Social Welfare (Members of the Defence Forces) Regulations, 1974: Motion.

Parliamentary Secretary to the Minister for Social Welfare (Mr. Cluskey)

I move:

That the Social Welfare (Members of the Defence Forces) Regulations, 1974, proposed to be made by the Minister for Social Welfare and laid in draft before Dáil Éireann on the 7th day of March, 1974, under subsection (4) of section 10 of the Social Welfare (Pay-Related Benefit Act, 1973, be approved.

The regulations which are the subject of the resolution which I have moved and those which are covered by the next resolution on the Order Paper deal with the question of bringing non-commissioned officers and men of the Defence Forces within the scope of the scheme of pay-related benefit under the Social Welfare (Pay-Related Benefit) Act, 1973. I propose, therefore, to deal with both resolutions together.

I have given details of the pay-related benefit scheme previously to the House but I will repeat briefly the main features of the scheme. The pay-related benefit scheme is designed for persons whose social insurance covers them for disability benefit, maternity allowance and unemployment benefit. Pay-related benefit will be paid as a supplement to these flat rate benefits during periods of incapacity for work or unemployment and the rate of pay-related benefit will be based on the claimant's weekly earnings between £14 and £50 in a previous income tax year. The scheme will be financed by pay-related contributions levied on employers and employees. These contributions will be 3 per cent of the employee's current earnings up to a ceiling of £2,500 in the year, the employer paying 2 per cent and the employee 1 per cent. They will be collected by the Revenue Commissioners through the income tax collection machinery. Employees in industrial, commercial and services-type employments in respect of whom the ordinary rates of employment contributions (stamps) are payable were brought within the scope of the scheme by the Act. Provision was made in section 10 of the Act to enable the scheme to be extended to other employees by regulations, and agricultural workers were recently included in the scheme by such regulations, a draft of which was approved by both Houses of the Oireachtas.

The position of commissioned officers in the Permanent Defence Forces under the Social Welfare Acts is similar to that of pensionable civil servants, local authority officials, pensionable teachers, et cetera, who are not insured for all the benefits of the social insurance system and who will not come within the scope of the pay-related benefit scheme.

Non-commissioned officers and men, on the other hand, are covered for all benefits of the social insurance system. They are not eligible, however, to draw disability benefit or unemployment benefit while serving in the Defence Forces but they pay flat rate social insurance contributions at a special rate while serving and these contributions enable them to qualify for disability benefit and unemployment benefit after they leave the Defence Forces.

It has always been the intention that coverage of the pay-related benefit scheme should be as wide as possible. Following discussions with the Department of Defence, it was agreed that non-commissioned officers and men of the Defence Forces should be included in the scheme on a basis which would enable them to qualify for pay-related benefit should the need arise after they leave the service. For this purpose the draft regulations which are the subject of the first resolution will apply the provisions of the Social Welfare (Pay-Related Benefit) Act, 1973, to members of the Defence Forces in respect of whom the special rate of flat rate social insurance contributions are payable. This will be done by including pay derived from their employment in the Defence Forces in the definition of reckonable earnings for the purposes of pay-related benefit and contributions.

As I have already mentioned, non-commissioned officers and men of the Defence Forces are not eligible to draw disability benefit or unemployment benefit while in service and, consequently, they will not be eligible, while serving, for pay-related benefit which will be payable as a supplement to those benefits. It would be inequitable that they should be charged pay-related contributions on reckonable earnings which they will not be able to use to get pay-related benefit. Provision is therefore made in the draft regulations so that when the stage has been reached where the earnings of a member of the Defence Forces in a particular income tax year can no longer be used for pay-related benefit purposes because he has continued in the service, then an appropriate refund of contributions which were paid on reckonable earnings in excess of £700 in that income tax year may be made. If, however, the man leaves the service while his earnings in an income tax year can still be taken into account for purposes of the scheme he will, of course, be eligible for pay-related benefit on foot of those earnings and no refund of contributions will be involved. The regulations which are the subject of the first resolution are being made under section 10 of the Act which requires that drafts of regulations must be laid before each House of the Oireachtas and that the regulations cannot be made until the draft has been approved by resolution in each House. It is intended that these regulations should come into force on 6th April, 1974.

In the case of persons already included in the pay-related benefit scheme, regulations have already been made to reduce their flat rate employment contributions payable with effect from 1st April, 1974. A draft of these regulations was approved by Dáil Éireann on 12th February, 1974. It was explained to the House on that occasion that in order to facilitate the collection of pay-related contributions, it would be necessary to charge the 3 per cent pay-related contributions on all earnings up to the ceiling of £2,500 in a year. The effect of this would be that pay-related contributions would be levied on pay up to £700 in the year which is the equivalent of £14 a week for pay-related benefit purposes. Since pay below £14 a week does not attract pay-related benefit, there would thus be what amounts to an overcharge of pay-related contributions on that amount. To compensate employers and employees for this overcharge, their flat rate contributions were reduced by 42p, the employee's part being reduced by 14p and the employer's part by 28p. Now that it is proposed to apply the provisions of the Social Welfare (Pay-Related Benefit) Act, 1973, to non-commissioned officers and men of the Defence Forces by regulation, it is proposed also to make similar reductions in the flat rate social insurance contributions payable in respect of them. The effect of the regulations which are the subject of the second resolution will be to reduce the employee's element of those contributions by 14p and the employer's element by 28p from 1st April, 1974.

