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Dáil Éireann debate -
Tuesday, 25 May 2010

Vol. 710 No. 1

Priority Questions

Departmental Expenditure

Olwyn Enright

Question:

32 Deputy Olwyn Enright asked the Minister for Social Protection the amount that will be identified for savings within his Department in view of the instruction by the Department of Finance that departmental cuts of €3 billion must be identified within a month; and if he will make a statement on the matter. [21935/10]

As the Deputy will appreciate, the Government is keeping the current and prospective budgetary position under constant review in the context of its medium-term economic strategy. In that regard, the Government will consider in the coming weeks various possibilities for savings that could be advanced in budget 2011. As part of its preparations for that, the Government has decided that each Minister would identify possible savings within his or her remit and advise the Department of Finance of these by the end of this month.

In identifying possible savings I will seek to protect the vulnerable irrespective of age. The main objectives of the Government medium-term strategy are to assist economic growth and job creation through a restoration of competitiveness; to prevent the general Government debt rising to unsustainable levels; and to restore expenditure and taxation to more sustainable levels.

As part of the strategy, it was announced in budget 2010 that the Government intended to make a further adjustment in current Government spending in 2011 of the order of €2 billion. In addition, it is also intended to make adjustments in capital spending in 2011 of the order of €1 billion. Capital spending, estimated at just over €10 million in 2010 for my Department, forms a tiny fraction of the nearly €21 billion overall expenditure and of capital expenditure generally.

My Department is currently engaged in the process of identifying a menu of initial options for structural programme savings in 2011. This process will also have regard to the outstanding recommendations of the special group on public service numbers and expenditure programmes. The options identified will, in turn, be considered by Government as one element of its deliberations on budget 2011 over the forthcoming months.

It is important to stress that, at this stage, no decisions have been taken either by me or by the Government in regard to changes in social protection schemes and services in 2011. Rather the options which will be identified by my Department will be designed to assist and inform the Government's consideration of the next budget. The sustainability of public finances is crucial for all and I genuinely believe that the Government must take steps to reduce overall public expenditure and restore stability to the public finances if we are to avoid the risk of making the economic situation far worse for everyone in society. This includes the recipients of the various schemes and services operated by my Department.

The Government has already made difficult decisions in this regard and the next steps towards recovery will require further such decisions. At the moment, I am engaged in an intensive round of consultations with a wide range of welfare representative organisations and I am listening carefully to their views. In an uncertain international environment, my priority will be to ensure that the overall Government strategy is advanced and to protect those most in need in a manner which is sustainable in the years ahead.

My question was more specific than the Minister's reply suggests. I asked him to indicate the amount of savings he expects to be identified for his Department. Of the €3 billion in savings for which the Minister for Finance has asked, what specific proportion has been asked of the Department of Social Protection? If he has not been given a specific figure by the Minister for Finance, is he drawing up a list of proposed cost-saving measures, or how is he going about it? In short, has the Minister for Finance specified that X amount must be cut from the social protection budget or is it up to the Minister for Social Protection to come up with his own proposals?

There will be a preliminary identification of various options which will then be examined and costed. These will be the subject of discussion between me and the Minister for Finance and, later in the year, the Cabinet will go through all these options before final decisions are made. The amount of money to be saved by any Department will be decided collectively by the Cabinet in the run-in to the budget. It is early days in the process and I am currently considering the savings to be made in various areas. At this stage there are no specific proposals on exact savings to be made. That is not the way it is done.

The Minister said his priority is to protect the vulnerable irrespective of their age. However, recent comments of his, which he has not rowed back on, have raised concerns, particularly for pensioners. He has since provided some clarity in this regard but people remain genuinely worried. In the context of the budget for social protection, will the Minister indicate the categories of persons he considers the most vulnerable?

I am looking at all the data and taking into account such issues as consistent poverty. Later this week I will meet with a broad cross-section of voluntary groups dealing with the elderly, lone parents, the unemployed and so on. Arising from all those discussions that will continue month after month, I hope it will be possible to arrive at a consensus in terms of the issue I highlighted, that is, the need to protect the vulnerable.

