Monday, 30 April 2012
Social Welfare and Pensions Bill 2012: Committee Stage (Resumed)
I understand we are waiting for the Minister in which case, while I do not propose to be disruptive on this occasion I have indicated to the Leader of the House that it is extremely poor practice not to have an Order of Business. This has happened twice in succession. We are meeting at 12. p.m.-----
It is my intention to have a break. If we finish Committee Stage at approximately 2 p.m. or 2.30 p.m. I will propose that we take a break for approximately 30 minutes but it will depend on how Committee Stage goes. Let us see how we progress.
As we are discussing amendments Nos. 6 and 7 together I wish to speak. These matters were discussed at length and I do not propose to go over all of the details we covered on the previous occasion. These similar amendments from Fianna Fáil and Sinn Féin cover the provision of a sufficient number of additional affordable after-school care places to meet demand. This follows the Minister's comment when the Bill was before the Dáil that she would not proceed with the changes in section 4 as she believed seven years was too young in terms of the removal of child supports from lone parents. If this amendment is not accepted and the section is passed all the changes proposed by the Minister in the Dáil and again here will be effective from 3 May.
I again ask the Minister what is the timeframe in respect of which she must report back to Government in regard to the provision of sustainable, affordable child care services and if she will give a commitment, for which I asked on a number of occasions on Friday but did not get, that there will be no change to the free preschool year during the term of this Government. Despite that this issue is relevant in terms of child care I did not get a response on it from the Minister. I remind colleagues that the Minister said in the Dáil that she did not want to implement section 4 of the Bill until she obtained a guarantee from her Cabinet colleagues on the provision of affordable child care services.
The Minister said on 18 April: "I entirely agree that seven is to young for anyone to seriously contemplate any of these things without there being a system of safe, affordable and accessible child care in place." On that basis, I would like to know what plans Government has to expand access to, as the Minister said, safe, affordable and accessible child care. We are being asked to pass this section of the Bill but the Minister will not accept this amendment which provides that a report on the provision of child care be made to the relevant joint Oireachtas committee before the legs are taken from under single parent families by way of the reduction in the applicable age from 14 years to seven.
I was grateful for the Minister's confirmation on Friday that approximately 180 single parent families will be affected straight away by this provision. However, I do not understand why the Minister said in the Dáil that she will not implement the cut from 14 years to seven years unless guarantees are in place from her Cabinet colleagues in relation to the provision of adequate child care services. I am none-the-wiser since Friday. I gave a great deal of thought to this matter over the weekend and it still does not make any sense to me. I would like to know from the Minister if a report is to be compiled on affordable, accessible child care services and, if she will give a commitment to this House that at the very least Government will not make any changes during its term in office to the free preschool year.
I agree with my Fianna Fáil and Sinn Féin colleagues on this issue. There is a clear conflict between what the Minister said a week or so ago and what is proposed. With the best will in the world, I do not believe for one second that it will be possible to produce the required number of affordable places. It has not happened in the past so why would it happen now? What evidence can the Minister give that this will happen? Child carers and creches are extremely expensive and they do not always work. We heard during the past few days of a child who had been left behind by creche staff and was found wandering along the canal. There are serious concerns around this issue. I find it impossible to believe that the Minister is capable, within the short space of time that will be provided if we pass section 4 of this Bill, of providing the appropriate number of affordable, safe and appropriate child care places.
It seems to me to be all of apiece with the type of policy that is termed "community care". Many community and psychiatric hospitals which care for the elderly have been closed. While in A Vision for Change this was considered an admirable project it was predicated on new places being available in advance of the closure of such facilities. I do not believe they have been provided. I am interested to hear from the Minister if the number of places required has been quantified and are ready to go. If not, I will be supporting the amendments.
The table which we discussed on Friday shows that in 2014 this provision will impact on new entrants in terms of children aged seven years and on existing recipients in 2015 and 2016 at the earliest and, similarly, in relation to those who became lone parents during the past year. The number of children on which this will potentially impact - we do not know if the number will be this high - will be approximately 170. I believe it will be more than possible to put in place arrangements in this regard.
North of the Border the applicable age has been seven years, in respect of which Sinn Féin has not had any difficulty. Services north of the Border may be somewhat better than they are south of the Border but they are not extraordinarily better.
Services north of the Border are more developed and extensive. There has been a significant expansion and development here of child care and creche places. The critical issue here is that we want to open up fresh opportunities for lone parents. As stated in the ESRI's report published last week, despite our having a significant volume of cash payments to lone parents the outcomes in terms of a reduction in child poverty are nowhere near what I believe everyone in this House aspires to. The evidence in that study and all other studies is that the best route is to allow people parenting on their own to remain strongly connected to education-training, thereby enhancing their education and qualifications, leading to financial independence through employment or development of their own business, which will be increasingly the case in future years in all categories of people at work in Ireland.
This measure seeks to enhance the outcomes for lone parents. As I stated last week, there are relatively small savings involved. Other countries with social protection systems which we admire and find credible and creditable apply a far younger age. Senators need to consider why this is so and whether Ireland can learn something from these countries in terms of improving outcomes for children experiencing poverty, which we are all concerned to addressed. We are spending a great deal of money, more than €1 billion, on lone parent payments. The report published last week shows once again that the outcomes for that type of spend in terms of the reduction of the risk of poverty for children in such families or the experience of poverty is nothing like it ought to be. The critical task is to improve our system in a way that makes sense.
These measures will be introduced on a phased basis over a number of years. Our system of social welfare has been described as "passive", with people entering our system of social welfare who may be left alone. We are changing the system for jobseekers so that there is strong interaction. That is through the Pathways to Work initiative, and these measures will include taking into account the family circumstances of people. If somebody is parenting on his or her own, family circumstances account for a great deal in how they would arrange their working life and arrangements.
We are developing a new model of a more active social welfare system with the object of giving better outcomes to both people who are jobseekers and lone parents. Ultimately, this will lead to better outcomes for their children. We are investing over €20 billion a year in this country in social welfare payments but we are not achieving the outcomes that we, as a society, deserve for that kind of investment in social spending.
I will be brief as we debated this very fully on Second and Committee Stages. I am very heartened to hear the Minister's commitment to ensuring there will be adequate supports put in place for lone parents with child care provision. The Minister deserves our support in making sure this system is rolled out so that people are not left in a difficult position when the changes are introduced on a phased basis. On Second Stage the Minister spoke of some other significant changes made over the years that were not thought possible at the time, including alterations at third and second level. The Minister for Education and Skills, Deputy Quinn, is making significant changes at primary level, which we will debate in the House tomorrow.
All of us who are committed to seeing the outcomes from the lone parent spending improved in tackling child poverty, as well as those who want to see progressive reform of social welfare models, must ensure that the system of child care described by the Minister is put in place. We must support the Minister in ensuring that is done. She has said she will engage with the Minister for Children and Youth Affairs and the Minister for Education and Skills to ensure it is done and the required levels of support are there for lone parents as the youngest child reaches the relevant age threshold. We will hold the Minister to account in that regard as we all want to see it happen.
I have direct experience of needing child care provision and the levels of child care provision in this country have improved substantially in recent years. There is no doubt about this as more women, in particular, have entered the workforce. We must ensure standards are maintained across the sector and access is made more affordable. There are more places available and many schools, especially those which I know in the Dublin area, are offering after-school care which was never available before because more parents are demanding it. It is a matter of ensuring co-ordination of what is already there in order to assist lone parents who will see changes to the payment system on an incremental basis. In speaking of progressive reform and improving outcomes, we are all on the same side. We all agree on the need for supports to be put in place.
We all agree that we want improved outcomes and I agree with the Minister's comments about ensuring the payments made to lone parents in the child care sector are targeted. I agree, to a large degree, that the cash payment to families does not necessarily find the way down to children and where it is supposed to be paid. We discussed this with regard to the free preschool year. When the early child care supplement was abolished by the previous Government, there was a plan in place to take over from it straight away and the free preschool year was introduced. There was a two thirds saving on the bundle, as we were able to provide those places with approximately two thirds less investment, with the funding going directly to the child care sector. This ensured all our children, regardless of background, had access to a free preschool year.
The free preschool year was implemented because we removed the child care supplement, and it happened pretty much straight away. The Minister and her Government are asking us to make changes to the lone parent allowances without any firm proposals for additional child care. The Minister will not even confirm today that there will not be any negative change to the free preschool year during the term of the Government. We are being asked to make changes to the single parent family payment and although I agree that payments should be more targeted, we would be acting in isolation of the Minister telling us the facts of the child care provisions, including places and cost. When will those additional accessible child care places be available? There are no timeframes.
We are being asked to make changes that will affect approximately 170 lone parents and although that is a small number, why are those people any different to the thousands of others? Why are they being singled out for changes? The Minister has argued it will be possible to put arrangements in place to deal with those lone parents but what arrangements are currently in place? That is the problem. The last time we made changes, the free preschool year was introduced at the same time and people knew where they were going. There was a path and although a supplement was being removed-----
I am not. The Government is not accepting the amendments being tabled and we are being asked to take the word of the Minister. We will be making changes to the lone parent payments but no additional child care is being provided. The Minister has not repeated what she stated in the Dáil, and I will not do so. She has not told us when there will be a report to Cabinet, how many additional places are needed and what the path will be. At the very least she should give us confirmation that the free preschool year would be kept in place. That is not covered in the amendment. We are being asked to make changes and take the Minister's word that she will ensure programmes will be in place to facilitate access for children of lone parents to affordable child care. I do not see anything to that effect and there are no plans in place. Why in God's name should we vote for a section to cut these payments when no alternatives are being proposed by the Government?
The Minister is sometimes given to long thoughts but they are always valuable and instructive. To a large extent I am on her side. I was once described in Dublin City Corporation - the Minister may well have been a member at the time-----
I can be quite tough on these. I asked the question as to whether photographic identification was required to collect social welfare benefit and I was told that the then Minister - a predecessor to the current Minister - did not even know. It took a year-----
I am establishing my credentials. I also stated my opinion that the child care benefit, of which Senator Bacik has spoken so eloquently, should be means-tested. I do not mind being means-tested for anything I get so I am not arguing that we should fire money at everything.
The services North of the Border and in other countries are incomparably better. The wife of Victor Griffin, a good friend of mine, had multiple sclerosis and they moved to the North of Ireland specifically because services here were so rotten compared to what they got in the North of Ireland. My difficulty with the Minister is not that I do not trust her - she is a most honourable woman - but she is not in the Government on her own. She must deal with the Minister for Finance and his Department, as well as the other ogres who will do everything they can to retrench. It seems that we are talking about what will be the budget in 2014.
I know, but you want to put me on a different track. I want to be on the same track as the Minister, and she says that one of her reasons is that this will not come into operation until 2014. However, she does not know anything about what the budgetary provision will be then. She might not have the money. If the treaty is passed, she will not.
I welcome the Minister back to the House. I am almost a year in this job, but I still feel quite new and am still learning. I seek clarification first regarding the amendments we are discussing. We are discussing amendments Nos. 6 and 7, and amendment No. 7 seeks to change some of the language by deleting one of the lines. However, we also oppose the section. Are we-----
When we reach the discussion on the section, the Senator can speak on it. However, we are now dealing specifically with amendments Nos. 6 and 7. Most Senators who have spoken, as well as the Minister, have gone outside the scope of those amendments in my view.
I look forward to hearing the replies to the questions asked by Senator Darragh O'Brien. Second, the Minister has said a number of times that it is important to improve our system because the spend within the current system does not lead to the outcomes we want. I agree with that. The Minister also said that the change in the age of the youngest child, which is effectively the provision we are debating, will not save money but that we must make changes in the age of the youngest child because that is part of her vision of improving the system. In my earlier comments I said that this change is in addition to the change instituted before Christmas with the reduction of the earnings disregard for determining the means for the one-parent family payment. That is reducing over time. Ultimately, according to figures given to me by the Department, the money saved by reducing the earnings disregard will amount to approximately €159 million up to 2015. Can the Minister indicate or confirm that some of the savings arising from that change might go towards the child care the Minister is promising for the future but is not willing to include in the law? We need child care, and the Minister has indicated as much. Is that a better way to spend the money than what it is currently being spent on?
I wish to read into the record a few lines of an opinion offered by Frances Byrne, director of OPEN, in the newspaper today. She puts the case better than I can. She states:
Those who share concerns about the serious levels of poverty that affect one-parent families are in favour of social welfare reform. The content of the Social Welfare Bill will not achieve this unless the critical issue of child care is addressed, as the Minister has described. The Minister will need to, therefore, have the courage, along with her Cabinet colleagues, to offer a clear and honest assessment in December on whether this has in fact happened. Otherwise the stated agenda to improve economic independence among lone parents will be set back by many years.
Official statistics show that more than half of lone parents receive absolutely no social welfare payment. Not all the money paid to one-parent families makes its way to the children. That is a valid point. We should be concentrating on putting in place provisions that will help and support families, such as child care within the family resource centres. Those models are working very well. We should also concentrate on matters such as school dinners to ensure that children receive-----
I am sorry. With regard to the amendment, the Minister clearly stated that she is not in favour of the age of the youngest child being reduced to seven, if the child care is not in place. She has two further budgets in which to reverse this if she so chooses.
Senator Darragh O'Brien is labouring under a misconception. No child aged seven will be affected by this in either this year or next year. Some children will potentially be affected from 2014 onwards. I do not know if the Senator is intentionally seeking to suggest that from next week children of seven years of age will be affected-----
-----because they will not. A transition timetable has been set out. It provides a clear time span in which the Department of Education and Skills, the Department of Children and Youth Affairs, in particular, and the Department of Social Protection will co-operate to improve and provide for enhanced child care, particularly preschool and after school care.
The Senator asked about the provision at present. I gave the figure but perhaps the Senator was not present at the time.
Currently, 61,000 places are being provided under the early childhood programme, 17,000 in community providers and 44,000 in private facilities. There is a large and significant amount of child care provision. It is not as much as we would like, but it would be wrong to characterise Ireland as a country without either the buildings for child care-----
This is important. To some extent, it might be argued that the Senator is suggesting it is impossible for the Irish Government and people to expand preschool and after-school child care places in a rational way over a number of years in parallel with the operation of this timetable.
