Dáil Éireann debate -
Wednesday, 16 Jun 1976

Vol. 291 No. 8

Redundancy Payments (Weekly Payments) Order, 1976: Motion.

Minister for Foreign Affairs (Dr. FitzGerald)

I move:

That Dáil Éireann approves the following Order in draft:

Redundancy Payments (Weekly Payments) Order, 1976,

a copy of which Order in draft was laid before Dáil Éireann on the 11th day of June, 1976.

The purpose of this order is to give effect to a decision of the Government that an unemployed person's after-tax income from benefits should not exceed 85 per cent of the average net weekly earnings after tax that he had received prior to unemployment. This decision, announced by the Minister for Finance when introducing the budget on 28th January, 1976, derives from public concern that the cumulative benefits and concessions available through different Government Departments to unemployed persons has left them with disposable incomes which are sometimes as great as, or even in certain instances higher than, their disposable incomes while at work. This order concerns only redundancy weekly payments which are one of a number of benefits that an unemployed person may be entitled to receive. The other benefits which when added with redundancy weekly payments shall not exceed that 85 per cent are unemployment benefit, unemployment assistance, pay-related benefit and any refund of income tax paid as a result of unemployment. However, if unemployment benefit or unemployment assistance by itself should exceed the 85 per cent, a person will receive only the unemployment benefit or assistance but without any diminution of it.

I would remind the House that in enacting the Social Welfare Bill, 1976, section 12, the Oireachtas has already provided the Minister for Social Welfare with the power to effect by regulations in so far as pay-related benefit is concerned what this order will effect in so far as redundancy weekly payments are concerned, that is to implement the Government's decision on the 85 per cent rule as outlined. I understand that the regulations under this Act that are necessary to implement the 85 per cent decision in respect of pay-related benefit have been drafted and will shortly be made by the Minister for Social Welfare and duly laid before the House.

The necessary change in the redundancy payment scheme with which I am now concerned requires an amendment of Schedule 1 of the Redundancy Payments Act, 1967, the provisions of which apply to weekly payments. While section 30 of the Act empowers the Minister for Labour to amend Schedule 1 by order, section 5 of the Act requires that a draft of such an order must be laid before each House of the Oireachtas and a resolution approving of the draft passed by each House before the order is made.

The operation of the arrangements governing redundancy weekly payments under the redundancy payments scheme is carried out on behalf of my Department by the employment offices of the Department of Social Welfare. Under present arrangements payment of a redundancy weekly payment is subject to the rule that when combined with certain social welfare payments it must not exceed 100 per cent of normal weekly remuneration, namely gross taxable weekly earnings, including regular bonuses and payments in kind, at the time of declaration of redundancy, or £48.08, whichever is the lesser. If the aggregate exceeds such limit, then entitlement to a redundancy weekly payment is reduced to keep the aggregate at that limit. It is now proposed in this draft order, in accordance with the Government's decision, to substitute a new limit of 85 per cent of net average weekly earnings, namely net after-tax take home pay, or £50, whichever is the lesser. Where redundancy weekly payments are combined with disability benefit or maternity allowance, the existing arrangement will continue except that the £48.08 limit will become £50. The exclusion of persons in receipt of disability benefit or maternity allowance, or persons on short time working, and persons whose entitlements have been determined before the operative date, is unavoidable for practical administrative reasons, and the problems encountered in bringing such persons within the scope of the 85 per cent rule will be reviewed.

Persons who while in receipt of redundancy weekly payments reach pensionable age will, as heretofore, remain entitled to the residue of these payments. Finally, I should add that the new 85 per cent limit will be applicable to those who become unemployed on or after 21st June, 1976 and who because they were not unemployed during the preceding 13 weeks, submit a new claim.

Mr. G. Fitzgerald

This order put before the House this morning regarding the curtailment of the payment of redundancy is a further indication of the lack of foresight of the Government in planning for the economic situation generally. They have placed before this House an order according to the 1967 Act, but I do not believe that the 1967 Act ever envisaged such a complex or complicated order being placed before this House. It appears to me to be one of the most incomprehensible legalistic pieces of jargon ever placed by way of order before the House. It would have been more appropriate to introduce it by way of a Bill which could be teased out on Committee Stage and possibly amended. The Minister said it would not be practical to have it implemented without going into greater detail. This is an indication of the lack of thought or effort which has gone into it.

