I move that the Social Welfare Bill 2011 now be read a second time.

The Bill will give legislative effect to certain Social Welfare measures announced in the Budget Statement of 5 December 2011, which are due to come into effect from 1 January 2012.

 

Budget 2012

German Chancellor Angela Merkel said recently that Europe faces its toughest hour since the Second World War.  We are certainly dealing with a global financial crisis of enormous proportions.

The European Union is at one of the most important junctures in its history as European leaders grapple with a banking, sovereign debt and currency crisis that has already lasted four whole years.

The initial crisis inIrelandwas home-grown, caused in large part by a reckless Fianna Fail-led government, their greedy developer pals, reckless bankers and lame regulators.

The home-grown problems have, however, been made greatly more difficult by the global financial crisis and the euro crisis in particular.

We have only a modest role to play in resolving the euro crisis. However, the job of getting the books balanced is one which is definitely within our control.

It is vital that this Government secures economic recovery in our country. To do this we must put the public finances back on a sustainable footing.  We must bridge the gap between Government expenditure and revenue which is currently filled by borrowing.

At present, there is a shortfall of €16 billion in the government’s finances. Unless the rate of borrowing is reduced, the burden of debt servicing will take up an increasing proportion of tax revenue.

This would mean that expenditure on vital schemes and services, such as those provided by the Department of Social Protection, would become increasingly unsustainable.

The government decided to make an adjustment of €3.8 billion between tax and spending in 2012.  Of this, €1.45 billion is to come from day to day spending including health, welfare and education. As the biggest spending Department, the Department of Social Protection must play its part in that adjustment.

This Department currently accounts for approximately 40 per cent of all current government expenditure. This means that four in every ten euros that the government spends are spent on social protection. The reality is that it is not possible to stabilise and reduce public spending without any impact on my Department’s budget.

However, despite the extremely challenging financial environment in which we find ourselves, the adjustment in social protection spending next year will be limited to €475 million or just over two per cent of the Department’s spend. This compares with a reduction in of €810m  in 2010 and a reduction in €515m in 2009 when the previous government was in power.

Some on the Fianna Fail benches have been critical of these measures. And I can assure you these are not the measures I would have hoped to introduce in my first budget. But let me very clear: this government has done more to protect the people who turn to the Department of Social Protection for help than its predecessor ever did.

We have minimised insofar as is possible the spending reduction in Social Protection because we recognise that people are totally dependent on the support provided by the State to enable them to eat, keep themselves warm, provide shelter for themselves and their families, and bring up the next generation of Irish workers.

There are many people out there who are “new to need” as a result of this deep and prolonged recession. On the outside they are coping, but behind closed doors they are just about making ends meet.

I want to make sure that these people do not slide helplessly into a cycle of deprivation and long term welfare dependency. I want to protect them from the worst consequences of this very deep recession by delivering on this government’s promise not to cut primary social welfare payments.  I want to ensure that the communities they live in remain sustainable and welfare spending contributes to this by stimulating and supporting local economies.

I want to make clear that the measures contained in the Social Welfare bill follow very detailed analysis and discussions by both parties in Government. Tough decisions had to be taken on where to reduce expenditure while at the same time trying to minimise the impact on those most in need.

Continued Support

Before I detail the areas where changes are being made, I would like to outline first the supports which are being fully maintained at their current levels, so as to provide reassurance to people who had been concerned that they might be cut.

This government has delivered on its promise not to cut primary social welfare rates.

The  personal rates of all weekly payments such as Jobseeker’s Benefit and Allowance, Illness Benefit, Invalidity Pension, Disability Allowance, Blind Pension, Carer’s Benefit, Carer’s Allowance, State Pensions, Widow’s Pensions and One Parent Family Payment will not be reduced next year. In addition, increases which are paid for spouses and partners are fully protected.

Extra allowances which are paid to pensioners who live alone and those who are aged over 80 will continue at their current rates. The Free Travel scheme and Free TV licence will not change.

The half-rate carers allowance scheme and the extra payment for caring for more than one person are retained as well as the Respite Care Grant at its current value of €1,700 per annum.  

Children and Families

I turn now to the question of supports for families.

In 2011 supports for children and families accounts for 12% of total social welfare expenditure or nearly €3 billion, of which €2 billion will go on Child Benefit. 