I recall when the early childhood year was announced. I strongly supported it at the time-----
-----because I considered it an excellent emphasis on services as opposed to simple cash payments. I have long been of that view and always stated it in the Dáil. That was a budget announcement. I remember, as others will, that there was absolutely no information forthcoming for a considerable period-----
There was no detailed information. In particular, many of the providers lobbied because they were unclear about it, which was fair enough because it was a big change. However, it was also difficult for the Government side to do that. The Senator is now asking us to make exact statements in great detail. Since January, my Department and the Department of Children and Youth Affairs have been examining the extra provision required and where places are required. There are 61,000 places, comprising 17,000 in community providers and 44,000 in private providers. A further 1,000 places are covered by the community child care subvention and there are 2,800 places in the child care education and training scheme. For after-school care, there are 15,864 places in the national child care investment programme, amounting to a total of 75,297. There is a great deal of provision and I have not yet touched on primary schools all over the country. We have a range of child care facilities and some or all of them have the capacity to provide an expansion in the number of places. Senators asked me about the Government's budgetary agreements for 2013, 2014, 2015 and 2016. I cannot speak about that because I cannot make an announcement until the budget is decided and the Minister for Finance makes his announcement. The work has started and is ongoing between the Department of Children and Youth Affairs and the Department of Social Protection. The Minister for Education and Skills has been strongly supportive in discussions about the requirement to expand child care in Ireland.
We are trying to make a number of changes to social welfare in Ireland. The critical one is that we want people of working age, whether on the traditional jobseeker's payment or parenting on their own, to be provided with a platform and a base on which to continue education and training and, ultimately, to be assisted by the enormous figure of €20 billion we invest in social welfare. They must be helped to get back to work or start their own businesses and to progress to financial independence.
This is a major change to what happens to people on social welfare in this country. It is a demanding change for everyone involved but this country must change in order to improve the outcome for children at risk of poverty. The study last week showed a particular risk for children in one parent families.
Amendments Nos. 2, 3, 4, 6 and 7 were initially grouped. The House decided to take amendments Nos. 6 and 7 separately. We have dealt with amendments Nos. 2, 3 and 4 and this covers much of the material Members are rehashing. I invite Senator Darragh O'Brien to contribute specifically on amendments Nos. 6 and 7.
I hear what the Cathaoirleach is saying. I thank the Minister for her comprehensive response, which was more comprehensive than her opening statement. That is not a criticism. I am not asking the Minister to highlight the number of places but I asked for a roadmap and a timeframe. I am glad to hear the Departments are working together and I am aware that we have child care places, which the Minister has detailed. I do not disagree with the principle of much of what the Minister is doing, in respect of trying to make sure these payments are focused. I have no reason not to take the Minister at her word but, as Senator Norris pointed out, the Minister must deal with the Cabinet. The amendments tabled are sensible and it is sensible to ask the Minister to report and provide an outline plan, at the very least, to the relevant committee, the Oireachtas Joint Committee on Jobs, Social Protection and Education.
The Minister referred to the changes made to the early child care supplement, which contributed to the free preschool year. There was a degree of confusion after the announcement but, in that case, there was a plan and people knew the proposal even though the outline and detail was not available.
How is that a point of order? The principle of a free preschool year was announced. The Minister says the three Departments are working together, which they should be doing anyway, on providing additional spaces. In this case, we do not have the bones of what the Ministers want to do. These amendments are sensible because they ask the relevant Minister to report to the Oireachtas joint committee and to outline the number of places to be introduced each year. We are being asked to make significant changes to how the system operates without knowing the alternative. Worse, it is open-ended because the Minister is not setting a timeframe on when this will be rolled out. Must we wait for a big bang approach in 2014?
These amendments are sensible and should be pressed. I cannot see why someone would not want the Oireachtas joint committee to receive an outline of the plan. However the Minister wants to sell this, there is no plan in place, nor is there an outline of the proposals.
I strongly support the Minister, who has given a comprehensive response. It is evident that the Minister for Children and Youth Affairs and the Minister for Social Protection are working closely together. In my town, we opened a 50-place community child care facility a month ago. There is a commitment from the Government to invest in child care. The Minister is on the right track and I urge Members to support her.
I urge the Minister to take on the amendments. We are not tying the hands of the Minister on the detail. The amendment relates to the sentiment of outlining a roadmap. My colleague, Senator Ó Clochartaigh, said on Friday that we are being asked to ratify legislation on the basis of promises. While Ministers come and go, the legislation remains. The amendment provides for some confidence that we will see a plan or a roadmap and I ask the Minister to take it on board.
I commend the legislation to the House. I hear what Senators on all sides say and it is positive that there is general acceptance that we should expand child care, particularly at preschool level, and after-school care. A larger expansion is required in after-school care. The discussion is very positive. While I cannot accept the amendments, I accept the spirit in which they were tabled. We share the same concern that spending on social welfare, which is a major commitment from this country, is not producing the outcomes it should in terms of poverty reduction for children. We spend more than €1 billion out of €20 billion on this area. We must ask ourselves why other countries operate differently. Throughout the world countries we admire, including Canada, Australia, New Zealand and that north of the Border, all have significantly lower age limits than we do mainly because their public policy accepted a long time ago that getting people to be active in the labour force or in creating a business during their working years is critical in giving them or helping them to have financial independence. The welfare system provides a great cushion, but we do not want to see particular groups ending up for decades, perhaps for their entire working lives, on welfare payments. That is not the best outcome for them, particularly for their children.
I appreciate that the Minister accepts the spirit of the amendment, but, as legislators, we must base our decisions on what is contained in the legislation. Therefore, in the absence of a framework or plan for the future, I must press the amendment.
The Seanad Divided:
For the motion: 23 (Ivana Bacik, Colm Burke, Deirdre Clune, Eamonn Coghlan, Paul Coghlan, Michael Comiskey, Martin Conway, Maurice Cummins, Michael D'Arcy, John Gilroy, Aideen Hayden, James Heffernan, Lorraine Higgins, Caít Keane, John Kelly, Denis Landy, Marie Maloney, Mary Moran, Tony Mulcahy, Michael Mullins, Catherine Noone, Pat O'Neill, Tom Shehan)
Against the motion: 15 (Thomas Byrne, David Cullinane, Mark Daly, Terry Leyden, Paschal Mooney, David Norris, Darragh O'Brien, Denis O'Donovan, Ned O'Sullivan, Averil Power, Kathryn Reilly, Jillian van Turnhout, Mary White, Diarmuid Wilson, Katherine Zappone)
Tellers: Tá, Senators Paul Coghlan and Susan O'Keeffe; Níl, Senators Kathryn Reilly and Diarmuid Wilson.
Question declared carried.
The Minister has compared the proposed position with that of other countries, but in reality, wrap around services are available and there is a smooth transition between the services in that they provide school meals as well as after-school care in other countries. We need to look at such a service in Ireland. Members have spoken about the provision of child care and after-school care. I accept Senator Bacik's comments on after-school care being available where her child goes to school, but there is probably a charge for it, as there is for all of these things. The reality is that after-school care is underdeveloped as the Minister has stated, but I hope we will develop this service.
I too spent the weekend thinking about the Minister's commitment to child care, like my colleague Senator O'Brien. I went through the Official Report to see whether the Minister for Children and Youth Affairs has given a commitment to early childhood education care for the lone parents who will be in the new category. I could not find it on the record. The Minister for Children and Youth Affairs, Deputy Frances Fitzgerald, is on record as making a commitment to the current free preschool year, and saying that she hopes to extend it to a second free preschool year. I cannot find a reference to the commitment to this vision. I know we are all trying to expand the child care supports but I cannot find a reference to it in the Official Report and I would have thought I would.
The Minister said also that the best route for the lone parent and his or her children is to become financially independent. As I said before, 80% of current recipients are in education or employment but there are problems with taking up work. The jobseeker's payment needs to be addressed because lone parents will want to work flexible half days for five days a week. I have a difficulty with the introduction of changes to the basis for payment of the lone-parent allowance on a phased basis. Even on a phased basis, reducing the age of a child for which the parent is entitled to the allowance will have an impact on children. If a person is bereaved and becomes a new recipient, he or she will be directly affected very quickly.
In analysing everything under discussion on Friday, I cannot understand the reason at this time to cease the payment of the lone-parent allowance when the child reaches seven years. Has a cost benefit analysis been done on the cut-off point for this allowance? Why was it decided to cease the payment in 2015 when the child reaches seven years of age? What saving will be made? Many of the parents involved will transfer to jobseeker's allowance and other benefits. We will be providing fantastic child care and after-school care which will cost the State money. I have no doubt that the early childhood care and education sector will be able to provide places and the capacity will be there, but it costs money. Where will the money come from to provide this service? Has a cost benefit analysis been done? Why are the changes being introduced in this manner?
I have concerns about the implementation and the rush to implement this particular section, where we have the unusual provision that section 4(2) will come into operation on 3 May 2012. The Seanad sat on a Friday and is sitting today, Monday, to facilitate the enactment of the Bill. We have a motion for earlier signature on the Order Paper. We have the Presidential Commission waiting for this Bill to be passed. Why not wait? Everything militates against rushing the legislation. This is the most incredible rush to pass legislation that I have seen in almost five years as a Member of the Oireachtas, except for the usual financial resolutions on the night of the budget.
What is the reason for the mad rush? As I said on Friday, the same applies to today, the doors of the Seanad and the Dáil are always open when we want to make cuts to the most vulnerable in society. I repeat my call. Where is the legislation from the Minister's Department and from the Departments of Justice and Equality and Finance that will help people? Why not open the doors of the Seanad and Dáil on usual days to help people instead of always appearing to facilitate hurt? We know there will be reductions but why not offer a carrot with the stick to show that something good is being done and that there is a plus on the reverse side. The section deserves to be voted down on the basis not only of its merits but the rush and the huge amount of effort that the institutions of State are going to today and last week to ensure the Bill is passed into law by Thursday next, come hell or high water.
I take issue with the Senator's comments about rush and undue haste. If the Senator looks carefully at the wording of the section he will see that, as the Minister has said, it is intended that changes be made on an incremental basis and, therefore, with time to ensure adequate supports are in place. From the constructive debate earlier on the two amendments, I considered it was a useful debate and that we were all in agreement on the need to ensure better outcomes from the spend and on the need to ensure that children are lifted out of being at risk of poverty. That is the real challenge. I supported the free preschool year, an important initiative introduced by the previous Government. It was a good example of how better outcomes can be achieved by spending less, simply by targeting it better. That is the model we are looking at.
In terms of child care, Senator van Turnhout referred to costs. Of course, there is a cost. The after-school model I am talking about is rolled out not only in Dublin but in primary schools all over the country on the initiative of parents who have taken it upon themselves to organise the provision of after-school child care. Generally it is on a much better value basis because the hours are fewer and the children are older and require less supervision. It is different from the preschool model with which people are more familiar. As Senator van Turnhout said the capacity is there and the Minister gave clear figures. We are all conscious of the enormous increase in the provision of child care places across the country. There is, perhaps, a misapprehension that the State will have to build new crèches or provide new legislation in order to ensure adequate provision of child care places for lone parents affected.
That is not the case. The capacity is there, it is how we ensure the places are made available through the existing system. There is not a requirement for any new buildings or new legislation. We need to be clear on what we are talking about.
In terms of the section, we are in favour of progressive reform. The lone-parent groups I have met, as Frances Byrne said in today's edition of The Irish Times, agree with progressive reform. They are concerned about adequate supports. We have had the debate on child care but the other support needed is to ensure that transitional arrangements are in place for those lone parents who are in employment and can remain in employment while in receipt of their allowance but are concerned the transition to jobseeker's allowance will be made flexible in order that they can continue in part-time employment on the same basis. Those are the issues we need to look at as well as the child care supports. Supports are available to ensure a smooth transition to the progressive reform we are making. The reforms are needed because the outcomes are not good under the current spend and the Minister has put that clearly to us.
I am always interested in Senator van Turnhout's contributions because of her own expertise in this area. We discussed this matter briefly and I was waiting for her and, perhaps, she intends to do it at a later stage. The Minister has emphasised that the reason the section is being introduced is to bring us into line with European countries. However, at the same time the Minister has tacitly acknowledged publicly the need to also provide enhanced support services for lone parents in the area of child care. The comparisons are not valid.
In all of the contributions she has made so far, where she has emphasised the practice in named countries, what is missing from the debate is the type, status and quality of child care being provided in those countries compared with Ireland. In a number of these countries, particularly in Scandinavian, France and Germany, there is a culture of high taxation. In paying high taxes, people expect the state to provide state-of-the-art services to them. We do not have that culture here. The problem is that successive Governments have adopted a low taxation culture. Figures published last week indicate that even though the amount taken out of the economy since 2008 is staggering, under the previous Administration the amount was about €24 billion, and up to 2014 there will be further adjustment of €9 billion to €10 billion, in order to reach our deficit targets. We are still paying below the European average. In light of all the Minister has said, and nobody doubts her bona fides in this regard, I am confident that measures will be introduced by the Minister and the Minister for Children and Youth Affairs, Deputy Frances Fitzgerald, in the next budget in regard to enhancing child care. It would be helpful if the Minister were to acknowledge that Ireland, even though an impressive architecture has been put in place in the past 15 years, still lags behind in certain areas in respect of the European models being put forward. In reducing the payments on the lines being proposed for Ireland, those governments would argue that they have a far better child care service.
Senator Bacik may consider there is capacity in the system. The most recent figures published by the Minister for Children and Youth Affairs in respect of the capital programme scheme showed that the applications far exceed the amount of money available. The cap being placed on those capital projects if €50,000. As chair of Leitrim Child Care, we have on our books €2 million to €2.5 million funding applications for capital projects for the provision of permanent child care in County Leitrim, which has the smallest population in the country. The Senator is very persuasive and I have always been impressed by the manner in which she put forwards persuasive arguments but sometimes she lets things slide through.
All I am saying is that the reality on the ground is that the Minister's Department has provided capital grants for which the applications are far in excess. If the applications are far in excess, that does not square the circle? How can one say there is a capacity if applications are far in excess? This is for the provision of more child care places right across the country. I do not want to go into the details but I am saying-----
What figures did the Minister give? How can one argue with the logic that if there is a sum of money provided by the Government under a capital scheme and that the applications are far in excess of what the Government has the capacity to provide, the Senator can turn the argument to say there is enough capacity in the system. There is not enough capacity in the system. There is a need for more affordable child care in the system and the Minister acknowledged the need for more enhanced child care.
I will not accept an irrelevant point of order. I am making a political point in answer to a political point made by the Senator. This is more directed at the Minister than the Senator in that the whole crux of what we have attempted to debate has not been just about the implementation of the scheme but linking it to an enhanced child care environment. It may sound boring and repetitive and I am sure the Minister will make the same arguments again but I only want to emphasise the importance of this that it is essential. The fact that the Minister raised the issue would suggest she believes this is fair and honest. There are problems relating to the implementation of section 4, but my main focus is on the indications given by the Minister that she would not wish the legislation to be implemented until and unless there is an enhanced child care environment here.