I realise the situation presents problems. The cumulative benefits and concessions available to a person makes his position more attractive than it was prior to his becoming unemployed. This is serious. It is demoralising in itself. It encourages a person not to work. It makes idleness and redundancy attractive. As against that, there is the really genuine case of the person who has given a lifetime of service to a company being made redundant and going on the unemployment register at the wrong age to stay there with little hope for the future because the Government are not providing adequate opportunities for employment to safeguard him.

I may be criticised, as I have been in the past, for not spelling out clearly what we would do. This would take some considerable time. It has been given thought and it is being given thought and it is possible to do it. The Government are trying to solve the unemployment problem by playing around with social welfare benefits and redundancy payments. We must look on the positive side, not the negative side. The positive side is getting people back to work. The burden on the person working has been increased over the past year in particular because we have a diminishing work force and growing unemployment. People have been saddled with a higher stamp charge and a higher redundancy contribution.

I want to ask the Minister some questions on the content of the Order. I should like him to simplify it, not only for Members of the House but for the personnel managers and the social welfare officers who will have to deal with it. It should be put in a form which can be clearly and easily understood by them. I want to ask the Minister about the refund of income tax. As I see it, the 85 per cent refers to the net weekly earnings prior to the person's unemployment. The net weekly earnings do not include the tax he has been paying. Apparently he is entitled only to 85 per cent of that net figure. The refund takes into consideration the tax refund he is getting. Perhaps the Minister would explain this to me. It seems to me that taxation is being imposed on him in two ways. For the purpose of arriving at the 85 per cent, the income tax he is paying is not taken into account. Secondly, when his weekly earnings after redundancy are being calculated, his refund of the income tax which he would have paid is taken as a payment to him. There appears to be an injustice to the individual.

There is another problem, and this is where the lack of foresight on the part of the Government is further evidenced. No limit is imposed on the person who becomes redundant up to and including 20th June. Limits are imposed on people who become redundant after 21st June. This is probably unavoidable in the circumstances. A date had to be decided on. Surely this should have been anticipated. The Ministers concerned, and particularly the Minister for Finance, should have envisaged the situation which was arising. Admittedly the Minister for Foreign Affairs is standing in for the Minister for Labour. I would have expected to get from him a detailed analysis of the present state of the redundancy fund.

This is important to the people who have been contributing to that fund for a long time, and who are burdened not only by the contribution but also by social welfare contributions generally and by the growing demands of direct and indirect taxation. These working people are suffering from the mismanagement of the Government more than anyone else. I want to put it on the record of this House that they are carrying a burden they will not carry indefinitely. The Government should wake up and realise these people should be kept informed fully of the state of the funds which come up for discussion in this House. There was a time when the redundancy fund was in a very healthy state. The Minister has given us no details about it this morning.

I have referred to the calculation of income tax. This is a particularly complicated order. We have the usual definitions. We are told the Act of 1971 means the Redundancy Payments Act, 1971, the order of 1974 means the Redundancy Payments (Weekly Payments and Lump Sum) Order, 1974, and the Principal Act means the Redundancy Payments Act, 1967. We are told:

Subject to subclause (ii) of this subparagraph, the total amount being paid in respect of a week to a person shall not exceed 85 per cent of his average net weekly earnings or £50, whichever is the lesser, but he shall not receive in respect of unemployment benefit, unemployment assistance, pay-related benefit or supplementary benefit less than that to which he would, but for this Act, have been entitled.

What Act? Is it not this order we are talking about, or are they trying to confuse the people still further by referring to an Act when it appears to me they mean the order. If the Minister corrects me I will accept his correction. Let me come to the calculation. The order states:

For the purpose of subparagraph (1) of this paragraph, a person's average net weekly earnings shall be calculated by—

(i) ascertaining his reckonable earnings (within the meaning of the Social Welfare (Pay-Related Benefit) Act, 1973) for his relevant employment period,

(ii) subtracting from those reckonable earnings the amount of income tax...

This is the one I am querying in particular—

... deducted from those reckonable earnings and the employee's portion (if any) of the amount of pay-related contributions payable by him in respect of those earnings.

