I wish to put a couple of issues to bed. Some Members on the Government side have commented on the level of social welfare payments. The level of payments since the first election I contested in 2007, and every single budget where increases were proposed, be they for the old age pension, jobseeker's allowance or jobseeker's benefit, were criticised at the time by the Government, then in Opposition, as not being enough. That is a fact. One can check the record and the election manifestoes. Leaving politics aside-----
The Minister also said she would protect pensions and increase pension provisions. I will not go over the 100 days and the 100 U-turns yet because I actually hope this Government does well. The provisions of this Bill are being paid for by a raid on the private pension funds of people who were prudent and did what consecutive Governments asked, which was to save for retirement.
I wish the Minister well in her job. It is the second or third most important job in government, in spite of comments made at the time she was appointed, as it controls about 40% of the budget. We are supporting the broad thrust of her actions in this Bill.
At the time the minimum wage was reduced, I said in the Dáil that if it did not produce the jobs, then it should be changed. I agree with the change, because it has not produced the jobs. However, I would make the same proviso in respect of the PRSI tax breaks. We are providing a tax break from middle class people with pension funds to employers, in order to encourage employment. If that does not create employment, then I would urge the Minister to row back on it. It is a tax break for small and large businesses and let us hope it works.
I did not know that Senator Kelly was a community welfare officer. There are many rumours about what community welfare officers can award to people. The provision in this Bill allows CWOs to go into the Department of Social Protection, rather than the HSE. That has been going on for a long time.
I have been a member of the social protection committee since 2007, and I know they do a great job. There has to be some consistency to this, because it is bad for the social welfare system. The rumours and stories that go around, particularly if one lives near an area with many refugees, are due to the discretion available and the different practices used.
Another issue which is slightly related to a provision in the Bill is that of writing off money owed to the Department of Social Protection. I do not think it is a matter for the Minister and I wonder is there a level above which the Minister would have to make a decision on writing off what someone would owe. In my experience, it can be done over the phone with an official in the Department and that might need to be examined, especially for sums over €10,000. From my experience with an official in the Department, it is possible to negotiate a sum of €50,000. Such sums should be dealt with by the Minister.
I would also like to welcome the Minister to the House. It is a great pleasure for us in the Labour Party to see her sitting before us for such an important Bill. The Minister has championed this Bill on all Stages and she is very committed to the measures in it.
I welcome wholeheartedly the restoration of the minimum wage. It is true that more equal societies are actually more competitive. There are many economic statistics which show that poorer people spend more of their money on essentials and spend more of their money locally, so restoring the national minimum wage will help the local economy.
Cutting the 8.5% rate of employer's PRSI is an exceptionally important measure as part of the jobs initiative. I am only too well aware of what happened in this country in the 1980s. At the time, I worked in Darndale, Killinarden and Ballymun and I saw those communities sink into the despair of unemployment, recession and the issues which came with that. We only have to look at our nearest neighbour, in communities such as south Wales, where a whole category of people are referred to as "NEETs", which means "Not in employment, education or training". There are three generations of families in this region who have never known a family member in employment. These are important measures that will prevent Ireland going back to where we were in the 1980s, or having the experiences of some of those communities.
In respect of the increase in the pension age, we need to ensure that there is no discrimination against older people in the workforce. I have spoken to the Minister on another occasion about this and I know she is committed to it. It is also very important that older people are not discriminated against when it comes to educational and training opportunities, and are given access to good quality employment. We need to work hard to ensure that happens.
I have had the pleasures of teaching and tutoring in UCD over the last few years, and I have met a significant number of young people going through that university. I am aware of the difference something like the internship programme can make to young people coming through the educational system today. There was a whole generation of young people in the 1980s who never got access to proper, decent job opportunities during that recession. The Minister has shown her commitment to the internship programme. When the last Government stepped down, there was not one single internship place in this country, and I know this Minister is committed to providing 10,000 internship places. If she has anything to do with it, that 10,000 will be 20,000. I commend the Bill to the House.
I welcome the Minister to the House. She is presiding over a Department that faces many challenges in the years ahead. She is more than capable of rising to the challenges and making the necessary changes which will ensure that people who most need benefit are those who receive it, and that those abusing it by making fraudulent claims will be rooted out and penalised.