What this section does is make us all think about the necessity for child care, preschool and after school care. In 1995 and 1996, when I was a member of the old expert working group on child care set up by the previous government, this was being discussed. I compliment the Minister on putting this issue on the table and I compliment the Government on setting up the Department of Children and Youth Affairs and appointing Deputy Frances Fitzgerald as Minister. I have faith in both the Minister for Social Welfare, Deputy Burton, and the Minister for Children and Youth Affairs, Deputy Fitzgerald, who is also a social worker. She knows the facts about single parents.
The most important issue for us is to remove uncertainty from the system. We must recognise that all single parents want the best for their children. Some single parents are working and trying to scratch together a few bob to provide child care for children seven years old and older. This proposal is a targeted approach to choose to do what is best for children with the money given to all parents, both those in the social welfare system and those in the single parent system, and to decide whether it is being used in the best way possible for the benefit of children.
This Bill brings the issues back to the table, not just child care, but the issue of after school care which has not been discussed enough. Senator Healy Eames complimented a parent who had moved off all social welfare schemes and benefits because of the help she was given. This is what the Minister has in mind and the sooner people in the various Departments get their heads together on this, the better. The Department of Education and Skills should be included in the discussions also. The previous expert working group on child care recommended that Department should make school buildings available free of charge. Currently they are closed and locked up after school time, but they are fine buildings that could be made available to the community. Senator Bacik is right. Applications are coming in for new build child care facilities, but there are already plenty of facilities in closed up and locked school buildings that would not cost the Departments anything to open up. SNAs have been trained to level 7 or 8 in the early childhood care and education programme and they are qualified to provide the programme but the problem is that they are attached to the Department of Education and Skills and it is not in charge here. The Department for Children and Youth Affairs is only new and cannot get everything done in one year.
When the Minister spoke on the Bill on Second Stage I heard her say that her Department and the others I have mentioned would knock heads together to see how best to make the provisions. The Minister has said the number of children involved is not too large. Therefore, it will not cost the earth. However, the plan must be put in written form. Senator van Turnhout mentioned the need for the cost-benefit analysis. That must be published. I speak from experience on this issue. I lectured at third level on early childhood care and education and I know what I am talking about. I have visited the Scandinavian countries and I have seen the facilities there. Senator Mooney pointed out that is paid for by the taxes paid. However, the cost should not be so great here because we have the facilities. We have plenty of empty buildings and perhaps they could be made available through NAMA.
It must be clearly indicated in written form what moneys will be saved by introducing this proposal and those moneys should be targeted at after school services. The people who will be most affected will be the single parents of seven year olds. They do not want to be stuck in the house all the time. I speak to single parents and they want to get out and to work. but they want to ensure their children are cared for. This proposal will put the issue on the table and open up the debate. I have spoken so often about early childhood care and education that I am like a broken record. Somebody said to me once what they would do if they heard me going on about it again. What we do not seem to realise is that these children are not sick children. They are healthy. Therefore, we should take the moneys from everywhere else and target it at the needs of children. This is what the Minister is doing.
I would like to hear the Department of Education and Skills announce that it is getting involved in this also. Education covers from the womb to the tomb, and just because children are in the primary school at seven, we should not neglect them. The work goes on. The Department of Jobs, Enterprise and Innovation should also be involved. An earlier amendment suggested this and I had intended to contribute on it. That Department and its Oireachtas committee must be involved. All the Departments with an interest in this issue must work together. Under the community child care subvention scheme currently, there is an opportunity to target not alone preschool services but also after school services. It would be possible to target that scheme at certain people but more research must be done in that regard.
This is one of the most important debates in this House as it puts the issues on the table and puts them up to the Minister for Children and Youth Affairs, the Minister for Social Protection, the Minister for Education and Skills and the Minister for Jobs, Enterprise and Innovation. They must all come together on this. Like other Senators, I would love to have seen the plan prepared by now but I will leave it for now. I expect the Minister will bring the plan forward at a later date and I look forward to that.
I will be brief as many of the arguments were played out in the debate on Friday. The one-parent family payment provided recognition of the greater practical burden faced by one-parent families trying to access employment and raise children. Other Senators raised the matter of the contributions made in the Dáil. The Tánaiste said there that the measures relating to the lowering of the age of the youngest child would go hand in hand with changes in the delivery and provision of child care and that it would be possible to implement those changes over time. Like OPEN, Barnardos and the National Women's Council, I remain unconvinced that the quality of child care needed can be delivered in the very ambitious timeframe put forward. Neither they nor I believe that changes to the one family payment should be cemented in legislation before a plan or road map is in place. There is no additional funding or investment available to restructure the child care, preschool or after school care in the short to medium term.
Senator van Turnhout asked what savings would be made when this proposal is implemented and many people have pointed out that any savings made must be targeted and used for children. Will the savings made be targeted at child care provisions and used to restructure them? When and how will that happen? It is incomprehensible that we are going to cement such radical changes in legislation without ensuring that any comprehensive reform of child care services is in place. It is for that reason that Sinn Féin opposes this section.
I take a different view to Senator Byrne on this. We have dedicated two days to debating a very important Bill and I do not see it as having been rushed. We have given extra time to it and have come in on Friday and Monday to do that. I do not understand why Senator Byrne says this is a bad thing.
We are still having a very good debate and it seems to me to be a more constructive debate than that in the Dáil. I agree with the idea behind what the Minister is trying to do and the move towards a universal payment. Down through the years the payments we have made have seemed to stigmatise people. We had deserted wife's benefit, unmarried mother's allowance, the lone-parent's allowance and then the one-parent family payment. Now we are moving towards a universal payment which will not stigmatise people. Over 50% of those raising children on their own are not drawing any social welfare payment. They are working and managing their own affairs. I know that the introduction of child care services will also benefit them. Of the remainder, 47% are working, which obviously means 53% are not. We need to motivate the people concerned to get back into education and the working environment. The Minister's ideals will help towards achieving this end. Even though we are pumping over €1 billion into one-parent families, the current system is not working in that child poverty remains an issue, with a figure of 67% among one-parent families.
We should be looking towards getting payments to the children through benefits in kind such as enhancing family resource centres, some of which I have visited. They provide a breakfast for children before they go out to school, organise after-school homework clubs and after-school child care services. We should be developing and enhancing these centres in order to provide for the child specifically. Last Friday I said there were rural schools all over Ireland that could be utilised to provide after-school child care facilities. We have a fantastic preschool in my own local school which actually doubled its numbers this year, having started only last year. Doubling its numbers will ensure its future. The facilities are available; all we need to do is put in place the staff needed to manage after school services. This would be a great way to move forward.
Time and again the Minister has reiterated that she is not in favour of reducing the age limit to seven years, unless the necessary facilities are in place. I know she has given a commitment and will take her at her word and vote with her today on the issue. As I said last week, we will be holding her to account when the reduction in the age limit is made, if there are no proper child care facilities in place. We will have to re-examine the issue at that stage.
I thank all of the Senators who have contributed to the debate. I stress again that this is a work in progress. It is obvious that no one is satisfied with the outcomes in spending €1 billion on lone parents. There is general agreement that we could secure a better outcome from what is a very important investment by citizens and taxpayers.
When Finland had an horrific banking crash a couple of decades ago, one thing they emphasised in seeking recovery was the need to place a fresh emphasis on issues such as early childhood education, child care, education in general and innovation. While its recovery in employment was relatively slow, this change was one of the reasons it made a very solid recovery in the longer term. We are spending over €20 billion on social welfare payments this year in a particularly difficult period for the country while it is participating in the troika's programme. We have to think about how we can leverage some of that investment in a way that it becomes productive in terms of job creation and people setting up their own businesses.
I said to Senators a few days ago that I had given an indication that when in government, we would restore the minimum wage, which we did. I also spoke to Senators about the interest among quite a number of lone parents participating in the JobBridge internship programme. I am happy to say that after detailed discussions with the Department of Finance and the Department of Public Expenditure and Reform we will be extending that programme very shortly, which is positive. Many lone parents have been interested in accessing some of the opportunities available under the programme because they are probably in fields that traditionally have not been included in community employment scheme-type opportunities which often have been the only opportunities open to those who are parenting on their own.
We are talking about parents, children and achieving the best outcomes in flexible structures to encourage people. We are moving towards this end in the broader social welfare system in respect of Pathways to Work. In this scheme we are saying that after people have completed their training and obtained their degree, up until the time they retire, we want as many as possible at work because in that way they are contributors to the social welfare system, rather than dependants. That, in turn, provides us with the basis for supporting pensions for old people, payments to families with children and those who have unfortunately lost their jobs. Unless we can recalibrate and rebalance the social welfare system in order that we have more people at work - I have discussed with Senators a variety of ways by which we can do this - we will remain stuck.
Looking at countries such as Canada, Australia, the countries of Scandinavia, Germany and Northern Ireland, how come they all have ages limits ranging from one year to seven years? The age limit in Northern Ireland is seven years. It is simply because in the literature of these countries there is a positive move in telling people that as their child is now settled in school, they would like them to go back and complete their education and training and develop opportunities for themselves. That is an important social signal to send and that is what we want to do. It is critical and appropriate at this time that we should carry out these reforms. Perhaps they should have been undertaken when the country had a lot money and it was easier to complete them. The fact is, however, that we did not do this, but I feel very strongly that it is important we do so now.
The one weakness in the social welfare system is that for whatever reason, we have emphasised cash payments as opposed to the delivery of services or even conditional cash payments. A conditional cash payment might be dependent on a person's child going to school and so on. We have not developed such an approach in Ireland, probably for historical reasons, but I do not see why we should not do so now, especially when money is a little tighter and we have to make that €20 billion stretch as far as possible and use it as productively as possible for everybody in the economy.
In response to Senator Marie Moloney's comments, there are 92,000 parenting on their own and receiving social welfare payments, but there are tens of thousands of others who parent on their own and do not receive any social welfare payment because they are working or have a business. We must look at these very successful role models, as well as at a situation where we have some who will remain dependent on social welfare for a long period of time. There are tonnes of reports which state the outcomes for the children of such parents in avoiding poverty are far lower than they are for the children of such parents who are working.
The Seanad Divided:
For the motion: 24 (Ivana Bacik, Colm Burke, Deirdre Clune, Eamonn Coghlan, Paul Coghlan, Michael Comiskey, Martin Conway, Maurice Cummins, Michael D'Arcy, John Gilroy, Jimmy Harte, Aideen Hayden, James Heffernan, Lorraine Higgins, Caít Keane, John Kelly, Denis Landy, Marie Maloney, Mary Moran, Tony Mulcahy, Michael Mullins, Catherine Noone, Pat O'Neill, Tom Shehan)
Against the motion: 16 (Thomas Byrne, David Cullinane, Mark Daly, Terry Leyden, Paschal Mooney, David Norris, Darragh O'Brien, Denis O'Donovan, Ned O'Sullivan, Averil Power, Kathryn Reilly, Jillian van Turnhout, Jim Walsh, Mary White, Diarmuid Wilson, Katherine Zappone)
Tellers: Tá, Senators Ivana Bacik and Paul Coghlan; Níl, Senators Ned O'Sullivan and Diarmuid Wilson.
Question declared carried.
I move amendment No. 8:
In page 8, to delete lines 33 to 51, to delete page 9 and in page 10, to delete lines 1 to 26
As the Minister is aware, this is essentially the same as section 4 with the exception that it relates to the transitional arrangements where categories of children may fall between stools because of their age. I accept we are making the same point again but I call on the Minister to support it. I was unable to make the earlier stages of the debate because I have just travelled from the dentist. The Cathaoirleach will be pleased to learn I have that sorted out and I am back to full health again.
I do not like the way the Constitution is phrased. Article 41.2.2° of the Constitution states: "The State shall, therefore, endeavour to ensure that mothers shall not be obliged by economic necessity to engage in labour to the neglect of their duties in the home." Obviously, I have a grave difficulty with the way this is phrased.
We do not like large elements of the Constitution. We are having a constitutional convention to undo many of the negative parts of the Constitution. I do not support the wording above but the thrust of it and the logic behind it is that parents should not be forced to go out to work to the detriment of caring for their children. Has consideration been given to this provision in the Constitution? Since the issues raised are essentially the same as those relating to section 4, I have no wish to rehearse them. We will be opposing the section if the Minister does not accept the amendment.
I do not propose to accept the amendment. The Social Welfare and Pensions Bill 2012 provides for the age limit of the youngest child for receipt of the one-parent family payment to be reduced gradually to 12 years of age in 2012, ten years in 2013 and seven years in 2014. This will apply to people who are new to the lone parents system after the enactment of the legislation. For other lone parents already in the system, the corresponding dates are 2015 and 2016. There is provision for a transition. It is standard practice when introducing such changes to put in place such transitional arrangements for existing customers for a period. This ensures existing customers are given notice of the change and are not affected abruptly. At the same time, from an administrative and efficiency point of view, it is not feasible to have different customers of the same scheme being treated in a different manner for an indefinite period. The reduction in the age limit is being applied to new and existing customers on a phased but different basis. Existing customers will not be affected by further age reductions until 2013 at the earliest.
The difficulty is that the effect of amendment No. 8 would be to remove the mitigating measures from the legislation. This is what Senator Cullinane is asking for in the amendment. The mitigating measures provide for a phased introduction for parents who come to lone parenting new. The measures will come in on a longer phased basis for parents who are already parenting on their own. If the amendment were passed, it would take all the mitigating transitional effects out of the arrangements. On that basis I would perhaps re-examine the amendment.
The Seanad Divided:
For the motion: 26 (Ivana Bacik, Colm Burke, Deirdre Clune, Eamonn Coghlan, Paul Coghlan, Michael Comiskey, Martin Conway, Maurice Cummins, Michael D'Arcy, John Gilroy, Jimmy Harte, Aideen Hayden, James Heffernan, Lorraine Higgins, Caít Keane, John Kelly, Denis Landy, Marie Maloney, Mary Moran, Tony Mulcahy, Michael Mullins, Catherine Noone, Pat O'Neill, Tom Shehan, Jillian van Turnhout, Katherine Zappone)
Against the motion: 12 (Thomas Byrne, David Cullinane, Mark Daly, Terry Leyden, Paschal Mooney, David Norris, Darragh O'Brien, Denis O'Donovan, Ned O'Sullivan, Averil Power, Kathryn Reilly, Diarmuid Wilson)
Tellers: Tá, Senators Ivana Bacik and Paul Coghlan; Níl, Senators Ned O'Sullivan and Diarmuid Wilson.
Question declared carried.