(iii) dividing the remainder under clause (ii) by the number of complete weeks in his relevant employment period, and

(iv) deducting from the quotient under clause (iii) the employee's portion (if any) of the employment contribution which was payable by an employee in the employment in which that person was employed in the last week of his relevant employment period.

To the people who may have drafted it, this may seem simple, but it is complicated, complex and difficult for the ordinary man in the street. Would the Minister suggest that orders of this kind would be accompanied by some sort of explanatory memoranda which would help ordinary people to interpret and understand the instruments.

We are not opposing this order. We realise the necessity for it but we condemn and criticise the Government for the situation they have landed us in, a situation they have created and which they were not able to anticipate.

Mr. Brennan

The necessity for this change of the 1967 Act was visualised in the budget. At that time the Minister spoke about public concern in this respect. Of course the public are concerned about this and other matters and the Government must now have begun to realise that public concern is something to which they must have some regard. Public concern has become a moral issue which must be considered side by side with the realism of the present situation, when money is not available.

I had the pleasure of amending the Redundancy Payments Act when the fund had accumulated and there was a considerable surplus. I then improved the benefits. We visualised then that our EEC entry would create a good deal of musical chairs in employment, that there would be changing from one employment to another, from one industry to another, that we would move progressively to better industrialisation, and we visualised a good deal of investment here from countries which were not EEC members who would take advantage of our membership. We foresaw a considerable change in the format of our industrial structure.

This was rudely interrupted by the advent of the present Government and the situation we are facing here today has to be confronted whether we like it or not. The redundancy payments legislation and the amendment which I introduced to it would be due for review by the Minister now in the light of the experience he must have had of the working of the legislation. I visualised at that time, and I wonder if it has been monitored by the Department, that people would condition themselves to becoming redundant almost on the eve of their retirement on pension. If a worker continues in employment until retirement comes he is not entitled to redundancy payments, but if he can manipulate it so that he can become redundant six months earlier, he can get benefits. In this regard I was surprised that semi-State bodies such as the Forestry Division have frequently acquiesced in this arrangement. It is not the fault of the workers who succeeded in benefiting, but this sort of thing does not do much to allay the public concern about which we hear so much talk.

This should give us reason to have a second look at the redundancy position generally to see if we cannot devise something so that the legislation is not manipulated in a manner which would erode the fund and defeat the purpose for which we brought it in. That was one of the most beneficial pieces of social legislation in our statute book and it is of the greatest importance that it should be properly administered and not abused. I am afraid that the purpose for which this was initiated has been fairly well obscured because of the absence of any proper plan or programme in regard to increasing employment and the provision of job opportunities. That fundamental aspect is being completely neglected.

It is therefore important that the anomalies and abuses which give rise to public concern should be dealt with without delay rather than having to come in here—I use this occasion to say it lest we be accused of not reminding the Minister at the appropriate time—to curtail the amount of benefits people are entitled to receive under the scheme. I should like to see the Minister taking some positive steps towards providing for continuation of employment and consequently obviating the need for redundancy payments, the creation of new job opportunities and giving producers and exporters a climate in which they can expand and therefore retain people in employment.

The old talk about "factors beyond our control" has worn so thin that it cannot any longer be relied on. We take from the taxpayers so much money, so many millions, that we are not in a position any longer to rely on "factors beyond our control". While we are taking such an enormous percentage of the earnings of our people we have to take responsibility for the conduct of our economic affairs. We have to justify the massive impositions on production and the enormous amounts we are taking from workers' pockets. The well is running dry. The Minister has not given us any account of how the redundancy fund stands, whether it is in surplus or deficit. When the fund was in surplus we on this side had the pleasure of improving the amounts of benefits and thus cushioning people against the full impact of the serious situation into which they had been plunged.

I ask the Minister to get down to the basics. It is significant that the Minister for Foreign Affairs is sitting in for the Minister for Labour because I remember him when we were in office, when I was sitting over there, having, as Deputy Garret FitzGerald, a panacea for every economic ill, in articles on finance in magazines and newspapers. He told us how everything could be regulated and manipulated without any difficulty. I am surprised and disgusted that he has not brought to bear some of his magical knowledge to the practical running of the Government, to the grassroots work of giving men and women employment to enable them to live, giving industrialists an opportunity to produce and expand, cutting the shackles binding people who are trying to generate wealth and make a contribution to progress, and not leaving us in the position of having to come in here and do little cosmetic jobs on things like the redundancy fund designed to alloy public concern because of people getting too much money as a result of possible manipulation of the different social welfare benefits that can be drawn.