Who are the vulnerable in the Minister's view? He has criteria for vulnerability and some are more vulnerable than others. Who does the Minister believe are the ones that he must protect?

As I said, data on consistent poverty is one important criteria——

The elderly are a group in severe difficulties when one examines the OECD figures.

The point is that there are people on very low income in all age groups who are vulnerable.

When one examines the data one will see this spans across all age levels. Those on the lowest amount of money are very vulnerable. I want to examine all of the data, have a continuing dialogue with all of the different groups, listen carefully to them and not make decisions on the hoof in May but try to have as much information and discussion to ensure I am well informed when the Cabinet discusses these issues later in the year. That will ensure that whatever decisions we must make will be made in an informed and sensitive way and that we make a particular effort to protect those who are vulnerable.

From the Minister's experience, who are they?

We must move on. Ceist Uimh. 33.

In financial terms, obviously it is those with the least income.

(Interruptions).

As the Deputy is aware, in terms of——

Social Insurance

Róisín Shortall

Question:

33 Deputy Róisín Shortall asked the Minister for Social Protection the reason for the delay in finalising full details on the PRSI incentive scheme for employers; and the way he intends to proceed [22002/10]

The employer job, PRSI, incentive scheme will be commenced in June and will be administered by the Department of Social Protection. Regulation or secondary legislation pertaining to the scheme is in the final stages of preparation, as are details of scheme administration.

The scheme will run for the calendar year 2010 only. However, any qualifying employment created in 2010 will be eligible for the scheme, which will be structured so that employment created prior to the launch can participate for 12 months forward from the time of launch and employment created later in the year will participate for 12 months to the corresponding date in 2011.

To qualify for the scheme the employment will have to constitute an increase in the employer's employed workforce above that applying in the three month period immediately prior to the date of commencement of the additional employee, who will have to have been on the live register for six months or more. In addition, participation in the scheme will be limited to 5% of the employer's existing workforce or five posts, whichever is the greater. The employer will also be required to declare when applying that the employment will be for, on average, 35 hours or more per week. These conditions are designed to prevent displacement from existing full time and part-time positions.

The scheme has not been launched to date as the regulation and administrative arrangements are being put in place. These arrangements are now close to completion and I expect to be launching the scheme in the coming weeks.

In this context it is important to note that jobs created prior to the launch will still be able to benefit from the scheme. For example, in the case of a qualifying employment created prior to the launch of the scheme standard employee and employer PRSI will be paid but, following approval for the scheme, the employer will benefit from a PRSI exemption for 12 months from their date of approval. Rebates of PRSI will not be a feature of the scheme.

The Minister's response, and his performance regarding this issue, is not good enough. This scheme was announced in the budget in December and here we are, five months into the year, and not a single job has been provided under this scheme. Over a week ago I asked the Minister's Department for details of this scheme, what had been done to promote it and how it would operate and it has still to come back to me with any response on that. Can the Minister tell us the reason this scheme was announced in December and five months have already been lost in regard to setting it up? We have more than 430,000 people on the live register. It would seem the Government has been so obsessed with the whole issue regarding the banks it has taken its eye off the ball in terms of job protection and job creation. Why is it that nothing has happened in the past five months regarding this scheme?

I have said that I hope we will have the scheme up and running within the next month. As I have already explained, anybody who has created employment within the terms of the scheme will be able to apply——

They do not know about it. The Minister did not tell them about it.

I am saying that people who have already created employment will be able to apply and they will get the exemption from the date of the launch of the scheme. I am anxious to get this scheme going and I agree with the Deputy that it is urgent. I have asked my Department to ensure that we progress the scheme as quickly as we can and I hope that we will have it up and running within a month from now. I will do my best to ensure that.

It is all very well for the Minister to say it is urgent but his actions and those of his predecessors would indicate that no urgency is being attached to the issue of jobs within the Government. Funding has been provided for this scheme since last December. There is the potential for 12,000 jobs to be created yet the Minister has not taken any action to set up or promote this scheme. It is fine for the Minister to say that employers can avail of it in retrospect but he has done nothing to promote this scheme. There is no process in place for making application. There has been no promotion of it. I want the Minister to tell us how an employer should go about applying for this scheme. What are the rules that will guard against job displacement and so-called deadweight? Has the Minister discussed those issues with employer groups, and will he give consideration to involving Enterprise Ireland in overseeing the scheme to avoid the possibility of job displacement?