I ask the Minister to explain section 7, which gives me the opportunity to raise the wider issue of community employment schemes. There was uproar in the voluntary sector when reductions were announced to CE schemes and the payments associated with them. The Minister rushed quickly to bridge the gap by indicating that she will not endanger existing schemes until such time as a review had been carried out. She made that statement in January and tomorrow will be May Day, but we have not heard a whimper from the Department regarding the review. I would appreciate her observations on the matter. She is clearly aware of the importance of CE schemes. Their future is surrounded by a great deal of uncertainty and the voluntary sector, which relies heavily on them, is in limbo while it awaits the outcome of the review. I am not familiar with the details of the review, its terms of reference or who is conducting it. Perhaps she can enlighten us.
Section 7 makes a technical adjustment to reflect current practice. It ensures that individuals on community schemes can continue to receive additional payments, such as payments for supplementary exceptional needs, once off grant payments relating to diet or rent and mortgage interest supplement.
Senator Mooney asked about the review of CE schemes. Two reviews are currently under way. The Department's estimated expenditure on employment support schemes for 2012 is €983 million. This represents an increase of €121 million because we have expanded or launched a number of schemes, including the JobBridge internship programme and the Tús programme, which is now being operated in almost every county. Individuals who have been unemployed for longer than one year are getting an opportunity to work for one year under the Tús programme. Some €315 million is specifically provided for community employment schemes, based on a figure of 23,000 participants and 1,400 supervisors.
Responsibility for CE schemes moved to the Department of Social Protection on 1 January and, as is prudent in the context of such a major transfer, I asked for a review of the schemes. The feedback and co-operation on CE schemes from sponsors, supervisors and, in many cases, participants has been positive. Feedback on the schemes' achievements focuses on the following three areas: social delivery of services, particularly in rural areas; the experience of scheme participants with a view to making it as positive as possible in terms of assisting participants to return to employment; and value for money. In the overall context of value for money, there is a requirement in the budget to make savings in the overall CE spend of 7.7%. That is being achieved through changes to the materials and training grants.
It is particularly welcome that considerable progress has been made in saving money in areas like administrative overheads. CE schemes have been spending a substantial amount of money on insurance, which they tend to negotiate on an individual basis rather than seek value for money on a grouped basis. Schemes are also spending money on accountants and auditors because many of them were established as companies under FÁS. That entails a significant administrative overhead. The Department's objective in conducting its review is to ascertain, over a period of time, how a considerable saving might be made in such administrative overheads. There are cases, for example, where community employment schemes have sources of income and could, therefore, afford to contribute to their funding costs. The detailed review of the schemes is ongoing and will be completed shortly. I am pleased to report that there has been a high level of co-operation from most of the schemes in supplying the relevant data.
The second review to which the Senator referred relates to the range of labour market support schemes within the Department's remit, including those subsumed into it on 1 January from the former FÁS labour services. Again, we are concerned with identifying the outcomes in terms of progression to employment or self-employment relative to Exchequer spending. Encompassed within this range of supports are the back to education allowance, community employment schemes, JobBridge, Tús, the rural social scheme and so on, all of which are under review. A broad commitment was given to the EU-IMF-ECB troika as one of the conditions of our bailout programme that such reviews would be undertaken as part of the ongoing examination of public spending. The reviews under way are designed to focus on three issues, namely, community delivery, the participant's experience and value for money. An issue raised in respect of all of the schemes at one time or another, the community employment schemes in particular, is how efficient and effective they are in providing a pathway to employment for participants. Many economists have been critical of the community employment schemes in this regard, including the ESRI which has published several critical reports. However, the reports have not always emphasised the social delivery model encompassed within the schemes, aside from the personal experience of individual participants. Both reviews are progressing and I expect them to be finalised in the near future.
I thank the Minister for her update on the joint reviews. For years there were attempts by the Department which was formerly responsible for community employment schemes to dismantle them by bringing into focus an exclusively economic rationale, with cost benefit analyses, a reduction in participant numbers and terminations of those schemes deemed less than optimally effective. In that context, I am considerably heartened at the decision to bring the schemes within the remit of the Minister's Department. I am particularly encouraged by her reference, both at the beginning and end of her contribution, to the social dimension of the schemes.
I was part of a group of what might loosely be described as dissident backbenchers under the Fianna Fáil Administration who fought tooth and nail against the then Minister's attempts to reduce the schemes purely on the basis of an economic rationale.
I knew that would raise a few eyebrows. That approach was taken in the context of the bailout programme and the pressure to justify the schemes to the troika as being entirely about upskilling participants in order to help them to enter the workforce. Although I speak from the perspective of a rural representative, this issue does not align with a rural-urban divide. In fact, the arguments I will make in respect of rural areas are equally applicable to urban environments, particularly those areas of social disadvantage in our larger towns and cities. For people who are out of work, particularly in the Border counties where there is a high proportion of single males without employment and among whom the uptake of these schemes is particularly high, community employment is vital in offering them dignity, confidence and a reason to get up in the morning. The difficulty from a rural perspective in the notion that participants, once they have upskilled, must proceed directly to work is that it falls flat when one considers that many of them are living in areas without adequate transport, do not have the financial capacity to hire a taxi and, most importantly, are obliged to travel if they are to have a reasonable expectation of securing work. In my own area the only towns in which there is some prospect of securing employment are Sligo, Longford, Cavan and, possibly, Enniskillen; beyond these one has no hope. Therefore, it is vital that the review the Minister is undertaking take adequate account of the social dimension. I have no doubt that, as a Labour Party Minister, she has the empathy and understanding I am attempting to convey in terms of seeking to ensure community employment schemes are not simply about the upskilling necessary to make the transition from welfare to work. The bottom line in the current climate is that there is no work available. It is vital that the Minister ensure the reports are brought into the public domain sooner rather than later. Without wishing in any way to diminish what she has said, I urge that the Department does not attempt to reinvent the wheel in reviewing the schemes newly within its remit. The basics are in place; everybody knows how the schemes work and what they are about, and all the statistics are available.
I fully agree that there are inefficiencies in the system. In this context, I am particularly pleased that the Minister singled out the financial drain of having to hire accountants, set up limited companies and so on. I fully welcome efforts to ensure a greater degree of group involvement rather than individual operation. It will be interesting to see how such initiatives will be progressed when the review recommendations are brought before both Houses, as I am sure the Minister intends to do. I take the opportunity to reiterate how important it is that there continue to be a strong social dimension to the schemes. As it stands, the uncertainty surrounding the reductions in grants, particularly for materials, is already having an adverse effect. Any savings as a result of addressing inefficiencies identified in the system should be redirected into the schemes in order to lessen the impact of funding reductions rather than being absorbed into the Department. The Minister referred to an increase in funding, but the reality is that the allocation to community employment schemes was reduced in the budget from €360 million last year to €315 million this year. I hope the Minister can make up some of the shortfall by introducing greater efficiencies into the system.
While I agree with much of what Senator Paschal Mooney said, I am confident that the Minister is committed to the continuation of community employment schemes. Where there is a budget of €315 million, it is incumbent on her to ensure we are getting the best bang for our buck. At the same time, I agree with Senator Paschal Mooney's comments on the social dimension. There are many participating in these schemes, particularly in rural areas, who are thereby provided with a reason to get up in the morning. In the absence of the schemes, there would, undoubtedly, be an increase in the number of GP visits and medical costs.
I certainly agree that the schemes should be reviewed with a view to securing greater efficiencies. However, there are schemes throughout the State that are operating very effectively and doing invaluable work as part of the Tidy Towns scheme, in the care of the elderly and providing many other worthwhile services. As everyone is aware, the ban on recruitment is preventing local authorities from taking on staff. In a very effective and efficient way, many of those schemes to which I refer are supplementing the work local authorities are doing in the context of Tidy Towns, etc. At this time of year, when we are trying to attract visitors to towns and villages, the last thing we want to see is litter strewn everywhere. Some of the schemes are doing fantastic work in improving the countryside and the appearance of our towns and villages.
I had a private conversation with the Minister in respect of this matter in recent days. I hope the review will soon be completed because there is some uncertainty with regard to what is happening. I am of the view that there is a need to examine the position with regard to the materials grant. I appeal to the Minister not to reduce this grant too much and ensure that there will be sufficient resources available in order that the good work to which I refer might continue to be done. There is a need for consideration to be given to schemes which are inefficient. We all have a responsibility to ensure that the very best value for money is obtained. It goes without saying that the centralisation of some of the schemes would reduce the level of insurance costs and accountancy and audit fees. I hope it is in this area that the Minister will make the necessary savings. At a time of such high unemployment, there is no doubt that a great deal of valuable work is being done in our communities for a small additional cost. I would like this to continue. I look forward to the completion of the review in the next four to five weeks.
As stated earlier, there is a key role for social investment in the context of Ireland's recovery and its participation in the programme with the troika. While the latter is seeking consolidation - that is, savings - in certain areas, I acknowledge that, as Senators have just stated, there is a critical role to be played in respect of social investment and the delivery of social services. If anything, my hope is that there will ultimately be an expansion when the review process is completed. Unemployment statistics are improving on quite a modest basis at present. The figure for unemployment has fallen to approximately 430,000, which is an extremely modest improvement. Unemployment remains at a very high level.
In more remote areas - such places can often be just five miles from the nearest town------
----community employment schemes, many of which involve a social investment and create social employment, are extremely important in the context of the delivery of local services and in respect of providing individuals with the opportunity to contribute. To use President Obama's phrase, these schemes also allow people to keep themselves "job ready" in order that, as the economy recovers and as employment becomes more available, they will be in a position to participate in the employment market.
As Minister, I would like to continue the commitment to community employment. There is an absolute commitment to the continuation of the number of places for both participants and supervisors. This is an important aspect. There are also a number of ring-fenced places in the area of community employment for individuals, and their families, who have experienced difficulties with drugs. These places mainly relate to urban areas. There are also such places in respect of people with disabilities and there are further places set aside for child care and child care training. All of these are vital.
The most important aspect of this matter is the fact that, alongside fiscal consolidation in respect of social welfare, there must be a strategic approach to social investment and social employment. If we can create a strong social employment and social investment impetus from the €20 billion to which I referred on a couple of occasions earlier, we will at least be able to put in place - if not the kind of high-paying jobs people would like - a framework for socially-useful and important employment.
The Tús scheme was developed by my predecessor but there was no one on it when I became Minister. In other words, it had not been initiated in any way. The experience in this regard has been interesting because there are now something over 2,000 people on Tús. There are those who compliment this scheme highly, while there are others who are rather critical of it. We are learning as we go. Essentially, Tús is for people who have been on the live register for more than 12 months. These individuals can become supervisors or participants.
The Government's internship scheme came into operation last July. What is interesting with regard to this scheme is that between 8,000 and 9,000 employers have offered to host interns. These employers comprise private sector companies of all sizes - small, medium and large - and community and voluntary organisations. For example, sporting organisations have, on a county basis, been putting forward proposals and have begun to take on interns in respect of sports development. Similarly, many proposals are coming forward from organisations in the social amenity area in respect of internships. Again, it is interesting that this has created another avenue of opportunity in the context of obtaining specific experience. People are either seeking to change fields - for example, they were previously employed in construction but they are seeking to move into another area - or they have completed qualifications but, due to the prevailing economic circumstances, they have not been able to obtain work experience and the internship scheme fills a gap in this regard.
Reference was made to local authorities. It could be possible to encourage even more expansion in this area. Obviously, I would be obliged to obtain the agreement of my colleagues in the Departments of Finance and Public Expenditure and Reform. However, a great deal of possibility exists in the context of changing the social welfare spend from being passive to being much more active and locally-oriented in nature. With the Pathways to Work initiative, I hope employers - be they in the public, private, voluntary or community sectors - will make known to their local social welfare employment offices either the vacancies that exist within their organisations or the needs they require to be met. Ultimately, this would allow us to build a system which incorporates a flexible response rate. Under the initiative, if private sector employers have jobs to offer, they will advertise them and if there is a particular need in an area, then local voluntary or community organisations, sporting bodies or local authorities could indicate what they require. This would eventually lead to a matching of requirements at local level. In other words, those who are available and unfortunately on the live register could be matched up to the vacancies or opportunities that exist. This is a matter I am interested in progressing. I will communicate further with the Senator when the review is completed.
I am grateful for the Minister's remarks and I wish to make two brief points. In the context of her remarks about the troika and about the insistence and efficiencies, I suggest she would have a friend in court in the IMF, rather than perhaps among the ECB. The IMF was seen as the big bogeyman and when its officials came to this country there was all sorts of analyses suggesting they would be the people who would dismantle the Irish economy. In fact the emphasis in recent years, as the Minister will know, has been very much on the social dimension to ensure economies would not be dismantled and that there is a need to have a more balanced approach. It seems the Minister would have a friend in court in that the IMF would accept that there is a social dimension in this regard whereas the hard-nosed bankers of the ECB and the Commission, which does not seem to have any heart, would probably be against it.
My second point relates to a sector the Minister raised in the context of the CE schemes. The highest percentage of the unemployed, in the context of figures that the Minister mentioned, since 2008 and the bank crash has been in the construction sector. The figures are 37% to 40% or something of that nature. It is very high. The Construction Industry Federation, headed by Tom Parlon, stated recently that there is a very real concern that the skills and expertise that had been available to the Irish economy during the boom time could be lost because some people were moving to other areas if they can find opportunities, as the Minister said correctly, and many construction workers have emigrated to England to take up work generated by the Olympic Games. There is a building boom in several of the states in Australia. As a result, there is concern about the expertise available here having regard to the tiny green shoots that are beginning to appear. I do not believe we will ever get to the point where there will be a need for the type of building that occurred in the past but nearly all the multinational companies that have announced significant increases in jobs in recent months have stated they will extend their existing buildings, build new headquarters, etc. There are some positives in that regard and we must try to grasp them when we see them. The private sector has flatlined and will remain flatlined until the 18,000 or 19,000 vacant houses are filled, which could take years. I am merely repeating the point, without labouring it, that in the review I hope this aspect affecting mainly those worked in the construction sector will be considered. I am sure Senator Mullins and perhaps and even Senator Moloney and Senator Moran, who comes from an urban area, would agree that a large cohort of those who were employed in construction sector, either unskilled or semi-skilled, are invariably the people who will seek to participate in CE schemes and, aligned with the remarks the Minister made about local authorities providing more CE place, those people would be ideally placed to enhance their local environments because of the skill they have, even at an unskilled or semi-skilled level, and that would keep them here. I am sure my colleagues would agree that even though the money participants get is not a great amount, this country is their home, as it is ours, and it is where we live. The last thing people want to do is to consider emigrating. In terms of there being anything that could hold them here and retain them in their local communities, the real value of the CE schemes could be in a macro-economic context rather than considering a scheme to be just another scheme in isolation.