As we all know the environment in which a child grows up is a major determinant of health and success in adulthood. Social protection resources must be targeted to ensure that those most in need of support receive it but also to ensure the supports are used in the best way possible in the formative years.

The Budgetary measures that directly affect child related payments are measured and the rates of payment continue to ensure that the needs of families are met. The standard rate of child benefit will remain unchanged at €140. There will be no reduction in Child Benefit for the first and second child.

I find it amazing that Sinn Fein is so critical of this measure when you consider child benefit inNorthern Irelandis just €67.70 a month for the second and all other children.

I have a question for Deputy Gerry Adams: how can you stand over paying the woman in Newry just €67.70 for her second child, while criticising this government for maintaining the rate at €140 for both the first and second children.

Let me remind you: In 2012, the monthly rate for the third child in the Republic will be €148. It will be €160 for the fourth and each subsequent children. How come your party can only manage to extract €67.70 for the second child from your paymasters inWestminster, whereas we can still manage €140 despite being in a bailout programme?  Why is the child living in Lifford less deserving than the one in living Strabane?

I appreciate that reductions in Child Benefit will be difficult for some families. However the provision of cash supports for children is only part of the solution to providing better long term outcomes for our children.Irelandhas comparatively generous child benefit rates but this does not guarantees that our children fare better when they become adults. We need to look at the way in which we are using money to address these problems to find better and more sustainable outcomes.

Reform and New Principles

Since being appointed as Minister for Social Protection in March this year, I have looked with fresh eyes at the existing social protection system.  One of my key priorities has been to balance the books, in particular by starting to put the Social Insurance Fund on a sustainable footing. The fund is expected to have a deficit of €1.5 billion this year and another €1.5bn next year.

Rebates to employers and lump sums paid directly to employees are paid from the Social Insurance Fund (SIF).  I consider that the level of rebate of 60% is not sustainable in the current economic climate. I am proposing therefore to reduce the rebate amount to 15%.  While this may cause difficulties for some employers it should be noted that redundancy rebate payments to employers are not common in many EU and other jurisdictions. In theUKfor example, the redundancy payment is funded 100% by the employer and there is no recovery from the State.

Given the low level of employer PRSI payable inIreland, I do not see why we should dip in to a fund that is already in deficit to compensate often profitable companies for the cost of making their employees redundant inIrelandand, in some cases, transferring their employment abroad.

Benefit in Proportion to Contribution

A core principle of sustainable social protection systems in advanced economies is that citizens receive benefits in proportion to their contributions. Some of the changes that I am introducing today in the area of pensions put this principle in to practice.

One Person One Payment

Another principle is that we should gradually move towards a system where everyone should have an entitlement to one weekly income support payment only — with no special arrangements or top-ups for particular groups. 

It is no longer possible to have a social welfare system where some people get more than one primary weekly payment, if we want to avoid reducing the level of weekly payments generally.

We have delivered on our promise to retain core rates, but we are discontinuing entitlements to certain concurrent payments.

Savings

Just over half the savings announced come from five main measures.

First, I am reducing the rebate for companies who make staff redundant.

Second, the fuel allowance will in future be payable for 26 weeks, a reduction of six weeks. The level of the allowance and its duration have greatly increased during the last ten years. The scheme is unsustainable, given the increase in numbers and costs and the fiscal position of the State.

Of course, we are still paying the fuel allowance for the coldest six months of the year (mid-October to mid-April). It has always been the case and will continue to be the case that a person in difficulty with fuel or energy costs can go their Community Welfare Service. This service has now been integrated into my Department and they are ready to assist people in difficulty.

Third, I am reducing Child Benefit to €148 for the third child, while the rate for the fourth child is reduced to €160.

Fourth, I am increasing the minimum contribution to rent or mortgage interest supplement by €6 a week for a single person and €11 week for a couple.

Curtailing access to the Mortgage Interest Supplement scheme is consistent with the Keane Report on Mortgage Arrears.

I am determined to get value for the half a billion euro which the Department is spending on rent supplement each year. I also intend to reduce rent limits where appropriate to ensure that state support for rent supplement tenants does not give rise to inflated rental prices.

Fifth, the amount of earnings disregarded for the purposes of the One Parent Family Payment means test will be reduced from €146.50 per week to €130 per week next year. 

