The extension will, in the same way as I have explained for flat-rate unemployment benefit, apply in the case of persons who had exhausted their full pay-related benefit entitlement within 78 days of the operative date of the extension and who still retain their entitlement to flat-rate benefit.
I am convinced that the success to date of the extended pay-related benefit system in terms of reducing the financial impact of sickness and unemployment has been of the greatest social and human importance. It is out of the question that we should allow our fellow-citizens who have in effect been betrayed by the inefficiency and unequal working of our economic system to suffer substantial deprivation.
In introducing the Social Welfare (Pay-Related Benefit) Bill, 1975 in this House I stated that an analysis of the operation of the pay-related benefit refuted absolutely the idea that this system provided some form of bonanza for malingerers. I pointed out then that the pay-related benefit scheme does not give the average unemployed man more than he could get if he were at work, but that it does keep his head above water. I said then, and I repeat now, that it is the purpose of all income-maintenance payments to cushion a person to the fullest extent possible if he becomes unemployed or ill and, further that before people condemn or distort the working of the pay-related benefit scheme and its effects, they should think very carefully and they should examine how it operates and what it is designed to do.
I have repeatedly stated in this House that the development of the broad range of social welfare services demands a continual process of review and, where necessary, of reform and change. We have in three years brought about a really major advance in many areas of social welfare and have created a new basic level of provision which cannot be reversed. Further improvements and structural progress in the system are being worked on in the Department of Social Welfare at present in active pursuit of the declared aims of the Government.
Review of the system has led in this year's budget to a change in the arrangements relating to the range of benefits available to unemployed persons and section 12 of the Bill is designed to facilitate the making of regulations to implement this change by restricting the total amount of the benefits payable to a wholly unemployed person to 85 per cent of net current earnings.
This decision arises from a detailed study carried out by an inter-departmental working group set up by the Government to make appropriate investigations with a view to assessing the possible disincentive effects of benefits and concessions available to unemployed persons. The establishment of this working group followed a report prepared for me on the working of the pay-related benefit system.
The study carried out by the working group was intended to look at the effects of the whole range of benefits and concessions which may be available to unemployed persons. These include, in addition to unemployment benefit, pay-related benefit and unemployment assistance, the weekly redundancy payments scheme, tax rebates, relief from tax and social welfare contributions and, in certain cases, reduction of differential rents. If inequalities exist—if there are situations in which people can become caught in the "welfare trap" where an unemployed worker could suffer financially by seeking and accepting a reasonable job offer—then this can arise only through an interaction of a number of the available concessions. This was the general conclusion of the working group and one which gives rise to very serious implications.
The working group concluded that it is not possible to say whether or to what extent the levels of income available to the main groups of unemployed persons do act as disincentives to seek employment. Incentive and disincentive relate to personal attitudes as much as—and perhaps even more than—to money. Research being carried out for my Department indicates clearly to me that unemployed men and women want to work and that there is little or no evidence that most of the unemployed see their situation as a tenable or lasting way of life, despite improved benefits. This is exactly what any reasonable person would expect.
I must reiterate my view that certain critical attitudes of some workers worried about their own jobs, and of opponents of the social welfare and other social services, are a reflection more of the psychology of recession than of the facts of the situation. The working group were of the view that the basic objective of the pay-related benefit scheme to which I have referred—to ensure that workers do not suffer a serious drop in disposable income on becoming unemployed—is being achieved even without the intervention of the other available scheme.
The study carried out revealed the existence of certain definite anomalies in the concurrent working of a number of schemes and the logical recommendation was made that there should be a rationalisation based upon the establishment of a unified wage-stop. This will now be introduced under the terms of the budget announcement.
The new approach will be brought into effect by appropriate regulations which will be made shortly. However, in general, the procedure will be along the following lines. When a worker becomes unemployed, his or her average net weekly income prior to unemployment will be calculated on the basis of the income tax cessation certificate with appropriate deductions for tax and social insurance contributions. A figure equivalent to 85 per cent of this average will then become the wage-stop level.
The flat-rate unemployment benefit, pay-related benefit and redundancy weekly payments where applicable will be calculated in the normal way. Where the total of these payments exceeds the maximum permissible income the total payable will be reduced accordingly. Where, however, the person concerned is entitled only to flat-rate unemployment benefit no reduction in this amount would be made. If the person concerned is entitled to a rebate of income tax an appropriate reduction in his total payments will, if this is necessary, be made to keep him within the maximum laid down. His position will have to be further reviewed on cessation of the tax rebates.