When someone on social welfare is allocated a local authority house, he or she can receive a fridge, a washing machine, a cooker, tables and chairs and so on. I suggest that a once-off standardised payment be made in such instances. A cap on payments for different family sizes could be introduced, because the system is being abused at the moment. Payments differ from area to area and that is not fair. There should be a cap and a standardised once-off payment for this. We are all committed to helping the most vulnerable in our community, and there are currently delays in processing disability and invalidity pensions. Genuine applicants for these payments need them more than anybody else. They should be processed much quicker than they are at the moment.
The transfer of community welfare officers to the Department of Social Protection has been flagged for some time. Has the commencement order been signed to allow this change to take place? If not, when is it envisaged to take place? Is it envisaged that the same local service and the same level of service will be maintained as a result of these changes?
Review bodies are set up in the Department from time to time to examine various areas of social welfare payments and so on. They usually involve senior people in the Department and others. If such bodies are set up in future, I suggest that community welfare officers, who are in the frontline, be included in them. These officers deal with people's problems on the frontline every day. An input from community welfare officers would benefit those review bodies as they come up.
On the Order of Business today, many Members questioned the HSE's decision to withdraw transport facilities in the west of Ireland for patients requiring cancer treatment and dialysis. The same problem exists in the south east. People are going to community welfare officers for help towards their transport costs. The CWOs are not facilitating them. I can understand why this is happening, because it is the obligation of the ambulance service to provide the service. The CWOs do not know where they are in such a situation, so it will have to be addressed between both Departments, because the people most in need cannot suffer as a result of this mix up.
Excellent contributions and suggestions have been made during this debate. I know that the Minister will take on board many of these suggestions. I agree with many of those made by Senator Kelly. Like the Fine Gael Party, the Labour Party is also a broad church. Hard decisions must be made, but any decisions made by the Minister will be done in a fair manner. I wish her well and I thank her for coming into the House. I know she will come before the House again very soon to explain the internship programme, for which I thank her.
Ar an gcéad dul síos, ba mhaith liom mo bhuíochas a ghabháil le gach Seanadóir a ghlac páirt sa díospóireacht seo. Go háirithe, ba mhaith liom mo bhuíochas a ghabháil leis na Seanadóirí a thug a dtacaíocht dos na réitithe éagsúla sa Bhille, go mórmhór leo siúd a labhair faoin scéim inteirneachta. I thank all of the Senators who contributed to the debate on the Bill, and I welcome the support of so many Senators for the measures contained in the Bill. There were a number of recurring themes which I wish to address.
With regard to social welfare reform, I wish to inform and advise Senators that I will be announcing this weekend, as indicated in the programme for Government, the formation of a commission for the reform of social welfare and its interaction with taxation and work, to ensure, as many Senators on all sides of the House said, that work pays. That is the bottom line. That came from Members' contributions.
Initially, we will be considering family income supports in the social welfare system and how they interact with the taxation system. I have already said, with regard to the Duffy-Walsh report and the proposed reforms of joint labour committees, that one must be very careful in moving to economise on wages, that one does not push people into greater dependence on social welfare. The figures that have emerged today for GNP and GDP growth in Ireland show what many Senators reflected in their contributions, namely, that we have two economies. We have an export, services and goods economy which is doing very well, as shown by the figures published today. However, we also have a domestic economy that is very flat and in which we are trying to both retain jobs and create new ones. Some Senators suggested monitoring the impact of the reduction in employers' PRSI. This applies to low-paid employees up to the end of 2013, and if there is no evidence that the measure is helping to retain jobs and increase employment, we will have to reconsider it. I gave that undertaking to the Dáil as well. We will be monitoring it.
When implementing changes to the social welfare system, it is important that we try to achieve continuous monitoring and updating of changes. In recent years, when there was a lot of money to spend, there was much expansion of schemes, which was gratefully accepted by the people availing of them, but it was done without much insight into the effect on the overall social welfare system.