I agree with the Deputy about the displacement and deadweight. That was one of the reasons for the delay because the officials in my Department had to ensure that when they were drawing up the regulations we would not create either displacement or deadweight. Deadweight was a problem with a previous scheme, and we are taking steps to avoid that.

What are those steps?

The steps are being written into the regulations. I will not announce the scheme today but——

Does the Minister know what they are?

I will not announce the scheme today.

It is five months since it was announced and there is still no detail available.

Allow the Minister to reply.

I agree that this scheme is a priority and I have worked hard to make sure it comes forward. I hope to have the scheme announced. I have to examine all the regulations. I will then sign the order and bring the scheme into place. I accept it would have been better if that could have been done faster but if we did not do the job thoroughly and if there were loopholes in the scheme that were open to abuse, that also would not——

Did the Minister not think about that before he announced it in December?

For goodness sake, 12,000 people could be benefiting from this scheme.

We must move on to the next question. We will hear a brief final reply from the Minister.

The Minister's lethargy means that not a single job has been created through it.

Please allow the Minister give a brief final comment.

As I said, we will have the scheme up and running in a month. It will run to the end of the year. We can then examine the scheme to see how it is working. It is important that the scheme——

That will be seven months, therefore, instead of 12 months.

No. As we said already, it will be backdated.

The Minister did not tell employers about it. It appears there is no sense of urgency about job creation.

Debt Management

Olwyn Enright

Question:

34 Deputy Olwyn Enright asked the Minister for Social Protection the action he is taking to assist persons who are over-indebted and need help and advice in coping with debt problems; and if he will make a statement on the matter. [21936/10]

The Money Advice and Budgeting Service, MABS, assists people who are over-indebted and need help and advice in coping with debt problems.

There are 52 independent MABS companies operating the money advice and budgeting services from 65 locations throughout the country, with national support provided by the MABS NDL. In addition, the MABS national telephone helpline is available from 9 a.m. to 8 p.m., Monday to Friday, and the MABS website can be accessed 24 hours a day at www.mabs.ie. Last year an additional 19 money advisers were recruited by MABS between September and December, bringing the number of MABS staff to over 270. The additional advisers have been appointed to MABS companies throughout the country.

The money adviser works out a budget and negotiates on behalf of the client with all creditors, including financial institutions and sub-prime lenders, to secure better terms for the client in managing the repayment of their debts. Where required by the client, the money adviser can assist with setting up a special account with a local credit union into which the client lodges an agreed amount of money regularly and from which each month the money adviser makes the repayments to the creditors on behalf of the client.

It is important that people coping with debt difficulties take early action and approach MABS for help and guidance. This can be the first positive step for people in addressing debt difficulties. I am satisfied that the Money Advice and Budgeting Service is providing a high quality service to assist people in overcoming their indebtedness and managing their finances.

The Minister's answer worries me if he thinks that MABS is the only solution to the debt crisis. It is part of the answer but it is not the whole solution. The Government has done nothing in terms of enforcing debt procedures, regulating debt collection and providing any sort of new system of personal insolvency.

Has he any idea how many mortgage advice cases the 52 independent MABS companies have dealt with and what the success rate has been? There are almost 30,000 people in arrears and 250,000 in negative equity. What caseload is MABS carrying? What is the average waiting time for a face-to-face appointment with MABS?

That is a detailed question arising from a general question.

It was the Minister's reply, not my question, that concentrated on MABS.

Deputy Enright asked the average waiting time.

For a face-to-face meeting.

I understand the average waiting time is four weeks. Meetings are prioritised and if there is a need for a more urgent appointment that is also considered.

There are protocols agreed with the Irish Banking Federation. It agreed to approach debt problems experienced by the clients. The objective is to agree affordable sustainable repayment plans for people with debt problems. It includes a commitment that no legal action will be taken as long as there is compliance by the client with an agreed repayment plan, which is mutually acceptable, affordable and sustainable. This is being monitored to see how well it is working.