Subject to the other conditions provided for, the maximum weekly amount of benefit payable by way of flat-rate unemployment benefit, pay-related benefit and weekly redundancy payments to a person who is eligible for weekly redundancy payments would then be £50. An example of the working of the new scheme could be given in the following terms.
Under the present arrangements pay-related benefit payable to a person currently becoming unemployed is based on his earnings in the 1974-75 income tax year. If we take the case of a married man with a wife and two children who earned £2,500 in 1974-75, his reckonable weekly earnings are £50. Under the present system his total benefit made up of flat and pay-related cannot exceed £50 which represents the "wage-stop" at 100 per cent. In fact, his flat-rate benefit would amount to £21.95 and his pay-related to £14.40 making a total of £36.35, leaving him well inside the "wage-stop".
Under the proposed scheme this man's "wage-stop" level would be 85 per cent of net current pay, that is, after deduction of income tax and his share of the social insurance contribution. Allowing for wage increases over the past 18 months, his current gross weekly earnings would be about £70. After deduction of income tax and social welfare contributions his net pay would be £54.55; 85 per cent of this is £46.40 and this is his "wage-stop" level under the new scheme. Accordingly, in this man's case the application of the new scheme would make no difference. He would still receive the same amount of flat-rate and pay-related benefit as under the present scheme. If this man was entitled to a tax rebate he could get as much as £10 a week by way of such rebate before the new 85 per cent "wage-stop" would apply.
The new approach will apply only to new claims received as and from an appointed day. It will do away with an anomaly which has arisen in a large part due to the operation of a number of relatively new schemes. I have repeatedly made clear the need for review of such schemes to ensure their proper working. It does not result from a widespread abuse and certainly does not represent a general level of benefits which is destroying the will and the incentive to find work. An adjustment was necessary and it is being made.
Much—indeed most—of the public criticism of the pay-related benefit system has been ill-informed, crude and confused. It has come from persons and groups who have shown little or no concern for the poor, or for the unemployed. I continue to be contemptuous of critics who have never faced—and who will never face —unemployment and its attendant stresses and strains. My job is to make provision for those who have and it is my concern to ensure that this is done.
The purpose of pay-related benefit is to improve on the position under the old flat-rate system by relating both benefit and contributions to earnings to some degree and to provide rates of benefit which will better enable persons to maintain, during sickness and unemployment, a standard of living reasonably close to that to which they have been accustomed. I have given it as my opinion—based on my assessment of its working over a year and a half—that the system has achieved that purpose.
I come now to the question of the increase in the rates of social insurance contributions which cover all benefits of the social insurance system. The increase in the contribution this year must provide for the appropriate share of the increases in benefits and pensions provided for in the Bill and for the general improvements to be made in the social insurance scheme. It must also include an element for the part financing of the extension of the unemployment benefit scheme for a further three months to which I have already referred.
Provision must also be made for the increases in contributions arising from the decision announced in the budget statement to transfer £8 million of charges from the Exchequer subsidy to the social insurance stamp as part of a phased reduction of the Exchequer contribution. The overall increase, in the case of contributions which count for all benefits involved is £1.53, of which the employer will pay £1.03 and the employee £0.50. Lesser increases will apply where the rates of contribution do not cover all social insurance benefits. The same section of the Bill provides also for the continuation this year of the special increase of 31p made in the Social Welfare Act, 1975, to meet the financial implications of the current abnormal unemployment situation.
The ordinary rates of contribution covering the social insurance services administered by my Department, including the increase of £1.53 and the special unemployment increase of 31p, will thus rise to £5.64 a week for men, of which the employer will pay £3.50 and the employee £2.14. For women, the new ordinary rate will be £5.56, of which the employer will pay £3.48 and the employee £2.08.
The rates of voluntary contribution will be correspondingly raised to £1.10 a week at the low rate and £2.83 a week at the high rate. Section 15 of the Bill provides for an increase of 39p to £1.73 in the new rate of voluntary contribution introduced in the Social Welfare Act, 1975, to cover the situation of a certain category of insured persons affected by the abolition from April, 1974, of the remuneration limit for the insurability of non-manual workers. Contributions payable in respect of occupational injuries insurance are to be increased by 2p a week to 14p for a male employee, and 11p for a woman—all borne by the employer. All of these new rates of contribution will be effective from Monday, 5th April, 1976.
The practical effect of these financing proposals is to continue the recent trend which has shifted the balance as between the Exchequer grant to the social insurance fund and the direct social insurance contributions. Both in relation to the social insurance fund itself and in relation to overall social welfare expenditure under insurance and assistance categories, the Exchequer share has been reduced over the past few years.