My final point is one that might bring a smile to the Minister's face in that we had a discussion on this last week. The Minister mentioned internships and there is a cohort of people who cannot avail of them, my son being one of them. He is unemployed and attending a FÁS course - please God he will be able to continue to be upskilled in the computer area - and was offered an internship in the broadcasting area. It seems he is following in my footsteps. He could not take it because he is living at home and because of our income he is debarred from signing on. The only way he can be considered for the internship is if he moves out of the house and has a separate address. The Minister said there are inflexibilities built into the entire social welfare code that she was attempting to address. I am not for one moment suggesting she will pluck this one out of the air and say she will do something about this, but I am grateful for her reassurance about addressing this area. I have said it before and will say it again, the Minister is the right person in the right job right now. I have no doubt whatsoever that she is examining the culture that has grown up over the years that has created these inflexibilities and I hope that she will in time be able to address them. There are people who are willing to work who are not a burden on the State, like my son and many others, who, given the opportunity, would make a useful contribution to society.
I wish to make a brief comment following on from Senator Mooney's good ideas and suggestions on how to utilise community employment schemes. We spent the last two days debating child care services and the community employment schemes could be utilised greatly for the enhancement of child care facilities. I ask the Minister to examine this. There are many people with expertise in child care who would be more than willing to partake in a community employment scheme in child care services.
I thank all the Senators for their comments. Our discussion emphasises the breadth of the modern Department of Social Protection and the fact that unfortunately because of the crash, many people are relying on the Department for support. The critical point is if we can identify how we can continue to provide that support but that we would also make it the basis of the development of a social economy model. That ultimately would be very positive for the individuals who participate on schemes and for the communities or the community organisations who benefit from them.
We oppose some of the proposed changes to entitlement to mortgage interest supplement. With this amendment it seems the Minister is introducing a new concept in social welfare law, namely, deferred need. As the law stands, if people have a mortgage and lose their job they can apply for assistance from the State to help pay their mortgage when they lose their job or when the need arises. They can apply for assistance when their circumstances change and the need first appears. However, with the Government amendment regarding mortgage interest supplement, a borrower must enter into an arrangement with their lender for 12 months before an application for mortgage interest supplement can be considered. As a practical person, I am trying to understand how this works and, for the purposes of clarity, I will use an example. I cite the case of a couple with a mortgage repayment of €1,600 per month who lose their jobs, or job as the case may be, and become dependent on social welfare. If they are to eat and pay their utility bills, the most they can offer the lender is about €160 per month. I base that figure on the amount a couple would be expected to pay towards their interest payments when in receipt of mortgage interest supplement. However, by definition, any person who is dependent on social welfare as a result of losing a job will have substantial arrears after a 12-month period. We must remember that forbearance, which is part of the moving into the mortgage arrears process, does not make a debt disappear, a creditor is simply extending the time before it enforces legal action. That is what forbearance is.
That brings me on to one of the conditions governing the award of a mortgage interest supplement. Under Statutory Instrument 412, the designated officer must consider if "it is reasonable to award a supplementary having regard to the amount of any arrears outstanding on the loan". That is what is done at that stage. Who will receive mortgage interest supplement after the 12 month period has passed, when will it be reasonable to provide assistance and when will assistance be denied? I understand the complexity of the problem and a policy response to the crisis has long been delayed, but I am not sure what this amendment to the mortgage interest supplement will achieve. Is it the intention to effectively abolish the scheme by making it impossible to qualify? The Minister is presuming that the lender will engage, which is an aspect we have debated frequently in terms of the other issues related to the mortgage crisis. A lender is unlikely to commit to anything in these circumstances. Those in a mortgage crisis, therefore, need to know what they are dealing with and the support, if any, they can expect from the State.
We oppose section 12 because we are convinced the mortgage interest supplement section should be deferred until such a time as the Minister can convincingly clarify who will qualify for mortgage interest supplement after the 12 month-period has elapsed. We may then be in a position to have an informed debate and understand what the Minister is proposing rather than a debate on a Bill the amendments to which, and particularly this one, were only received relatively recently.
I would like the Minister to clarify some aspects of the Bill which are unclear. I know she will be able to enlighten us. Subsection (b)(ii) states: "prior to entering into the alternative payment arrangement referred to in subparagraph (i) the person had entered into and had complied with a different alternative repayment arrangement agreed between that person and his or her mortgage lender...". The Minister might enlighten us in that regard because it is unclear. It appears two arrangements are being sought. My concern is that many vulnerable people would not be good negotiators. They would go into the bank but would not be able to negotiate with the bank which is a powerful force, as we have come to know over the years. Many of our banks are now under State ownership and it is incumbent on us, as a Government, to ensure the banks enter into meaningful agreements with people who are in trouble with their mortgages. The arrears will accrue in any event because we are only supplying the interest on the mortgage. I ask the Minister to advise the House if she has had any discussions with the bank on this issue and if so, has she laid it on the line to them that they have to enter into meaningful negotiations with people who are in trouble with their mortgages. She might clarify that paragraph for us.
With all due respect, this section has been badly thought through. The idea in principle is a good one, namely, that we would ask the banks to shoulder the blame but I ask her to withdraw the section for a number of reasons. The Minister was present the morning Professor Kilborn spoke at the FLAC conference which I also attended. It was one of the most enlightening speeches I ever heard on the mortgage and indebtedness problem. A point Professor Kilborn repeatedly made was that the situation for Irish borrowers negotiating with banks is very much predicated upon the fact that the alternative is bankruptcy and that the alternative favours the banks rather than the borrower, giving the banks the upper hand. Professor Kilborn spoke about trusted intermediaries being required, whether that be the strong arm of the Central Bank or the 100 debt advisers the Government promised with the publication of the Keane report, to give a strong arm to the vulnerable borrowers who are negotiating with their banks, but nothing has happened on that. As Senator Moloney stated, what the Minister is doing is sending in vulnerable borrowers to negotiate with banks to try to get some sort of deal. Incidentally, the banks are not obliged to give a deal under the mortgage arrears resolution process. They are obliged only to consider such a deal. What happens in a situation where a bank refuses to offer an alternative repayment arrangement? That is possible under the current procedure.
Where is the definition of a mortgage defined in social welfare legislation? A mortgage is a document I hand over to the bank and the bank gives me a housing loan in return. The Minister might explain where the word "mortgage" arose from in the legislation because my understanding is that the term is a housing loan and that is what it should be in the legislation. The terms "Mortgage interest" and "mortgage lender" are defined but I do not know if the word "mortgage" is defined anywhere in social welfare statutes.
Interest due because of delay is not covered under whatever rules are in place regarding mortgage interest supplements. We will now have delayed interest because of alternative arrangements that are being introduced. What is the position on that? The interest that builds up in the meantime over the year one has not paid may well be part of this engagement with the banks. Who will pay that or will people be allowed to claim mortgage interest supplement in respect of that particular interest? There is no obligation on banks to engage. Why do we always put the obligation on the small person? There is no obligation on the banks. Professor Kilborn or perhaps another speaker made the point at the conference I referred to that we are always obliging the consumer to do something and there is never a positive obligation on the banks. There is no obligation on the banks in this legislation to do anything, and there is nothing in the code of conduct to force the banks to put in place what is envisaged in this legislation. That is a major gap.
In terms of the lender refusing, I have given a number of reasons in that regard. Politically, I might fight with the Minister on the lack of mortgage advisers but it is a serious problem. As the people from New Beginning have stated, we are sending people into banks. The banks are telling them they have to stop watching Sky television or stop shopping in Dunnes Stores and that they should stop in Lidl or wherever instead. That is not right. While the intent of the section to force more of the burden onto the banks is welcome, it is badly executed and will lead to many more problems than it will solve and before this legislation comes into effect the Minister will be encouraging a deluge of applications. I will be encouraging anyone who is considering looking for mortgage interest supplement to apply as soon as possible.
I would also ask the Minister to remove the section. My understanding is that under this section people will not get the mortgage interest supplement for the first 12 months of the arrears. A previous speaker mentioned FLAC. It also noted that by denying any access to mortgage interest supplement for 12 months from the date arrears arise, inevitably many borrowers in trouble will come out of their period of difficulty with an arrears problem which could have been contained if the mortgage interest supplement had been available. The wording of the section places the onus on the borrower to show that he or she has engaged with the process. That is part of the problem. As Senators said earlier, it again puts the banks front and centre and not the person in difficulty who needs to be supported. Even where an alternative payment option may be offered by the lender there is no guarantee that it will be a fair offer or that the borrower will have the capacity to be able to pay the proposed new sum.
I am sure we all deal with people in mortgage distress who come into our offices who have real difficulties dealing with banks. It can be an intimidating environment for many people, especially vulnerable people who are very concerned about how they will pay their mortgage, keep a roof over their head and deal with all the reminder letters. That is a very difficult situation in which they find themselves. I agree with Senator Byrne that many vulnerable people will find it difficult and intimidating to negotiate with banks.
If the law is amended as proposed, in cases where the lender proposes an interest only repayment for a period, where the borrower cannot pay the full amount proposed by the lender they will not be able to access mortgage interest supplement for 12 months. In those circumstances, mortgage interest supplement could potentially cover the shortfall of the payment during that time but failure to access mortgage interest supplement could result in the borrower accruing further mortgage arrears and falling deeper into debt. In such circumstances the problem is that a mortgage that was manageable can suddenly become unmanageable and unsustainble, and therefore removing the payment of mortgage interest supplement while the borrower engages with the mortgage arrears resolution process for a period of 12 months will also impact on people who only require short-term support. Has the Minister considered that because people who may be out of work for a limited period and who are able to re-enter the workforce after a relatively short period of time will be excluded?
We see fundamental flaws in this section. I agree with Senator Zappone and Senator Byrne that it is flawed. The intent is good. We can all appreciate the logic behind what the Minister is trying to do but I am concerned about what the text of the section means in practice for people, and for that reason I oppose the section and ask the Minister to withdraw it.
This section deals with the entitlement to mortgage interest supplement. As Senators have noted, the purpose of the mortgage interest supplement scheme is to provide short-term income support to eligible people who are unable to meet their mortgage interest repayments on a house that is their sole place of residence. The supplement assists with the interest portion of the mortgage repayments only. The underlying principle of this legislative provision is to ensure the mortgage arrears resolution process functions alongside State supports such as the mortgage interest supplement and that the forbearance arrangement implicit in the mortgage arrears resolution process is reflected in the eligibility criteria for the mortgage interest supplement scheme. Under this provision, the mortgage interest supplement scheme will continue to provide short-term income support to those who need help with their mortgages. The change is that lenders will be expected to deal with the borrowers' immediate difficulties, which they already-----
I have to hand the code of conduct on mortgage arrears as published by the Central Bank and will turn to the relevant provisions. The onus will be on lenders and borrowers alike to engage and to deal with the immediate problem. When I attended the presentation by Professor Jason Kilborn, he, together with everyone else with expertise on debt, all stated the critical thing is to get both the lender and the borrower to engage. Unless one gets to that point of engagement, one is not really dealing with what is a tremendously difficult and traumatic issue in which, I suggest to Members, the critical point from a public policy point of view is to ensure people remain in their family homes.
This year, the Department of Social Protection will spend approximately €50 million on mortgage interest supplements for more than 18,000 families. This new provision reflects the Department's desire for positive and absolute engagement from the lenders in return for the supplement being given to them by the Department through its payment of the interest portion of people's mortgages. While I appreciate this constitutes a change, I refer to the lecture by Professor Kilborn and others. The critical problem in Ireland, which has been identified in many of the discussions, is to use leverage with the lenders to induce the latter to enter into reasonable arrangements. Consequently, simply paying the mortgage interest supplement without having the lender fully committed to and engaged with the mortgage arrears process, is not very helpful although I acknowledge it is helpful, up to a point, to the individual. The code of conduct on mortgage arrears stipulates that forbearance is one of the elements that is required. The Department is spending a not insignificant amount of money at present and this sum of €50 million is going directly to the banks, albeit without any longer outcome. I believe Senator Byrne acknowledged this point in his remarks. There is no quid pro quo by the banks to their distressed customers, who also are customers of the Department of Social Protection. The purpose of this provision is to obtain greater and better engagement in the mortgage arrears process by the lenders.
The code of conduct on mortgage arrears sets out how mortgage lenders must treat borrowers in, or facing, mortgage arrears with due regard to the fact that each case of mortgage arrears is unique and must be considered on its own merits. Since becoming Minister, I have had the opportunity to visit a number of citizens information centres and, in particular, offices of the money advice and budgeting service, MABS. The Department is spending approximately €47 million on salaries and supports for the Citizens Information Board, CIB, and MABS. This is a not an inconsiderable amount of money in respect of employing money advisers and so on. However, the critical issue people have highlighted to me is the lack of serious engagement by the banks. The other issue dealt with by MABS in particular, as well as by community welfare officers, is that many people have complex debts and have more than one loan. This debate pertains solely to people's most important loan, namely, the loan on their family home, and to having a strategy to keep people in their family homes above all else. However, people do not merely have mortgage debt but also have credit union debt, car loan debt and possibly credit card debts. In addition, they may have run a business in the construction industry and may have used part of the collateral in their family home to guarantee some of the debts of that business. When meeting MABS advisory officers nationwide I have been forcibly struck by the complexity of people's debts and the fact they may have a string of different debts.
The issue is how should one best leverage the €50 million the State will spend through the Department of Social Protection in paying mortgage interest to the banks. Should one try to do this in a manner that requires greater engagement by the lender in the mortgage arrears resolution process? This is the purpose of the provision under discussion. The code of conduct sets out the framework lenders must use when dealing with borrowers in mortgage arrears or in pre-arrears. All such cases must be handled sympathetically and positively by the lender, with the objective at all times of assisting the borrower to meet his or her mortgage obligations. Under the code of practice on mortgage arrears, a lender must explore all options for alternative repayment arrangements to determine which options are viable for each particular case. The lender must provide the borrower with a clear explanation in writing of the implications of any alternative repayment arrangement. In addition, the lender must establish an appeals board to consider any appeals submitted by the borrower and to independently review decisions made by the lender's arrears support unit, the lender's treatment of the borrower's case or the lender's compliance with the requirement of the code. Under the code, lenders must now have staff who are dedicated to dealing with arrears in such an arrears support unit. Section 12 provides that the person applying for mortgage interest supplement must satisfy the Department that he or she is actively participating with his or her mortgage lender in accordance with the processes for dealing with people who have mortgage arrears. The Department's objective is to ensure people are assisted to stay in their family home and the lender assists people in doing that, given that the Department of Social Protection is undertaking, after a period, to meet the mortgage interest payment. It is a significant commitment on the part of the Department of Social Protection. In return for forbearance or other arrangements, after a period the bank will actually get the Department to meet the mortgage interest requirement.