There is then the issue of those who are not covered by the Irish Bank Federation.

I understand that there are discussions taking place to try to extend the protocol to other major groups such as credit unions and utilities and that they are also discussing this issue with one of the sub-prime lenders.

There is a lack of urgency in this regard. Arrears are growing by the day. People are getting further and further into debt and the response is not dealing with it.

The Department has a role here in terms of mortgage interest supplement. There is a review that has been ongoing since I came into this position opposite the then Minister for Social and Family Affairs. We are spending €70 million on this. Effectively, the Department is handing this cheque to the financial institutions. They are now telling customers to seek a mortgage interest supplement and then they will re-negotiate. When will the review on mortgage interest supplements be completed? Approximately one third of cases are being refused. We do not have definite figures from the Minister. We need the review so that we can have a real discussion on how this operates and link that in to the overall debt issue. When will we see that review?

I agree that the review needs to be brought to a conclusion. I would also bring to Deputy Enright's attention the Cooney committee, the special committee set up to look urgently at the question of indebtedness.

I met with that committee. I am aware of it.

I met with Mr. Cooney also and my Department is part of it. My understanding is the committee is to report next month.

I agree that this is probably one of the most urgent issues that I must deal with as Minister. The Deputy can rest assured that since I came into the Department, I have put a great deal of time, effort and emphasis on the need to move forward with viable proposals to deal with all of these issues.

Looking at the statistics, a large number of the clients of MABS are in rented accommodation. These are not all mortgage holders.

Only a small number of those with a mortgage problem are going to MABS.

That is correct.

They do not feel they are able to get all the advice they need because MABS is not resourced to give them that extra sort of advice.

I fully agree there is need for urgent proposals on how we deal with debt problems. One of my big concerns is that often I find where there are mortgage problems there are a great many other debt problems on top of them and dealing with the mortgage in isolation is not the solution. Having spoken to many of the people involved in MABS as I go around the country, they also bring that to my attention, that it is a complex problem and we must come up with a comprehensive solution to deal with debt problems and as far as possible, through agreements, protocols and new systems, to avoid it going to litigation.

When will we see action on that?

Ceist Uimh. 35 in ainm an Teachta chéanna.

We are not far from agreeing.

My hope is that we will get this report quickly——

Ceist Uimh. 35 in ainm an Teachta chéanna, Deputy Enright.

——and then we can act on it quickly. I agree on the urgency, and particularly that it is important to protect people's houses.

Ceist Uimh. 35, le do thoil.

Social Insurance

Olwyn Enright

Question:

35 Deputy Olwyn Enright asked the Minister for Social Protection if his attention has been drawn to the difficulties self-employed persons experience in claiming jobseeker’s allowance under the current system; if he has any plans to reform the PRSI system in order that self-employed persons can benefit from adequate support when they become unemployed or when their business fails; and if he will make a statement on the matter. [21937/10]

Self-employed persons pay PRSI Class S contributions which provide cover for long-term benefits such as State pension and widows or widowers pension. Employees are covered by PRSI classes A, E, H and P, which provide cover for the above benefits as well as for short-term contingencies such as jobseeker's and illness benefits.

PRSI coverage is related to the risks associated with employment or self-employment, the annualised system of contributions for self-employed persons and the practicalities of administering and controlling access to short-term payments. Self-employed persons pay class S contributions at a rate of 3% per annum as compared to the 14.75% full class A contributions paid by employees and their employers, to reflect the narrower range of benefits they receive. A system of separate arrangements for employed and self-employed workers within a social insurance context is common in other European social protection systems.

A self-employed person who has paid insufficient class A contributions may instead qualify for jobseeker's allowance. Jobseeker's allowance is a means-tested payment and, in assessing a person's means, account is taken of all income which the person may reasonably expect to receive during the succeeding year. In general, the person's means will take account of the level of earnings in the last 12 months in determining the person's expected income for the following year. In the current climate account is taken of the downward trend in the economy and it is accepted that future earnings may be lower than those of previous years. The process also recognises the potential for significant upward or downward variations in income from one year to the next.