These regulations which it is proposed to make under subsection (9) of section 6 of the Social Welfare Act, 1952, also may not be made until a resolution approving of the draft regulations has been passed by both Houses of the Oireachtas.

I recommend both the draft regulations for the approval of Dáil Éireann.

Mr. Faulkner

I understand we are discussing both regulations together. I take it that the alterations in the rates of contribution in these cases are similar to those made in the rates of contribution relevant to persons already included in the pay-related scheme. On a previous occasion I asked the Parliamentary Secretary if he could let me know what the income would be from the 3 per cent which is levied on the gross income of the employee and also what the reduction in the cost of the stamp would amount to. I should now like him to inform me of the total amount of money which the 3 per cent earnings of members of the Defence Forces who will be included in the pay-related benefit scheme will bring into the fund in a full year and also what the total amount of the reduction in the cost of the stamp will amount to in a full year. If he is not in possession of that information now, perhaps he will let me have it later.

The Social Welfare (Pay-Related Benefit) Act, 1973, made provision for including groups of workers other than those involved in the original measure-agricultural workers, for example. Quite recently the House unanimously approved the admission of agricultural workers into the scheme. I now welcome the inclusion of members of the Defence Forces. The greater the number of categories of people we can admit to this scheme the better because we are coming closer to what we all desire, that is, a comprehensive social security scheme for all.

The pay-related benefit scheme was a very significant step on the road to this comprehensive scheme. Anything we can do to further the interests of members of the Defence Forces is to be commended. We are all very proud of our Army and whatever can be done to make service in the Army more attractive should be done. I believe the change proposed here will help considerably. In the definition of a member of the Defence Forces it is stated that his employment is mainly employment as a member of the Defence Forces. What is meant by the word "mainly"?

The Parliamentary Secretary pointed out that so long as a soldier is in the service he is not eligible to draw most of the benefits normally available under the scheme. I understand from his speech that the pay-related contributions collected from him in a year in which he could not qualify will be returned to him. When are they returned to him? Is it at the end of the year?

The Parliamentary Secretary also pointed out that there is a special rate in relation to the cost of the stamp for members of the Defence Forces. This is right having regard to the fact that while they are in the services they are ineligible to enjoy some of the benefits which accrue from being insured. The Parliamentary Secretary referred to the case of commissioned officers in the Defence Forces under the Social Welfare Acts and pointed out that they are in a similar position to that of pensionable civil servants, local authority officials, pensionable teachers and so on who are not insured for all the benefits of the social insurance scheme and who will not come within the scope of the pay-related benefit scheme. This is something which merits further consideration.

The motion we are discussing deals with regulations which affect NCOs and men. As the Parliamentary Secretary is aware, many serving officers must retire at an early age. In fact, they retire at an age which in the context of 1974 is regarded as quite young. Some of these officers get outside employment when they leave the services but we must also take it that many of them do not get employment or have to wait for quite a considerable time before getting employment. I am sure the Parliamentary Secretary will agree that at that young age the drop in income is quite considerable. There is justification for the inclusion of such people in a pay-related benefit scheme of some kind. These officers must retire at an age below the normal retiring age in many other similar professions.

Pensionable civil servants, local authority officials and pensionable teachers retire at 65 years of age but junior officers in the Defence Forces who only reach a certain rank retire at an earlier age. I know there are difficulties here and that such men unlike the NCOs and men of the Army, are not insurably employed but I feel in the particular context in which these officers find themselves further consideration might be given to this matter to see if there is any way in which they could be included. Their situation is very different from that of people working in the other professions mentioned by the Parliamentary Secretary.

A considerable number of the newer recruits to the officer corps have now the opportunity of attending university but this does not apply to the older officers nor does it apply to quite a number of the newly recruited officers. In the explanatory memorandum it is stated:

Under the scheme, pay-related benefit will be paid as a supplement to the appropriate flat rate benefit at a rate determined by reference to a person's earnings in a previous income tax year.

First, does this mean that the 3 per cent is not paid on current earnings but rather on the previous year's earnings, and, if this is so, does it mean that the extra amount payable will be based on the previous year's earnings? I ask that question because I feel that if the pay-related benefit is payable on the previous year's earnings in a situation where national wage agreements provide considerable increases in earnings, the relationship between the flat rate plus pay-related benefit would be considerably out of line with current earnings. I asked the Parliamentary Secretary a question about this in the Dáil some time ago.