There are also a number of other changes to the One Parent Family Payment scheme. The scheme cost €1.1 billion in 2010, up from €751 million in 2005. Despite these significant levels of spending on one parent families, the results have been poor in terms of tackling poverty and social inclusion.

The budget announcement included a number of other measures which are not provided for in this Bill. Some of these measures relate to non-statutory schemes and do not require legislative amendments. Other measures will be implemented through regulations and through legislation to be brought forward early in 2012.

In that regard, I want to specifically welcome the PRSI base broadening measures announced by my colleague Michael Noonan, Minister for Finance, in the budget. The revenues of over €50 million to be raised from these measures will contribute to filling the €1.5 billion hole in the Social Insurance Fund.

I also welcome Minister Noonan’s recognition that absenteeism is a problem in both the public and private sectors inIreland. I will in 2012 bring forward proposals to deal with absenteeism in both the public and private sectors. I will engage in discussions with all interested parties and invite submissions from the public with a view to bringing forward a range of proposals.

I will also be introducing changes to Community Employment Schemes.

The number of CE Schemes operating currently is 1,143 schemes with 23,300 participants with an overall budget of €360m.  We will seek value for money reviews of schemes emphasising good outcomes and experience for participants. 

The National Training Fund will provide €4.2million for training on CE in 2012.  In addition, SOLAS will continue to provide access to its training programmes to CE participants.  The need for training on CE varies depending on the participants needs and how long they have already been on the scheme and the training already received. 

 

 

DSP will be spending €977m on employment supports (incl. CE schemes) in 2012, up from €882m in 2011.

It is in that context, that reforms in how labour market activation and labour market supports (including CE) are funded and managed is being looked at.  This includes looking at the funding received from other sources, including statutory organisations.

I would like to recognise that Community Employment Schemes provide a very important and valued contribution to Social Employment and training for unemployed people.  Many Community Employment schemes provide vital community services right across this country.

In addition, there are community and voluntary sponsoring organisations that receive funding from a multiplicity of state agencies, these will be examined in terms of their ability to continue the programme with reduced funding from DSP. 

DSP will be working very closely with the Department of Education and Skills with a view to the provision of training for CE participants.

As the government signalled yesterday, I will be proposing an amendment at committee stage to withdraw Sections 8 and 9 and 10 of the Bill. Those are the measures I had proposed to reform the Disability Allowance and the Domiciliary Care Allowance. I am sorry that this proposal caused such anxiety among people with disabilities and their families.

 

But I want to assure you that this is a listening Government. I have listened to the concerns of those affected by this proposed measured and as a result – as the Taoiseach told the House yesterday – the matter has now been ‘paused.’

 

I have asked barrister Ita Mangan, who chairs the Advisory Group on Tax and Social Welfare, to carry out a review of the Domiciliary Care Allowance and Disability Allowance in relation to children and young adults.

 

I also welcome the fact that Minister Brendan Howlin has allocated €20 million for activation measures, to help people get back to work, education or training including a planned programme in relation to people with disabilities.

 

Main provisions of the Bill

I will now outline the main provisions of the Bill.

Section 3 provides for the abolition of entitlement to payment of Disablement Benefit in the case of assessments of loss of faculty amounting to less than 15%, with effect from the beginning of January 2012.  Existing recipients of Disablement Benefit who have qualified for payment before 1 January 2012 on the basis of assessments of less than 15% will be protected. 

 

Section 4 provides for discontinuing the current entitlement to the payment of a half-rate qualified child increase where the spouse, civil partner or cohabitant of the beneficiary has weekly income in excess of a prescribed amount of €400 in the case of new claimants of carer’s benefit, State Pension (Contributory), State Pension (Transition) and Invalidity Pension, with effect from the beginning of July 2012.  This section also extends the reference to the “spouse” of the beneficiary, in the case of similar provisions applying to the Incapacity Supplement scheme, to include a reference also to the “civil partner or cohabitant” of the beneficiary. 

Existing claimants in receipt of the half-rate QCI will not be affected. .

 

Section 5 provides that the implementation of certain provisions of Schedule 6 to the Social Welfare Consolidation Act 2005, relating to changes in the entitlement conditions for State Pension (Contributory) and State Pension (Transition) with effect from 6 April 2012, will not apply to existing recipients of those pensions.  Paragraph 3 of Schedule 6 provides for the increase in the minimum number of paid employment or self-employment contributions required to qualify for the State Pension (Contributory) and the State Pension (Transition) from 260 to 520 with effect from 6 April 2012.