There are no plans to extend cover for short-term benefits to this group of insured workers. Any such measure would have significant financial implications and would have to be considered within a budgetary context. Consideration would also have to be given to an appropriate increase in the rate of the PRSI Class S contribution.

There are two strands to the question, how to deal with the persons who were self-employed who now find themselves in a position where they no longer have employment and then to look at the PRSI contributions to ensure that down the road more self-employed persons do not find themselves in this position because they paid only the class S rate.

To deal with the more immediate problem, no doubt the Minister, like myself and all our colleagues here, is dealing with this every day. There is a significant number of persons who were self-employed who suddenly find themselves with practically no entitlements on losing their jobs. The Minister has mused over the past two weeks in The Sunday Business Post on some of his views in this regard. He spoke of his new scheme, the employer job initiative scheme. I understand it is the one to which he referred in the articles, although it is not clear all of the time because we do not have the detail. The Minister seems to think that the skills among those fully qualified self-employed persons are most suited to this scheme. Can he explain how the scheme will work to particularly help that category of person?

Deputy Enright is correct in stating that there are many self-employed persons who did not understand that they were not covered, for example, for jobseeker's benefit, until the employment dried up. There were many in the construction industry who never thought the work would cease, particularly those with trades, and suddenly they find themselves in a situation where they are not entitled to jobseeker's benefit. Many of them who have partners or spouses also find themselves in a situation where they are not entitled to jobseeker's allowance. That is something Deputy Enright and I have encountered. They are not covered. They have not paid the contribution to be covered for unemployment benefit, it is a clear statutory position. On the other hand, there is a pool of talent that could do considerable work in providing services to the community.

There is a model in terms of farmers. For farmers who have low incomes and self-employment, there is farm assist, but there is also the rural social scheme where they work in the community and provide services in return for which they get a fixed payment. None of these functions has transferred to my Department and therefore the situation of setting up schemes is something for the future. The Deputy has identified a challenge and we must see how to deal with that challenge. There is no question of giving them rights to jobseeker's benefit because, quite simply, they have paid 3% on the self-employed contribution and this does not entitle them to short-term benefits.

With respect, the Minister has not answered my question; he has just elaborated on my question. The Minister stated in interviews that he regards this new scheme as being particularly useful for people who formerly worked in the trades and in the construction sector to facilitate them in gaining employment. How will this scheme specifically help the category of formerly self-employed people? My question is specific.

As I said, legislation is required to transfer the legal powers to deal with these matters.

The Social Welfare Bill will be taken in two weeks' time.

Exactly. Please God, the powers will be transferred and then we will be able to deal with creating activation in order to give people an opportunity——

The Minister said specifically in an interview that this new scheme would be suited to the self-employed.

Please allow the Minister to reply.

That is all I am asking. He is not answering my question.

Please allow him to answer.

I fully agree with the Deputy that there is a challenge here for self-employed people and I intend bringing forward proposals to see how to deal with this issue. Obviously it will be required to go to Cabinet. I do not have the legal responsibility at the moment but I am sure the Deputy agrees that this is an issue that needs to be tackled because there is a significant challenge for self-employed people at the moment.

Pension Provisions

Seán Barrett

Question:

36 Deputy Seán Barrett asked the Minister for Social Protection the reason a distinction is now being made as regards the payment of PRSI at Class S rate, between those in retirement who purchase an annuity to draw down income and those who do likewise by using approved retirement funds; and if he will make a statement on the matter. [21938/10]

Approved retirement funds or ARFs are funds managed by a qualifying fund manager into which an individual may invest the proceeds of his or her pension fund on retirement. The income and gains of such funds are exempt from tax within the fund. Any amounts withdrawn from an ARF are referred to as a distribution. A distribution is treated as income from an employment. It is subject to income tax and the fund manager must operate the PAYE system on it.

Under social welfare legislation any payments received by way of pension are not regarded as reckonable emoluments for the purposes of self-employed pay-related social insurance. However, unlike annuity products, ARFs are not pensions but are treated as assets. As such, distributions from ARFs fall within the charge to self-employed PRSI.