There is another point I should like to have cleared up. I think I know what the position is but I would prefer to have it clarified here. I am aware that pay-related benefit contributions will be collected only up to £2,500 a year. The Parliamentary Secretary has again stated that here. Does this mean that payment of pay-related benefit will apply only up to £2,500? Will the maximum benefit payable be the flat rate plus 40 per cent of £50 per week?

Mr. Brennan

This question may not be very relevant to the Order but has the Parliamentary Secretary any figure for the number of agricultural workers who will benefit under the scheme? The number on the PAYE list was rather small when I was examining it. I had a feeling there might be an occasional agricultural worker who would be as happy if he was not fished out at all.

Mr. Meaney

I should like to join with Deputy Faulkner in saying that we are glad these regulations are being brought in. They are essential at this time because it is not always easy to get young men to join the Defence Forces and we must offer every possible incentive when competing against industry. We must at least give them the same conditions when leaving the forces as if they were working in industry during the time they serve in the Army. We are very proud of our Defence Forces; they are doing a very good job. Too often in the past that fact was not recognised. When many of these men retire at a very early age it is only right that benefits such as those being introduced today, and with which this party entirely agree, should be available to them. It is very difficult for those retiring at an early age to get other positions. I have always thought, and I should like to say very forcefully, especially when the Parliamentary Secretary is here, that there should be more concessions for ex-Army men when they apply for positions outside. They should get some sort of priority but nowadays they do not seem to get it. They must take their chance with everybody else and there seems to be no recognition of the fact that they have spent many years serving the country. There should be some scheme in the Department of Social Welfare or the Department of Labour under which they would get priority in applying for positions especially when they have an honourable discharge. This would give a greater incentive to young men to join. When joining many young men say they will only stay for so many years, whatever the contract is, and when they come out they have to seek jobs and they are just "nobodies". That is a ridiculous situation. I should like the Parliamentary Secretary to do whatever he can in his own Department to ensure that such men get priority in applying for jobs. We do not want to waste time. Deputy Faulkner has asked some questions and I have no doubt the Parliamentary Secretary will reply to them. Like the other Deputies I welcome these regulations.

Mr. Cluskey

I welcome the approach to this matter by the Opposition speakers. I thank Deputy Faulkner, the Fianna Fáil spokesman, in particular for his usual constructive contribution in matters of this kind and I shall reply as best I can to the points made.

Deputy Faulkner asked about the income from the 3 per cent to be levied and it is estimated that it will be approximately £12.5 million net and the loss of contribution income by reason of the reduction in the stamps is also estimated to be approximately £12.5 million. The Deputy also asked about the exclusion of Army officers and, indeed, other categories which are mentioned in the introductory statement. As the Deputy said, certain difficulties are involved but I recognise the validity of the point he made, particularly in the case of junior officers who are required to retire at a much earlier age than people in other occupations. This undoubtedly presents problems for them especially those who are not in the Army to avail of university courses that are now available to Army officers.

We have a particular responsibility to those serving in the Forces, on whom we rely a great deal and anything that can be done to show our appreciation in a practical way for the services they give the nation should be done. In the background of the difficulties which Deputy Faulkner has acknowledged to exist in this field I shall have the matter examined to see if there is any way of devising some means of allowing for the fact that Army junior officers have to retire at an early age.

The Deputy also raised the question of the 3 per cent on current earnings. There is a ceiling in regard to pay-related benefit and it is £2,500. A job will not attract pay-related benefit below £14 per week or above £2,500 a year. The benefits are paid on reckonable earnings within the previous income tax year. A concession is made in that on the reckonable earnings a 4 per cent advanage is built in; the £2,500 is divided by 50 instead of 52.

There was some speculation regarding the figure at the cut-off point, whether it should be 80 per cent, 90 per cent or 100 per cent of reckonable earnings. So far as pay-related benefit is concerned, it is intended that the figure will be 100 per cent of reckonable earnings. This will compensate considerably, even allowing for advances in wages and salaries.

It has been acknowledged that it is a tremendous improvement of the present system. It will ease the burden on insured persons who are unfortunate enough to become unemployed or ill and it will take into account the earning capacity of the person concerned. In the past a relatively long period of unemployment or sickness could leave a family in debt for years. We hope the introduction of the pay-related benefit scheme will prevent that situation arising in future.

Deputy Brennan asked the number of agricultural workers who would be involved. Approximately 30,000 such workers will be affected eventually by the scheme. The Deputy mentioned that not all of them might welcome being included but I am sure the Deputy did not mean these people would try to evade income tax. This scheme will be of considerable benefit to workers who are unfortunate enough to become ill or unemployed. I have tried to deal with all the points raised. Deputy Meaney raised a matter which I answered in relation to people serving in the Defence Forces.

Dáil Éireann debate - Thursday, 21 Mar 1974

Social Welfare (Members of the Defence Forces) Regulations, 1974: Motion.

Dáil Éireann debate -
Thursday, 21 Mar 1974