People spoke about incentives to work. I do not think it is a secret that this is something that is lacking in the current social welfare system. The example was given earlier by Senator Healy Eames of a young man with a family who was reluctant to accept a job with a salary of €40,000. Let me try to do the maths. For an unemployed couple with three children, one benefit is the entitlement to a medical card if one or more of the children have an ongoing medical condition. If one is in low-paid employment and does not have a medical card or even a GP card, we all know how expensive it can be. For example, for a child who has a couple of bouts of asthma over one winter, the cost of visiting a GP can be €50 to €60, certainly on the northside of Dublin, and then there is the cost of prescriptions and inhalers. This problem is easily addressed by allowing people to retain their medical cards if they move into work, as in the back-to-work schemes that Senator Moloney spoke about. I was involved in setting these up many years ago when unemployment was high. We had an 18% rate of unemployment at the end of the 1980s and the beginning of the 1990s.
The other big differential between those who are working and those on social welfare is, of course, rent supplement. Let us be honest about this. For a family of five renting a three-bedroom house, particularly in Dublin, this can be worth as much as €1,000 per month, without any taxation considerations. A person who is the breadwinner for a family of five and earning €40,000 per year must pay PRSI, the universal social charge and a small amount of income tax, whereas a family on rent supplement could be receiving a housing benefit of €1,000 per month - which would not be untypical for such a family in the Dublin region - or, for a family outside Dublin, a couple of hundred euro less. We are talking about a differential of €10,000 to €12,000 per year, and that is what constitutes the difference to which people have referred in their examples.
Shortly after taking office, I asked my Department to carry out research on this, because employers do say they offered a job to somebody at €35,000 or €38,000 and he or she was not interested. I do not think those examples are in any way mythical, but they do relate to people with a number of children who are entitled to a medical card. The medical card issue is addressable by instituting a transition period, but the rent supplement issue can only be addressed by a concerted effort by the Departments of the Environment, Community and Local Government and Social Protection, working together to make arrangements such as the rental accommodation scheme, or the RAS, as people call it in Dublin. We must remember that in a family receiving rent supplement, only the person who receives the rent supplement is assessed for the contribution, whereas most differential rent schemes assess the social welfare income of all adults in the house.
I have had detailed discussions with my colleagues the Minister for the Environment, Community and Local Government, Deputy Hogan, and the Minister of State with responsibility for housing, Deputy Penrose, to examine whether we can move the rent supplement scheme from my Department to local authorities and the Department of the Environment, Community and Local Government, where there is expertise in dealing with housing, by the beginning of next year. The differential rent system would apply. We would also be in a position to obtain better value in rents and to ensure landlords are fully registered for tax and income purposes.
Many Senators mentioned the issue of social welfare fraud. The message must go out that fraud is not acceptable and that it is taking food out of the mouths of old age pensioners who are relying on the State for their income. When we take Committee and Report Stage of the Bill next week, we might explore some of those issues.
I thank Senators for their support on the internship scheme. Last year and the year before, Fianna Fáil announced 5,000 intern-type places, but none of them was ever taken up. There is also the Tús scheme, which is a valuable scheme designed by the previous Minister, but I was disappointed when I came into the Department to find there was not a single person on it. We are now making a considerable effort to fill those places because Tús is a copy of the rural social scheme, which was run quite well over a number of years.
The increase in the age of eligibility for the State pension has been signalled over a long period. The discussions have been ongoing since 2007. I accept what Senators have stated about the difficulties the transition year may pose and I am aware of these. We will examine the matter but we are in an enormous economic hole. The difficulty for Ireland is that the current fiscal deficit, the gap between income and expenditure, is enormous and we must bridge it. The reason the sovereign has been completely destabilised is because of Fianna Fáil's ill-fated and disastrous bank guarantee, whereby the then Fianna Fáil Government took the debts of the banks collectively onto the sovereign. That has weakened the sovereign more than anything else.
Had we only to address a fiscal deficit we would have several difficult years ahead but our credit rating would not have been damaged in the way that has happened. We must work our way out of this and, therefore, difficult choices must be made in the context of the next budget. The issue is to target social welfare benefits and other arrangements such as the child benefit payments community welfare officers, CWOs, make to people who really need them to ensure the benefits are spent, especially on children in Ireland. We must ensure that children in receipt of benefits attend school and that their books are bought for them from the various allowances made available by the Department. We can save money in certain areas and make reforms. All of these are sensitive issues but I am heartened by the fact that so many Senators from across the Chamber seek change and we can discuss some of these in greater detail next week.