Section 12 provides that arising from such participation, the person must have entered into an alternative payment arrangement with his or her mortgage lender. Where the claimant has entered into an alternative payment arrangement with his or her mortgage lender, he or she must also be complying with that alternative arrangement and he or she has availed of an alternative repayment arrangement for at least 12 months. These new eligibility criteria apply to new mortgage interest supplement claims only. Existing mortgage interest supplement claims will not be affected. The mortgage interest supplement scheme will be available after the person has availed of an alternative payment arrangement for 12 months from the lender.
The code of conduct on mortgage interest arrears published by the Central Bank applies to the mortgage lending activities of all registered entities, except credit unions, operating in the State including a financial services provider authorised, registered or licensed by the Central Bank and a financial services provider, authorised, registered or licensed in another EU or EEA member state. The code applies to the mortgage loan of a borrower which is secured on the primary residence, namely, the family home. Section 33 of the code states:
A lender must explore all options for alternative repayment arrangements, when considering a MARP case, in order to determine which options are viable for each particular case. Such alternative repayment arrangements must include:
a) an interest-only arrangement for a specified period;
b) an arrangement to pay interest and part of the normal capital element for a specified period;
c) deferring payment of all or part of the instalment repayment for a period;
d) extending the term of the mortgage;
e) changing the type of the mortgage, except in the case of tracker mortgages;
f) capitalising the arrearsand interest; and
g) any voluntary scheme to which the lender has signed up e.g. deferred interest scheme.
This change is seeking to ensure lenders and borrowers are part of the mortgage arrears resolution process. The key point made by Professor Jason Kilborn is there has to be a realistic coming together of both the lender and the borrower to work out a resolution of the difficulties. The Minister for Justice and Equality is currently preparing legislation on personal insolvency arrangements. Again, the Department of Social Protection's role is to assist people who qualify for mortgage interest supplement but to ensure they are in a mortgage arrears resolution process.
I have listed the flaws in the legislation. I would be grateful if someone more learned than I could find the definition of "mortgage". In the Consumer Credit Act it is defined as a housing loan, and a mortgage is just a document one signs. Perhaps it is somewhere in the social welfare legislation. Mortgage interest is defined but are the terms "mortgage" and "mortgage repayment obligation" defined? Professor Jason Kilborn's point at the Free Legal Advice Centres conference was that borrowers need help. They are dealing with the banks on their own and the banks have no real incentive to help them. It is a fact that under the code of conduct a bank is not obliged to offer an alternative repayment arrangement. In the absence of mortgage interest supplement, it may well be an incentive for the banks to tell the borrower the mortgage is unsustainable and, accordingly, no alternative repayment arrangement will be offered. Again, "alternative repayment arrangement" is defined in the code of conduct as well as separately defined in the legislation.
There is an appeals process for borrowers but there is no reference to it. For example, after this legislation is passed, if I were to apply for mortgage interest supplement and the bank refused to enter into an alternative repayment arrangement under the code of conduct or the legislation, what happens to my supplement? If the alternative repayment arrangement is that my arrears and interest are capitalised, do I have to wait a year for mortgage interest supplement?
The Minister raised the issue of poverty traps. Mortgage interest supplement can become a poverty trap by the length of time that it takes for the supplement to be paid. It really should be a short-term solution and limited rather than postponed. If a supplement recipient informs the bank he or she does not have it anymore, there is a strong incentive on the banks not to deal with him or her. Accordingly, there is a stronger incentive on the bank to claim a mortgage is unsustainable and push the person into the appeals process. The Government promised 100 extra debt advisers who have yet to materialise. Before the Minister puts this measure in place, she must give borrowers the help they need.
The Minister pointed out that Professor Jason Kilborn said there needs to be a realistic coming together of both the lender and the borrower. The only realism that can be brought into that is if the lender has strong help whether from a strong Central Bank or strong Government which does not just ask the banks to do something nice but demands it in legislation. We are not doing that in this section. No onus is being put on the banks; it is entirely on the borrower.
Another objectionable aspect of this section is the Minister requires community welfare officers to become experts on the mortgage arrears resolution process with the banks. The Minister claimed the obligation is to engage. The obligation is not to engage but that the dedicated person, that is a social welfare officer, must be satisfied that the person has engaged with his or her mortgage lender and arising from such engagement has entered into, and where required, is complying with an alternative payment arrangement agreed between that person and his or her mortgage lender. The community welfare officer is now judge, jury and executioner on whether to make the payment. I do not know what training has been provided for community welfare officers on this process. They cannot be expected to know what goes on within banks. It is giving them much more discretion than should be allowed. It is difficult enough for them to know the exact requirements of social welfare law without having to go into what are called statutory codes of conducts - it is statutory in that they are empowered by a statute, but the code of conduct is not a statute.
The definition in the Bill, in section 12, of an alternative repayment arrangement is woolly. According to the definition, it means any arrangement entered into by an applicant for the supplement referred to in subsection (5) in respect of his or her mortgage that incorporates a change in any terms or conditions of the mortgage that applied when the mortgage took effect, and for the purpose of assisting that person to resolve any difficulties he or she may have in meeting his or her mortgage repayment obligations. In other words, this statutory definition of alternative repayment arrangement is different from the code of conduct definition. There will be considerable confusion about this. The welfare officers will have to go back to the statute. The statute requires a change in the terms and conditions when, in fact, the code of conduct prohibits changes in terms and conditions in certain circumstances, particularly in tracker mortgages, and it is supposed to be for the purpose of assisting that person to resolve any difficulties he or she may have in meeting his or her mortgage repayment obligations. The definition includes any practice, referred to in a code of practice - we know the code of practice to which the Minister has referred but the Bill refers to any code of practice - that is specified for the purpose of resolving any difficulties with meeting mortgage repayment obligations.
That definition is very broad and all-encompassing. In some ways it is separate from the definition of alternative repayment arrangement in the code of conduct that we are used to. It will lead to considerable confusion. It will increase poverty traps and will put the borrower in an even more vulnerable position with the banks because he or she is now going in with €100 a week less than he or she had. By definition, if we pass this section, the customers are in a weaker position.
The flip side to that is that the Minister must make some statutory provision before the section comes into effect to enable these debt advisers to be put in place in order to give the vulnerable borrowers a strong arm when they go into the banks.
On the status of the code of conduct on mortgage arrears, to be clear, the last major revision of the code was 1 January 2011. The code sets out how mortgage lenders, referred to as "lenders", must treat borrowers in or facing mortgage arrears with due regard to the fact that each case of mortgage arrears is unique and needs to be considered on its own merits.
The code sets out the framework that lenders must use when dealing with borrowers in mortgage arrears or in pre-arrears, and such cases must be handled sympathetically and positively by the lender with the objective at all times of assisting the borrower to meet his or her mortgage obligations. This code acknowledges that it is in the interests of both the lender and the borrower to address financial difficulties as speedily and as effectively as circumstances allow.
As for the legislative basis, this code is issued under section 117 of the Central Bank Act 1989. It is not true that the code has no legislative basis.
It is under section 117 of the Central Bank Act 1989. The Central Bank has the power to administer sanctions for a contravention of this code under subsection (3C) of the Central Bank Act 1942 and lenders are reminded that they are required to comply with this code as a matter of law. As I stated, the last major revision was effected from 1 January 2011.
The code is the code of the Central Bank. It applies to all registered entities. On an appeals board, the lender must establish an appeals board to consider any appeals submitted by the borrower and to independently review any of the following: a decision by the lenders arrears support unit; the lender's treatment of the borrower's case; or the lender's requirement with the requirements of the code.
If I recall, Professor Kilborn, in his presentation and in his slides, specifically instanced, for instance, jurisdictions such as France. I recall the slide he used has a French flag flying over it. He was instancing the fact that France has these kind of tough procedures which force the hands of the lenders.
In this case, what is in it for the lender is that the Department of Social Protection has set aside a budget of €50 million. Senator Byrne might ask what, in the overall scheme of things with banks, is a mere €50 million and I can understand that. Nonetheless, the banks are very anxious to have as much payment towards the debts of their poor unfortunate customers in mortgage difficulty and what we need from those banks is a balanced response to assist people.
The following, to which Senator Byrne referred, may be of interest to the Senators. In terms of the duration of mortgage interest supplement in 2011, roughly 37% of those receiving a mortgage interest supplement were doing so for one year or less; some 26% were receiving it one to two years; and the balance of over 40% were somewhere between two years and six years. The mortgage interest supplement was originally meant as a short-term supplement. On Senator Byrne's query about the term "mortgage" as opposed to "housing loan", of course, the mortgage interest supplement was originally to help those who had a local authority loan, for the most part a housing loan, who had unexpectedly lost their employment. In that sense, it was almost one arm of the State - the local authority loans were centrally funded by the State - assisting somebody to stay in a local authority because if the person had lost the local authority house that he or she was buying, he or she would have ended up back in another local authority house.
There is a problem for some. If the mortgage interest supplement goes on for a long period of time and the recipient gets an opportunity of employment, he or she may - a little like in the case of the rent supplement - find it difficult to accept the offer of employment because he or she is so reliant on the mortgage interest supplement. This is an area where we must look at what we can do that improves the interaction and the commitment, in particular, of the lender, to deal with the mortgage arrears and to deal with the borrower with a view to assisting the borrower to be able to stay in his or her family home and over a period of time, to meet his or her commitments or to revise his or her commitments to meeting a mortgage. That is the objective.
What training is being provided to staff? Who decides if an alternative repayment arrangement is not being complied with? This is an intolerable burden to be putting on the community welfare officer. I do not know how he or she will do it. He or she will have to go through all of the documentation to ensure it has been complied with.
The Minister has not answered the question as to what happens if the bank refuses to put an alternative repayment arrangement in place. There is nothing there. I reiterate the point that there is no incentive on the banks to do it. There is no obligation in the code of conduct. While the statute requires a change in the terms and conditions of the mortgage, the code of conduct does not require it. This measure is badly thought out and drafted. The idea is good in principle but the Minister should take it back to the drawing board and this section should be withdrawn.
I am in agreement with the Minister on much of what she has said. However, I think the argument in some ways is effectively to force the lenders to ensure that they are participating in that code of conduct. It is to force the lenders to do that for a period of a year because, as Senator Byrne has indicated, even though the lender is obliged to explore alternative payment options, as the Minister has identified and all the different criteria such as those of the Central Bank, they are not obliged, ultimately, to offer any alternative repayment options. Therefore, for that period of a year at this stage, the Minister is almost saying she is forcing the lender at least to engage and to ensure the lender is following that code of conduct for that year. However, the people who are in difficulty will no longer receive the mortgage interest supplement. From the statistics provided by the Minister, 37% of those - I may be misinterpreting those figures - are on mortgage interest supplement for a year or less. Is it the case that as we move forward, that large percentage of people will not have access for that year? As the Minister rightly points out, it ought to be and should be short-term support, but what is short-term support and would it not be within that first period of one year? As I suggested in my opening remarks, I wonder if this amendment is moving towards abolishing the scheme, as distinct from attempting to provide a short-term support within that period of a year.
I refer to the interim report of the expert group on mortgage arrears, the Cooney group, which recommended a six-month deferral as distinct from a 12-month deferral. I ask why the Minister chose six months instead of 12 months but this amendment, without adequate protections for the borrowers that may be put in place when that personal insolvency legislation is ultimately enacted, is effectively taking away any type of short-term support for borrowers.
I reiterate that one is endeavouring to bring the lender into a process whereby the lender has to make certain accommodations with the borrower. In most cases, a borrower will get into difficulty over quite a period of time and it does not tend to occur instantly. The measure is an effort to ensure that the lender engages in the process.
Senator Byrne asked what expertise was available to the Government. The Department funds the Money Advice and Budgeting Service whose money advisers are located around the country. Many of these advisers are expert and very helpful to individuals in negotiating-----
I ask the Senator to bear with me. I have met the people at the coalface and I am not satisfied with the level of engagement by banks. In reply to Senator Zappone's question as to whether existing borrowers would be affected, the answer is "No". This provision applies to new entrants into the process.
If there was more engagement by the lenders at the very beginning of the process, it is quite likely that fewer borrowers would end up in the same level of difficulty. That is one of the problems. This legislation is only a very small part of the total picture but it is a substantial financial commitment. Following our discussion this morning, I ask what would €50 million do for after-school care but instead this amount is going to the bankers. In the scheme of things and considering what the banks have cost the country, an annual commitment of €50 million is probably relatively small. In the scheme of what has been identified as important expenditure, we must see if a structure can be created where the mortgage arrears process is enforced and the lenders must engage before they are in receipt of support from the Department. The community welfare officers have joined the Department since last October. When they joined the Department, I requested the information which I have been giving to the House. I will ask my officials to provide Senators with the details of the numbers involved in the different counties who are in receipt. The county with the biggest number is Dublin, with more than 3,000. I note that County Meath has approximately 1,300; County Carlow has 345; County Cavan has 427; County Wicklow has 520; and County Offaly has 282. It is very widely spread throughout the country. This system was designed for a different period. We need to keep the system but we also need to require more of the lenders. I appreciate the concerns of Senators on both sides of the House that this could adversely affect the borrowers but, to be honest, we must also try to leverage the financial influence we have in our payment of the mortgage interest supplement to influence the behaviour of the lenders so that they will comply with the possibilities offered by the mortgage arrears resolution process.
What the Minister describes would be achieved if there were an obligation on the financial institution, the mortgage lender, to enter into one of these alternative repayment arrangements. There is no such positive obligation. I agree they have to be nice and think about all the aspects of the case and engage with the borrower. There is an obligation on the vulnerable borrower, but not on the banks, and it is the same old story.
The Taoiseach and the Tánaiste meet the banks quite regularly to talk to them about how they are dealing with poor, unfortunate families who are worried about keeping the roof over their head. In addition, the regulator, Mr. Elderfield, also has regular meetings. I am certain the observations of the Senators reflect their experience from meeting people in this kind of trouble, to both the Taoiseach and the Tánaiste and to the Governor of the Central Bank and the Financial Regulator. I remind the Senators of the status of the code of conduct.
The Seanad Divided:
For the motion: 24 (Ivana Bacik, Colm Burke, Deirdre Clune, Eamonn Coghlan, Paul Coghlan, Michael Comiskey, Martin Conway, Maurice Cummins, Michael D'Arcy, John Gilroy, Jimmy Harte, Aideen Hayden, James Heffernan, Lorraine Higgins, Caít Keane, John Kelly, Denis Landy, Marie Maloney, Mary Moran, Tony Mulcahy, Michael Mullins, Catherine Noone, Pat O'Neill, Tom Shehan)
Against the motion: 16 (Thomas Byrne, David Cullinane, Mark Daly, Terry Leyden, Paschal Mooney, David Norris, Darragh O'Brien, Denis O'Donovan, Ned O'Sullivan, Averil Power, Kathryn Reilly, Jillian van Turnhout, Jim Walsh, Mary White, Diarmuid Wilson, Katherine Zappone)
Tellers: Tá, Senators Ivana Bacik and Paul Coghlan; Níl, Senators Ned O'Sullivan and Diarmuid Wilson.