The financing of social welfare expenditure, and indeed of the social services as a whole, is a matter which gives rise to a great deal of comment and concern, in particular at a time of economic stringency such as we are now experiencing. It is my belief that a very significant change in the basis of financing social welfare expenditure is needed and the special working party established last year by the Minister is engaged in the preparation of recommendations for such a change.
This is, of course, an area of some complexity and one which calls for a lot of detailed research and analysis. Until such changes can be introduced as a permanent feature of the social welfare system the present unsatisfactory and, indeed, regressive system of flat-rate contribution must continue. I am aware that the burden of this particular form of taxation falls especially severely upon lower paid workers, and especially on many women workers, and that it can create difficulties for some firms.
The working party on financing will, of course, take into account the developments in social security policy which are taking place at the EEC level and will seek to produce a system which will be, at once, in line with general, progressive European practice, and appropriate to our particular circumstances. Ireland is in a very different position demographically, in terms of industrial employment pattern, and in terms of relative economic development to many of the more advanced countries with which comparisons are too often glibly made.
The Bill contains one or two reform measures which have been designed to deal with gaps or anomalies in the existing legislation.
There is provision for the payment of a benefit, at a rate equal to the contributory widow's pension, to a widower whose wife, immediately prior to her death, had been in receipt of a retirement pension which included an increase in respect of him because he was wholly or mainly maintained by her because of his physical or mental infirmity. This will bring the retirement pension scheme into line with the contributory old age pension scheme.
Section 18 deals with the payment of child dependant allowances to recipients of contributory widow's pensions. At present, these allowances are payable in respect of children who normally resided with the widow or the late husband prior to the date of the husband's death and, also, in respect of the children, grandchildren or step-children of the widow or of her late husband, or adopted children, who came to reside with the widow after her husband's death. The Bill provides for payment of allowances in respect of all qualified children normally residing with the widow, regardless of the date on which they became normally resident with her. A similar provision is being made in respect of the scheme of non-contributory widow's pensions.
I began these remarks by referring to the general economic situation and to its impact on social welfare policy and performance. Perhaps no Department of State is more aware of the importance of economic growth and of overall national development than the Department of Social Welfare. My Department find themselves faced with the task of providing a part of the response to the problems created by the ups and downs of the economy, whether because of unemployment, or low pay or poverty. Deprivation and financial need are caused by the failures of our economic system to a large degree and in a society with any claim to be caring or compassionate there must be an immediate response to such problems designed to alleviate their impact on individuals and families. This is the first rule of the social welfare system and I believe that it is my responsibility to work for the highest possible level of development and perfection of that system.
I recognise that the Bill now before the House reflects the impact of the current economic situation. However, by far the most important consideration is that the progress made to date in improving the level of payments should be maintained. This has been done.
There is a great deal of discussion on social welfare policy at present and, in general, I welcome this. It is essential that the development of our policies and programmes in this area —which is of direct concern to so many of our fellow-citizens who are deprived in one way or another—should be the subject of debate and, indeed, of critical assessment. At budget time and at the time of the introduction of the Social Welfare Bill, this aspect of public policy becomes of even greater interest because of the cost to the community involved in maintaining even our present standards of provision.
I deplore, however, the tendency of some people to distort what is being attempted and what is being done. First, I regret the inaccuracy of much comment. For example, to suggest that social welfare has been cut back in this budget is totally incorrect. Also, to speak or write as if social welfare were just about unemployment benefit and assistance—and pay-related benefit—is to mis-state the true position.
Let me repeat that unemployment benefit, pay-related benefit and unemployment assistance together will account—even in this year of continuing high unemployment levels—for only 24 per cent of total social welfare outlay. By far the largest share of the money spent—£180 million or 45 per cent of the total—will go on pensions of all kinds.
My major concern about the present criticism of the social welfare system is that it can lead—often on the basis of quite inaccurate statements—to very negative public attitudes to social welfare as a whole and to the need for further improvements in the system. Such criticism, and such attitudes, can do a great disservice to our less well-off fellow citizens.
I have absolutely no illusions about the size of the problem facing a country like Ireland, with serious economic difficulties and with pressing social needs, when attempting to provide adequately for the old, the sick, the unemployed and the deprived. Despite the very real advances which we have been able to make in recent years, and despite the great measure of expansion of our social welfare schemes which has been possible, the task remaining is a major challenge to us all.
In facing up to that challenge it is essential that we get our facts right and that we assess the situation objectively and honestly. I believe that the truth of the position in relation to social welfare policy is that success in tackling our social problems depends upon our success in evolving and implementing a total national strategy for development in all sectors—economic, social, cultural and political.
I now recommend this Bill to Dáil Éireann for speedy and favourable consideration.