It is very like scraping the bottom of the barrel throwing in this income tax refund here. I agree with Deputy G. Fitzgerald that this should be removed from the order. The possibility is this refund might not become payable until after the death of the claimant. It takes quite a time to assess what is due by way of refund and a claimant may die before he becomes entitled to the 85 per cent. This looks like scraping the bottom of the barrel and one of these days the bottom will be worn very thin because it is getting quite a bit of scraping now.

I hope the Minister will have another look at this legislation to see what improvements can be made. The possibility is that anomalies can be removed and abuses eradicated. This is comparatively new legislation. When we introduced it it was on trial, more or less, and it should be subject to review from time to time. Any deficiencies can then be removed. The Minister should take an overall look at this legislation instead of bringing in these complex orders which are so difficult, as Deputy G. Fitzgerald said, for the average man to understand. With orders like this there should be job opportunities for auditors and accountants to decipher the complexities of the forms. Where redundancies occur it is almost imperative for one to call in the experts to examine the position. The whole thing has become too complex and we should simplify rather than create further complexity. Those entitled to benefit would need the services of an ombudsman to straighten out their position and discover the different benefits to which they may be entitled, forecasting the possible rebate of income tax to which one may be entitled. The Minister should simplify the whole thing and that can best be done by amending the original legislation. We had a great many bankruptcies and though redundancy payment was made a first charge on the assets in many cases it was not recoverable. The position should be examined carefully now and that examination can only be done by an overall look at the legislation generally, bringing in an amending Bill in due time to make all round improvements and doing away with the necessity for these complex orders.

Mr. Moore

This is a very simple document, symptomatic of the Government's laissez-faire approach to this very serious problem of redundancy. The Minister might have given us some background showing the state of the fund, the number of redundancies so far this year and the number that may occur during the rest of the year. Will there be an increase in the stamp because of the dwindling workforce having to meet greater outgoings? In the very first paragraph the Minister said:

This decision, announced by the Minister for Finance when introducing the budget on 28th January, 1976, derives from public concern that the cumulative benefits and concessions available through different Government Departments to unemployed persons has left them with disposable incomes which are sometimes as great as, or even in certain instances higher than, their disposable incomes while at work.

It seems to be the fashion to slander those who have lost their employment and the Minister's concern seems to be that the unemployed may be drawing higher disposable incomes than they had when they were actually working. The vast majority of the unemployed are unemployed through no fault of their own. They are unemployed because of lack of policy by the present Government and they are now being made the scapegoats. They did not suffer enough by losing their jobs but the Minister for Labour, through the Minister for Foreign Affairs, is now going to make sure their incomes are kept down to 85 per cent of their wages. I think this is preparing the ground for more drastic measures the Government intend to take very shortly either by increasing the price of the stamp or cutting back on the amount of redundancy payment. What the Minister should be doing is increasing the amount. No man wants to go on drawing the dole. Think of the position of the thousands of young people who have failed to get a first job. The Minister's glib statement annoys me because of its lack of concern for the unfortunate unemployed. Surely the Government could produce some kind of white paper dealing with the whole problem of redundancy and retirement. Should the older people be retired earlier to make jobs available for others? The economists might not approve but it would show some positive action by the Government to remedy redundancies.

This document does nothing to give anyone confidence that the Government are thinking beneath the surface or that they appreciate the state of the economy, where there is a record number of unemployed, and then we rap them in the manner outlined in the paragraph I quoted. It is like the words of a Victorian do-gooder to show how benevolent the State is to allow these people to draw 85 per cent, but the public are concerned about this matter, and the Government, therefore, act because there is public concern.

I read in the papers about a demonstration in the city last night which shows the public are becoming concerned very much not at the fact that unemployed people are drawing 85 per cent of their wage or salary but at the fact that 160,000 people cannot draw any money apart from State benefits. It is time that the Government should recognise that the writing is on the wall and that unless they take appropriate remedial action and convince the people, including the unemployed people, that they are concerned with more than just limiting the amount of social welfare through redundancy payments which can be paid to people, they may not be sowing dragons' teeth by their very inactivity and that soon there may be grave social unrest.