Question declared carried.
I will not delay the House but I have a general question. In section 15 the Minister is making provision for information for the purposes of establishing identity. I presume this is part of the scheme to introduce an identity card with a photograph and various technical innovations. The Minister's Cabinet colleague, Deputy Varadkar, was in the House recently and he indicated that he would be introducing a similar type of card for driving licences, once the driving licence scheme is centralised and set up. He indicated there might be an amalgamation on this between Departments. How far advanced is the scheme in the Department of Social Protection? Am I correct that the Minister's predecessor, Deputy Ó Cuív, initiated this process? How long will it be before the cards are available? These cards are not just about establishing identity but also about stamping out fraud. Are there ongoing discussions about introducing a combined card that will incorporate everything, in a similar way to the identity card used by the French?
The Department has commenced the phased introduction of the new public services card as part of the standard authentication framework environment, SAFE programme. The introduction of the card and the associated registration process has been piloted in a number of local offices around the country, including in Tullamore, Sligo and Kings Inns in Dublin. So far, approximately 6,000 cards have been issued on the pilot programme. From the Department's perspective, as well as combating identity fraud, the public services card will, in time, replace cards currently in use, such as the social services card and the free travel card, with a highly secure card which has a photograph and a signature.
This section requires that as part of the conditionality of applying for a social welfare payment, people must agree to have their photograph taken for the purposes of the card and be willing to supply a signature. We hope to issue a couple of hundred thousand cards this year. As the Senator knows, new claimants and jobseekers currently collect their money at their local post office and we plan to roll out the new cards for them in particular. When the new technology is fully operational, when claimants go into their post office with their card, the card will be put into the machine and the claimant's photograph will come up on screen for the post office assistant. This will be of a biometric standard and will provide counter staff with a reliable guide as to whether the claimant is the person on the card. This should be of significant assistance with combating identity fraud, which is a problem. Fraud might involve someone claiming for an Irish person who has gone abroad, a person claiming for an immigrant who has left or a case of multiple identities. In the past year, the Department has prosecuted a number of people for serious multiple identification fraud.
Identification fraud involves significant moneys. If someone builds up six or seven identities and claims social welfare for each of them, he or she defrauds the Department of a significant amount within a short period of time. This provision ensures that the new card comes into universal use over the next couple of years as it is rolled out. This will enable us to build up a more secure identification system. As regards the driver's licence, I understand this will be a separate card. However, the social and public services card will be available for use by other public services because it has the capacity to carry a significant amount of encrypted data. For instance, the use of the card for access to health services would strike me as being one such use. The card will probably be of value with regard to some areas of educational services, such as grants. The first step is to organise the issuing of the cards. This project has been discussed over a long period but I am happy to inform the House that the first roll-out began last September on a pilot basis. We hope to move to the issuing of significant numbers of cards in the near future.
I support the Minister on this initiative. For far too long, there has been flagrant abuse of the ordinary PPS card where anyone can present with another person's card. In my experience in this field I have seen it happen for far too long. I recently heard of the case of a family returning from England who had been in the UK for 15 years and other individuals had been claiming social welfare on their cards for all that time. I hope this new system will deal with this problem but I would be concerned that anyone using a double identity under the current system could still be able to use a double identity with the facial recognition card as all they have to do is present it twice in two different areas. I hope the system will be able to detect such fraudulent activity. The system should also use biometric fingerprinting in the future.
Before the Minister replies I wish to add to those concerns voiced by Senator Kelly. I assume that modern technology allows for these cards to be hacking proofed. I understand these biometric systems are very advanced and have helped in the reduction of credit card fraud. The point is well made.
The Department has devoted a long number of years' work into the development of this system. Biometric identity security is very well advanced. For example, members of gyms and other clubs are perfectly happy to allow their thumb print or iris print as a confirmation of identity. At this stage, our system relies on a photograph and a signature. I will come back to Senator Kelly as regards his query. Identity fraud is a big problem in modern social welfare systems right around the world because clever people can abuse the system. The courts have taken a very stern view of individuals who commit identity fraud. I refer to a number of such cases last year in which custodial sentences were handed down to persons with multiple identities and this is a growing problem. The development of the card will significantly enhance the Department's capacity to deter this kind of fraud.
I oppose section 16. When the Minister launched the Pathways to Work scheme, she stated: "I am trying to ensure that people don't find the security of the social welfare system more attractive than the risky world of work." This sits with the Minister's own lexicon when she used the term, "lifestyle choices" recently. This rationale ignores the reality that employers have been forced to reduce people's hours, left, right and centre, as a consequence of the recession. The people who will have their income cut as a result of the provisions in this Bill are not plodding along happily in part-time employment; many of them are in enforced under-employment. Through no fault of their own they have lost part of their job or at least they have lost many of their hours. I do not intend to dwell on this section so I will keep my contribution brief. Does the Minister think it is easy to go out and find a second job or find an employer who will be happy to offer the hours that fit neatly and precisely with an existing job? Jobseeker's benefit is an insurance-based scheme so these cuts, in my view, are an insult to those people who have worked, who have accrued their entitlements, have hit hard times and yet now they are being penalised. I do not regard this as fair and for that reason I oppose the section. I await the Minister's response.
I support Senator Cullinane's remarks. There seems to be more than anecdotal evidence that there has been a considerable tightening up by Department inspectors with regard to those who are in part-time employment. I have feedback from some of the partnership companies who are dealing with people who have fallen through the economic basket and they are finding it somewhat intimidating. I ask the Minister to outline the policies with regard to enforcement.
One of the strange features of the Irish social welfare system is that the calculation of days goes back to when social welfare was first created. The social welfare week is based on a six-day week and Sunday is not included for calculating earnings for social welfare purposes. This goes back to the time when people often worked a half day on Saturdays and the only people who worked on Sundays were, by and large, public servants such as nurses, doctors and firemen, for example. There was very little issue of such workers ever being in receipt of social welfare.
As announced in the budget I propose to bring the social welfare week to a five-day week this year in accordance with long-established employment practices and next year I propose to have Sunday earnings taken into account where a person works on a Sunday. It is possible that some workers earn a significant part of their income through working on a Sunday, perhaps in a sector where Sunday working is very significant. These are changes in social welfare which over a period of time will help the social welfare system to reflect modern working arrangements as they apply currently.
The effect of this measure will not impact on anyone whose sole income is from social welfare. The headline rate of €188 per week for a single person is unaffected if the person does not have any additional income from employment in respect of days worked. It will only apply to those who have earned additional income from working some days during the week. In the current fiscal context some savings will also be achieved. At present, a single person in receipt of jobseeker's benefit who works three days a week receives €94 of their jobseeker's payment, that is 50% of it, in addition to their income from employment. The income from employment will vary according to rates of pay and amount of time worked each day but as jobseeker's benefit is not means tested, no regard is held to this when paying the €94.
The effect of this measure will be to reduce the contribution from jobseeker's benefit to the weekly amount of total income, welfare plus wages combined, and help towards a reduction in reliance on social welfare among those who currently avail of a mix of welfare and earned income. It is proposed to base the payment week for jobseeker's benefit on a five day week. Payment is currently based on a six day week. This effectively brings all casual part-time workings into the same method of calculation of payment as systematic short-time workers. If a person normally works full-time but their employer reduces the number of days worked on a permanent basis, the person may get jobseeker's benefit for the days they do not work. For each day a person is unemployed, one sixth of the normal rate of jobseeker's benefit is currently payable. For example, if they get part-time work for two days, they can get four sixths of the normal jobseeker's benefit for that week. This measure proposes that from July 2012, for each day a person is unemployed, one fifth of the normal rate of jobseeker's benefit is payable. For example, if a person gets part-time work for two days, they can get three fifths of the normal jobseeker's benefit for that week.
There has also been some comment to the effect that the measure acts as a disincentive to additional employment. In this regard, the following key points may be noted. Under the measure, people working zero, one or two days per week will continue to have a financial incentive to take up additional employment even at the national minimum wage. Losses currently experienced where a person working three days a week gains a day of employment and thereby exits the social welfare system are lessened by the measure. Under the measure, jobseeker's benefit customers will continue to receive benefit for the same number of weeks as provided for currently.
In some cases employers who have people on short-time working and want them to take up more work because conditions in the business have improved have found exiting the social welfare system becomes quite difficult because of the basis of the six day week. It has been suggested that if the social week were more aligned with reality in terms of how people work nowadays, this would be a reform which would be worthwhile in the longer term. It is proposed to address the Sunday issue in the legislation for next year. In general, there are significant numbers of people who work on a part-time basis. If we could get employers to offer people more employment, the savings to the social welfare system would be considerable and it would allow us much more scope to do some of the things people have identified at different times of the debate on the legislation.
I wish to address the proposed changes to the jobseeker's benefit, to which the Minister has referred. Where a jobseeker's benefit recipient works for part of a week the payment entitlement will be based on a five day week rather than a six day week. This means a number of conditions will apply. The basic premise is that if one's working week is reduced to, say, two days, up to now one would have got four days of jobseeker's benefit. That is based on the six day rule. It is now proposed that it be reduced to a five day rule. The difference that will mean in one's take home income will be significant. Under the previous system if one worked two days and received four days benefit, one would receive a take home income of €125.33 per week and under the new proposal of working two days and receiving three days benefit, one would receive a take home income of €112.80 per week.
Fianna Fáil is totally opposed to these cutbacks. There are more than 133,000 part-time and casual workers on the live register. A substantial number receiving the benefit of the universal social charge cut will find it immediately taken away by the social protection cut. The universal social charge cut will cost the Government €47 million but it will claw back €27 million in reduced social protection payments to part-time workers. Once more the Government is clearly hitting vulnerable low income people - workers who can only work part-time due to the lack of job opportunities available in the current recession. The Minister referred to employers taking on more workers and I have relentlessly drawn attention in the Seanad to the fact that the banks will not give money to small and medium sized companies. The Governor of the Central Bank has vociferously said this. The Minister, Deputy Bruton, is listening to the bankers who say they are giving loans to business but he is not listening to what ISME or the Small Firms Association are saying. Unless the banks give money to companies they cannot develop and grow their business. It is as simple as that.
The Seanad Divided:
For the motion: 26 (Ivana Bacik, Colm Burke, Deirdre Clune, Eamonn Coghlan, Paul Coghlan, Michael Comiskey, Martin Conway, Maurice Cummins, Michael D'Arcy, John Gilroy, Jimmy Harte, Aideen Hayden, James Heffernan, Lorraine Higgins, Caít Keane, John Kelly, Denis Landy, Marie Maloney, Mary Moran, Tony Mulcahy, Michael Mullins, Catherine Noone, Susan O'Keeffe, Pat O'Neill, Tom Shehan, Jillian van Turnhout)
Against the motion: 14 (Thomas Byrne, David Cullinane, Mark Daly, Terry Leyden, Paschal Mooney, David Norris, Darragh O'Brien, Denis O'Donovan, Ned O'Sullivan, Averil Power, Kathryn Reilly, Jim Walsh, Mary White, Diarmuid Wilson)
Tellers: Tá, Senators Ivana Bacik and Paul Coghlan; Níl, Senators David Cullinane and Kathryn Reilly.
Question declared carried.
I move amendment No. 9:
In page 25, between lines 19 and 20, to insert the following:
'Green Fund' is a guaranteed and interest bearing fund to be established by the government to promote energy efficiency and create jobs;".
Amendments Nos. 9 and 10 are grouped so I will speak to both of them. They provide for investment in reliable investments such as Government bonds, which is useful for pension funds and would also aid Ireland. That is the way it should be but instead much of the capital in pension funds is being lost to us. It goes abroad into other types of investment, including into foreign government bonds. The Minister would agree with the logic of what is proposed, namely, that we force or encourage pension funds to invest some of the huge amounts of money they invest every year into actions that will create jobs in this country. We proposed this in our pre-budget submission and it was also put forward by the Irish Congress of Trade Unions in its pre-budget submission last year. It makes perfect sense.
The pensions component of this Bill is of value and I support the main objective of this section. It is good that the Government recognises the need for legislation to promote greater prudence on the part of pension schemes. However, we are missing an opportunity in this Bill in terms of encouraging some of the funds to invest in Ireland and its economic recovery. That is not guaranteed in this section. Irish pension funds fell much further than those of other countries, largely because they invested so disproportionately in equities. Those funds are still being invested disproportionately in equities. This Bill should have been used to channel Irish private sector pension funds, which are currently estimated by the Irish Brokers Association to be of the value of €80 billion, into more specific strategic and employment intensive investment initiatives in Ireland. We propose that 7% of that should be invested in job creation and investment ideas. It would make perfect sense.
I referred to our pre-budget submission. In that we recommended that €5 billion from the funds be invested in a housing energy retrofit programme, which could create up to 50,000 jobs. The Labour Party's election manifesto also referred to retrofitting and said that investment in this area would be an incentive and opportunity to kick-start economic growth and get people back to work. It would act as a stimulus. We are told that what this country most needs at present is a stimulus for jobs and investment, and creative ways to use whatever funds that might be available to create jobs. This is an area the Government should consider.
I do not believe the Minister will accept the amendments today but I hope she will examine the sentiment expressed in them and explore the possibilities that might exist for next year. Sinn Féin has consistently argued since 2009 that the State needs a stimulus and more State investment to create jobs. It is difficult in the current climate to find the necessary funds to fund a stimulus, so we must be creative and think outside the box. Compelling some of these companies to use some of their funds for investment in Ireland is a logical step to take. I hope this is something the Minister and the Government will consider. I would like her to accept the amendments but similar amendments were not accepted in the Dáil, so I assume they will not be accepted today. However, I hope the Minister will at least accept the sentiment behind the amendments. Is it something the Government will consider in the context of next year's budget?
We referred briefly to this last Friday. We proposed inserting a new section in the Bill but it was ruled out of order. It would have allowed early access to tax free cash for funded pension schemes. I believe there is merit in that proposal. I am aware from our discussion on Friday that the Minister intends to bring forward more substantial pension legislation and we welcome that. We should think outside the box in this regard. As Senator Cullinane mentioned, the Irish Brokers Association produced a very good paper on this. Not surprisingly, it was not supported by the Irish Association of Pension Funds. Why would it want people to take their funds out early? However, there would be no cost to the State. It would involve allowing early access to the tax free cash element of a pension scheme, which somebody can draw down at retirement anyway, if certain criteria are met. However, our proposal was ruled out of order so it is a discussion for another day.