 

Section 6 provides for increasing the number of qualifying contributions required to qualify for the Widow/er’s and Surviving Civil Partner’s (Contributory) Pension.   Existing pensioners will not be affected by these changes. I will be proposing an amendment at committee stage to change this section to increase the number of paid PRSI contributions required to qualify for these Pensions from 156 to 260 from December 2013.

 

Section 7 provides for the discontinuance, with effect from January 2012, of the transitional measures which enable the One-Parent Family Payment (OPFP) to continue to be paid for a period of up to 6 months where a claimant’s weekly earnings exceed €425. Existing OPFP recipients who are benefitting from these transitional measures at the beginning of January 2012 will continue to receive the transitional payment for the unexpired balance of the 6 months period.

 

Section 8, 9 and 10: As the government signalled yesterday, I will be proposing an amendment at committee stage to withdraw Sections 8, 9 and 10 of the Bill.

 

Section 11 provides for the discontinuance of the payment of the grant for multiple births under the Child Benefit scheme with effect from 1 January 2012.   This section also provides for the phased alignment of the different rates of monthly Child Benefit payable according to the family size into a single rate.  The rates payable to the third and subsequent qualified children will be reduced with effect from 1 January 2012 and further reduced from 1 January 2013, when there will be a single rate of €140 for each qualified child.

 

Section 12  reduces the period for backdating claims to long-term contributory pensions such as the State Pension (Contributory), the State Pension (Transition), the Widow/er’s and Surviving Civil Partner’s (Contributory) Pension schemes and the Guardian’s Payment (Contributory), from up to 12 months before the claim was made to 6 months.  The new backdating arrangements will apply to claims for such payments made from the beginning of April 2012.

 

Section 13 amends the rules relating to the assessment of means for certain social assistance payments, including -

 

• the abolition of the income disregard for income from employment by the HSE as a Home Help in the case of all social assistance payment schemes, and
• increasing the proportion of income from farming and fishing assessed as means from 70% to 85%, for the purposes of the Farm Assist and Jobseekers Allowance schemes.

These amendments apply to both new and existing claimants of the relevant schemes with effect from 1 January 2012.

 

Section 14 provides that for the purposes of calculating means for the One Parent Family Payment (OPFP) the weekly earnings disregard is being decreased from €146.50 to €60 over a 5 year period commencing from 1 January 2012.  The annual reductions in the weekly disregard will apply to both new and existing OPFP claimants.

 

Part 3

Section 15 provides for amendments to the Redundancy Payments Act 1967 by way of a reduction from 60% to 15% in the rebates paid to employers from the Social Insurance Fund.  This reduction will apply in the case of rebates paid to employers on or after 1 January 2012 in respect of the statutory redundancy lump-sum payments made to employees who are made redundant on or after 1 January 2012.  Rebates paid to employers on or after 1 January 2012 in respect of the statutory redundancy lump-sum payments made to employees who are made redundant before 1 January 2012 will continue to be paid at 60%.

 

Committee Stage amendments

As I have already stated I will be introducing a number of amendments at Committee Stage These include amendments to provide for -

• changes to PRSI by extension of liability for share-based remuneration and the abolition of employer PRSI relief on employee pension contributions,

and

• changes to discontinue, for new claimants, entitlement to receive a weekly social welfare payment where a person is also participating on a Community Employment Scheme. 

 

 

Conclusion

The transition to a more balanced budget simply cannot be made without reductions in social welfare spending.  It is not possible to stabilise and reduce public spending without any impact on my Department’s budget. If we do not make these changes now we risk making the economic situation far worse for everyone, including welfare recipients, in the long term. We have done our best to protect the most vulnerable members of our society by maintaining the primary weekly social welfare rates and the main child benefit rates.

Even after these savings, this government will spend €20.5 billion on Social Protection in 2012 sending a very strong signal that we place a very great value on the role of welfare in protecting our citizens at this extraordinarily difficult time.

 

I commend the Bill to the House and look forward to an informed debate. 

 

Molaim an Bille don Teach and tá mé ag súil le bhur gcuid tuaraimí a chloisteáil maidir leis na míreanna atá ann sa dá lá seo atá romhainn.