There has been no recent change in legislation pertaining to this area but my Department recently clarified to qualifying fund managers that, as the legislation stands, they are required to apply the appropriate PRSI when making distributions. In this regard it may be noted that only distributions made before pension age will attract the charge to PRSI, as social insurance only applies to individuals between the ages of 16 and 66.

My Department, working with the Department of Finance, the Revenue Commissioners and the Pensions Board, is currently engaged in a review of ARFs and the interaction between PRSI and pensions in the context of the national pensions framework. This review will have particular regard to the necessity to achieve the correct balance between ensuring that the social insurance fund is supported by contributors and providing incentives for people to save for retirement.

I will ask the Minister a direct question. If the two of us retire at 65 years and we receive our payment from our pension fund, and the Minister decides to purchase an annuity and he draws down €20,000 a year and I decide to put mine into an ARF and I draw down €20,000 a year, does it make sense to him that he does not pay PRSI whereas I do?

First, I do not have any private pension fund so the direct question does not apply to me.

The Minister should answer the question.

I did answer it because the Deputy spoke about himself and me. I tried to answer the question. The Deputy has raised an issue that has validity. There are, I understand, other——

Why charge PRSI?

Because under the present law——

That is not true.

Please allow the Minister to reply and I will call the Deputy again.

My understanding is that as the legislation stands, they are required to apply the appropriate PRSI when making distributions.

The Minister for Finance set up this system whereby people were given an alternative as to whether they would purchase an annuity or else put the money into an approved retirement fund and draw down their income from that. The main difference, from the State's point of view, is that the State is guaranteed for all time, so long as the fund remains in place, and PAYE is paid on all of the income taken, right down to the day there is no income left. This is compared with an annuity where tax dies when the person dies and this could be after five or six years. Therefore, the State gets more PAYE from an ARF than from annuities. I am asking the Minister a straight question. Can he tell me who on God's earth decided only recently in a circular from his Department that ARFs are not pension schemes and are instead retirement funds? Withdrawals from ARFs are liable for PRSI at Class S. What benefits does a person get paying Class S contribution from the Minister's Department if he or she is being asked to pay when in retirement and receiving an income which is fully taxable, as is the same with annuities?

I will present another scenario to the Deputy. If somebody retires at 63 and ——

The Minister is asking a question.

This will explain and elucidate why this——

The Minister is entitled to answer as he will.

——issue is not a one-way street. Supposing one retires at 63 and one does not have enough contributions made to earn a full pension. Then, putting up the Class S could be an advantage because one would get another three years.

The Minister is asking a question.

I am confusing myself now. The tradition is that the Opposition asks the questions and the Minister answers the question.

The second issue I would like to elucidate is that I am informed we are bound to charge this under the present law as it is. The Deputy asked me who introduced this provision. It was brought in by Oireachtas Éireann.

It was not charged up to this year.

Apparently, it is still legislatively bound to be charged. I cannot change the legislation without bringing it before the Houses of the Oireachtas.

It is the Minister's interpretation.

I assure the Deputy I never put legal interpretation——

When I refer to the Minister, I mean his Department as he represents the Department.

But it is a legal interpretation, therefore, the Department informs me we are bound by law in this regard. If the Deputy wishes, I will ask my officials to double check whether we are bound by law. I do not have any great feeling on the matter one way or the other. We are examining the issues fully with the Revenue Commissioners and the Department of Finance and that is the best way forward in the circumstances. I know the Deputy has strong views on the matter.

The Minister asked about someone who might retire at 63. If the Minister retires at 63 he can equally get an annuity as easily as an income from an ARF. The point I am trying to put across to the Minister is that if A draws his income from an annuity, he is not asked to pay PRSI. If B draws an income from an ARF which is exactly the same as it is a fund, the same as an annuity is a fund, one is now being asked to pay PRSI and one gets no benefits.

The Minister has indicated that this matter is subject to review.

They may look the same but there is some slight legal difference. I know the Deputy feels very strongly about this matter and he raised it in the Seanad with the Minister for Finance. I will have it double checked from a legal perspective. I want to be helpful on the issue. If the double check shows the law is as it is, we will try to see where we go from here. I want to ensure there are not other consequences because there will always be a thin line between what is pension and what is income from earned income.

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