With regard to the amendments before us, I understand the sentiment behind them, but the logic is a different kettle of fish. I do not believe any Minister for Social Protection can direct a pension scheme trustee to invest his or her money in any way, shape or form. However, there is something that can be considered in the future. Fianna Fáil proposed in its pre-budget submission to allow an option for pension schemes, be they Irish or international, to invest 5% of their funds in Irish infrastructural projects. We could set up an infrastructural fund. If that option was taken up, they could be relieved of the 0.6% pension fund levy. It might be a carrot and stick approach to encourage them to take that option. Infrastructural investment for pension schemes is something many pension funds across the world are seeking. It gives a good solid return. For projects such as metro north and metro west we must think outside the box as to how we can fund them.
I mention this because the Minister has done a great deal of work in the Department on the pensions area and how we might harness the more than €80 billion in pension funds. The State cannot utilise it. For that reason, while I understand the sentiments behind the amendments, I am surprised they are considered in order because under pensions legislation, the State cannot direct scheme trustees to invest funds in any area. If we legislated for that, there would be a flight of pension funds out of the country. It should also be remembered that many European and worldwide pension funds are managed and based in Ireland. I believe, therefore, that the amendments are ultra vires, although it is no harm to discuss them.
Can the Minister give an indication of the approximate timetable for bringing forward the pension legislation? We have done a great deal of work on the issue of early access to tax free cash. Will the Minister allow a consultation period on it, as we did with the Green Paper, whereby we could submit our ideas in this area? The infrastructural investment idea and allowing a way out of the private pension levy, which I have spoken about at length over the last few months, are positive areas we could examine which might gain the support of pension scheme trustees.
There was an aspect of pension funds that annoyed me intensely during the Celtic tiger years. Like many people, I have invested in private pension funds and I must admit that I have dabbled, and I use that word advisedly, in the stock market over many years. Some people like to dabble in horse racing or the lotto, but I always had an interest in balance sheets and seeing how they would perform. I would hate to describe how they look now. However, it annoyed me intensely that Irish pension funds overwhelmingly invested in Irish banks. Time and again I recall contacting Irish-owned pension funds, such as Irish Life and New Ireland Assurance, and asking them to justify this. I discovered that in some instances they were actually owned by the banks in question or had some financial link with them. I could never understand why the pension fund managers never looked outside the box but instead put all their money into the same basket. We saw what happened.
As a consequence, since 2008 many defined pension funds have more or less tanked and people who had looked forward to a comfortable retirement are in serious distress. Ironically, Irish pension funds in recent years have been investing increasingly abroad, mainly in Germany, but now are being encouraged to return and to invest in Ireland. However, the scenario has changed dramatically as rather than investing in Irish banks, it now is envisaged that they would invest primarily in Irish infrastructure. Although I agree with the sentiments and motives behind the Sinn Féin amendments, they beg the question as to whether the money would realise a capital return even were the trustees in agreement with the proposals. Ultimately, the responsibilities of the trustees lie in deciding where to invest the money to ensure there is a capital return on the investments for those who contribute to the funds.
Senator Darragh O'Brien also referred to this point but one of the most calamitous decisions taken by the present Government was to abandon metro north. That decision will haunt this Administration-----
The reason I raise metro north is because of a question that arises in respect of the sovereign bonds the Government intends to issue to encourage pension funds to invest in Ireland inc. The question arises from Senator Cullinane's contribution, in which he stated the establishment of this particular fund would result in money being invested in the Irish economy. Where was the money when the metro north project was still extant? The cost of metro north had reduced considerably, as a result of infrastructural costs declining rapidly, from original prices of something between €4 billion and €4.5 billion.
This would have an immediate impact and an impact nationally. For example, it would have an impact on the decision regarding the location of the national children's hospital. A range of issues arise, including the number of jobs that would have been created as a result of its establishment, as well as its creation of direct links from Dublin Airport to the city centre, links which Dublin alone of all the major capital cities of Europe lacks. All businesses in north County Dublin also were heavily supportive of the project. I acknowledge the metro would run through the Minister's constituency and that she supported it. I express the hope, in the context of the amendments, that this project will be revisited within the present Administration's term of office. I make this point primarily because of all the praise given to the Government by the troika in respect of the monetary process under way, its single major criticism of the budget was the Government over-compensated by reducing the capital programme. This was the only aspect of the report singled out by the troika, which stated it was counter-productive. This debate concerns methods to stimulate growth in the Irish economy and in this context, it appears obvious that the Government must revisit major infrastructural developments such as metro north. It should start with the latter project and then work its way down towards the myriad of local authority schemes relating to national, county and regional roads that would provide real employment.
In the context of the ongoing debates and discussions on how this €80 billion can be used, I take Senator Darragh O'Brien's point well and am sure the Minister will make the same point, namely, she cannot force the pension funds into investing. However, I hope she will provide the environment in which jobs can be developed. In the main, governments do not provide jobs directly but tend to create the environment in which they can be created. This should be a key part of the Minister's discussions with her Cabinet colleagues. The Minister needs no reminder that the ultimate beneficiaries would be the country as a whole, the people of north County Dublin and the national constituency that would make use of the benefits of metro north.
No one in the Chamber would disagree with the necessity for a stimulus package for the economy. I agree with Senator Darragh O'Brien and I like his thinking in this regard. It would be both good and innovative to invest a limited amount of Irish pension funds, which at present are valued at €77 billion, in infrastructural projects. The State is the only agency that can capture the value of infrastructure investment and the Labour Party is greatly in favour of a stimulus package. Members will recall that a few weeks ago, Labour Party Senators proposed investing or incentivising the pension industry to invest in seed funding for businesses with particular regard to risk capital. An investment of 0.01% of the entire pension fund would achieve a fund of approximately €70 million, while an investment of 5% would yield approximately €350 million, which would be very welcome.
That said, ways to incentivise the industry must be found because the idea of compelling the industry is neither legal nor desirable. Most prudent economic commentators probably would agree with me on this point because the entire theory underpinning the provision of pensions concerns risk diversification across sectors and across geography. It is a good job that this is the theory because one can imagine what would have happened, for instance, had Ireland's pension funds trustees decided to invest in the banking industry by investing in Anglo Irish Bank or similar institutions in previous years. In common with most things Sinn Féin does, its amendment looks highly attractive at first glance. However, when one gets into its detail, one finds a little more complexity is involved. Consequently, I am not in favour of the amendment but I would certainly encourage the Minister to find a mechanism by which one could incentivise the pension industry to invest more in Irish infrastructure.
Senator Darragh O'Brien, who has touched on this issue on previous occasions, worked in the insurance business in a previous life, as did I, and we probably have similar views on pension funds. Basically, the amendment proposes that the Government should borrow money from private pension funds to fund infrastructure. At present, the Government cannot borrow money from anywhere except from the European Union and the IMF. Consequently, were it my pension fund, I probably would operate on the same logic as that used by the rest of the money markets, that is, until stability is achieved it would be extremely difficult to commit one's money to Ireland unless one knew the money would be repaid. At present, those who are calling for a "No" vote in the referendum are placing a risk on people's pension funds, were the latter to invest in the country. Members are aware that Ireland cannot borrow money from anywhere and this amendment essentially concerns borrowing money through a private pension fund.
Many people have private pensions and while I would welcome money coming back into the economy from pension funds, it should be for the right reasons. It should not be, as Senator Gilroy noted, on foot of being compelled to so do by a diktat that satisfies a certain constituency in the country. One should recall that such pension funds do not comprise profits from companies but are the savings of ordinary people who have worked hard all their lives. Moreover, I note that at present, many pension funds have reduced in value. It sounds extremely attractive to suggest one should put money into a green fund, although I do not know how that would be defined. At the same time, however, Sinn Féin is telling the rest of the world that while we do not want their money, we seek their private pension fund money. Consequently, I cannot agree with this amendment and I am sure the Minister will share that opinion.
It is interesting that it is the two Labour Party Senators who disagree with what has been called for by the Irish Congress of Trade Unions, which is very similar to what Sinn Féin proposes. Senator Harte made the interesting point that the Government cannot currently borrow money, which is true. We cannot borrow money because investors do not have confidence in Ireland or in what the Government is doing. The Senator's party leader stated at the Labour Party national conference - I use the word "national" loosely - that Ireland would be a 26 county-----
It is typical of the Minister to be flippant about jobs and the need for this country to get people back to work. The Minister knows exactly what we are talking about, which is a green fund in the sense of a fund for Ireland to get people back to work, one which will enable us do much of what was in the Labour Party's pre-election manifesto, including the retrofit programme. The Labour Party also referred at that time to the establishment of a strategic investment bank. What has it done in that regard? Will such a bank be established?
The Minister might spell out when and how it will work. The Labour Party also said it would put in place a retrofit programme which would get people back to work. I hope the Minister will appreciate the logic behind the amendment. We need to be creative and to think outside the box. There was constructive criticism of the legality of the amendments in terms of whether it is possible to "compel" but it is certainly possible to "encourage" and that is something we should do. I hope that the Government will consider this proposal in its negotiations on next year's budget.
Depending on the Minister's response, we may withdraw the amendment and take on board the constructive advice from the Fianna Fáil representatives. I will wait to hear what the Minister has to say before making a decision.
It is not often I agree with Sinn Féin but I believe Senator Cullinane is correct that we should be encouraging people to invest. We cannot dictate to trustees of pension funds where to invest their money but there is no harm in highlighting that this is a good area in which to invest.
I do not propose to accept amendments Nos. 9 and 10. As supplementary pension schemes are usually established under irrevocable trust the assets of the scheme are legally separate from the assets of the employer. Under trust law, trustees of occupational pension schemes are required to act in the best interests of scheme members and have the principal responsibility of ensuring that the entitlements of the members are adequately protected. In this context, the trustees have a responsibility to ensure that any investment made by the pension scheme is prudent, will generate a reasonable financial return and is in the best interests of scheme members. Senator Cullinane has indicated that he is aware of that requirement of trust law.
The pensions Act was amended in 2010 to facilitate pension scheme access to sovereign annuities and the underlying bonds referenced by these annuities. Much work has been done by the pensions regulator and the NTMA on ensuring the development of an Irish based sovereign bond - subject obviously to market yields - of a sufficient duration to provide matching assets for pension schemes. It is anticipated that the financial sector will develop sovereign annuities referencing these sovereign bonds. The reforms which are before us in the Act are part of the structure that will enable this to happen. In 2008, owing to turmoil in the markets the previous Government suspended the pension funding standard on a temporary basis. However, this "temporary basis" turned out to be four years, and counting.
In terms of the situation for the 1,200 plus defined benefit schemes, the restoration of the funding standard is a very important step - a difficult one for many of the schemes - in terms of restructuring, consolidating and protecting the benefits for members of the schemes. We are also introducing in this legislation the concept over a long period of time of a risk reserve which again will help to build up the security of pension funds. Pension funds have taken a hammering given the turmoil on the markets, which is difficult for the 222,000 plus members of defined benefit schemes.
Senators may be interested to hear that according to an Irish Association of Pension Funds survey - these figures are often given - the total assets in pension schemes at the end of 2009 was approximately €72 billion. There is a great deal of money invested, of which defined benefits account for approximately €48 billion and defined contribution schemes account for approximately €24 billion. One of the features of the defined benefit schemes, for reasons alluded to by Senator Mooney, is that their investment in equities is on the higher side, approximately 64%. These are the figures for end 2009. Bonds and cash account for approximately 28%. In terms of defined contributions, equities account for approximately 58%.
I do not have it before me but it is probably based on equities worldwide. The National Pensions Reserve Fund, when operational in the equities market, used various standard programmes for investment in equities around the world. Many defined benefit schemes are closed to new members and as such their membership is older. Obviously, as membership age in pension funds increases there is a move towards cash and bonds and away from equities. Many schemes are trying to recover their losses and the equities appeared to offer the best route in that regard. It has been an extraordinarily difficult time for them.
On the proposal from Sinn Féin, for technical reasons it would not be possible to accept it because it would be out of line with the legal obligations of the trustees of pension schemes. However, if one was looking to the further development of the eurozone and was trying to develop a product above and beyond the work being done in relation to blended annuities, which move away from purely German-based annuities, one of things at which one would look in the eurobond market would be the development of a type of eurobond or euro product which would have a guarantee on a European-wide basis.
The country is in a programme and if citizens agree to support the referendum, we will have access to the ESM which will give us access to funding. People advocating a "No" vote are saying they will advocate some alternative source of funding as yet unidentified by them. If there was a consolidation of the eurozone and a much stronger growth and investment pact within the eurozone, alongside the fiscal consolidation implied in the stability treaty, one could envisage having products relating to green energy - for example, building up the use of wind power in Ireland for sale into the wider European market in which pension funds could invest. If one was to do that with Irish pension funds or with anybody else's pension funds, one would have to have quite a conservatively structured product which would offer a return over a very long period time - perhaps an investment of approximately 30 to 35 years. That is the kind of product in which pension funds would be interested in having a percentage of their investment. That is certainly what people like Jack O'Connor, the president of SIPTU, and David Begg, the general secretary of the Irish Congress of Trade Unions, have referenced on a number of occasions.
However, it would have to be done on a very secure long-term basis carrying moderate rates of returns with low risk for the members of the pension fund because, at the end of the day, these pension funds are the property of the individual members of the pension fund who subscribe to them and in which they are saving for their retirement. One would have to have a very high level of security and act quite conservatively in regard to the investment strategy. It is not just a sum of money that one can put into this or that. One would have to structure it very well.
That was something between the former Minister and the promoters. I was always rather surprised that the price tag reported appeared to be as high as it was. I will not say more than that.
The unilateral decision was taken to give a unilateral guarantee to the banks which, in turn, had consequences for our capacity for further fund raising. The banks, the promissory notes and the NAMA structure have all imposed obligations on Ireland which are very difficult and onerous for taxpayers, so they limit our freedom of action in regard to other areas but I will not go into all of that now.
In regard to the amendments in respect of the pensions legislation, they are meant to provide a framework to restore the funding standard of Irish pension funds and, over a period of 11 years, after the funding standard has been restored over a three-year period, to introduce a risk reserve. We are talking about a long-term framework of reform in regard to defined benefit schemes which, hopefully, will help defined benefit schemes to come through what has been an extraordinarily difficult period. However, as I said, I will not be in a position technically to accept the amendments in the name of Sinn Féin.
I refer to finding a way to having structured investments. Work is ongoing on developing the annuity product. I am happy to say that I am confident that after this legislation is passed and assuming there is no further turmoil in the markets, we will see pension funds developing products in line with the work that is being done by the regulator and the NTMA. That would be a positive development. When we see how that goes, we may then, in the context of wider developments in the eurozone and assuming the fiscal treaty passes, be in a position to develop euro-wide products that would provide for the kind of investment everybody has referenced.