I would like to ask the Minister how our redundancy payments compare with those in the other EEC countries. Are they higher or lower? If they are lower, are we aiming at parity with other countries? I appreciate the fact that the Minister for Foreign Affairs is not the Minister for Labour, but the fact that he is sitting in this morning for the Minister for Labour means that he must take responsibility.

On the matter of income tax refunds, anyone knows that when an income tax refund is claimed, it takes so long to give one that it has lost its value because of inflation. While the refund will be given at the figure of a year ago, it is paid in present-day currency with reduced purchasing power. What I am trying to say is that there are many more things concerned with redundancy payments than are stated in this document. I would suggest to the Minister, therefore, that he might consider giving the House some more information on the state of the redundancy fund, the current number of applications for redundancy payments which have not yet been decided on, and the possible number which will occur during the rest of the year.

In yesterday's papers there was a report about a large Dublin industrial concern closing down. We hope that by some means this can be averted. One can readily see the huge impact the claims from these workers will have on social welfare payments in whatever category they are placed. Therefore, I would appreciate if the Minister, as well as telling us the state of the redundancy fund, would say if it can stand the strain which is about to be put on it without increasing the stamp value.

Mr. C. Murphy

The concept in this draft order is perhaps simple, but the way it is presented to us is most complicated. Even the Minister himself in his brief had considerable difficulty in interpreting what it was about. He paused for a considerable length of time.

Dr. FitzGerald

I hesitated. That was my own bad English rather than anything to do with the order.

Mr. C. Murphy

I do not accept that, and I quote from the Minister's statement:

I would remind the House that in enacting the Social Welfare Bill 1976, section 12, the Oireachtas has already provided the Minister for Social Welfare with the power to effect by regulations in so far as pay-related benefit is concerned what, this order will effect in so far as redundancy weekly payments are concerned, that is to implement the Government's decision on the 85 per cent rule as outlined.

Dr. FitzGerald

The comma was my mistake in drafting, and I hesitated over my own error.

Mr. C. Murphy

I do not even know about the significance of the word "what", because after the word "what" there was a pause by the Minister which showed his perplexity.

Dr. FitzGerald

At the comma which I had inadvertently included in my drafting.

Mr. C. Murphy

I do not think so.

Dr. FitzGerald

The Deputy will have no difficulty in proving the order is complex if he looks at the order, without having to quote my speech.

Mr. C. Murphy

As I said in the beginning, the concept may be simple but the legal jargon of the Department's draft is shocking. People will be wondering what little box they will fit into if they are unfortunate enough to become unemployed. It seems to be a set of little boxes for people now and according to your classification you will fit into it. If the Minister is taking responsibility for the Department of Labour, that is fair enough, but surely he, as an economist, ought to have given a few examples by means of a tabular statement which would clarify the position for the Members and, more importantly, for people who may become unemployed or may be unemployed and who may, because they have a claim within the past 13 weeks, become subject to this order after the 21st June, 1976. Again the Minister says that under present arrangements social welfare payments must not exceed 100 per cent of normal weekly remuneration, or £48.08, whichever is the lesser. This draft order now proposes to substitute a new limit of 85 per cent of net average weekly earnings, that is, the net after-tax take home pay, or £50, whichever is the lesser. Then the statement goes on to list the exceptions, the other little boxes. I hope when the Minister is replying he will elaborate on the different categories, or perhaps at a later date some explanatory literature will be made available by the Department of Labour so that in our clinics we may be able to help the many unfortunate.

The Minister's statement reads: "... to substitute a new limit of 85 per cent of net average weekly earnings". I am concerned at the word "average", and it is a little complex in the sense that when provision was being made for this change in the budget, we were told that 85 per cent would be based on the last week's earnings not, as might have been a better situation, 85 per cent of an average based on a relevant period of time. What consideration has been given to the fact that under the new national pay agreements people at present unemployed would have been granted increases had they been employed? Was any consideration given to a system of index-linking of their benefits and entitlements? Is there a double losing out by some recipients here? I hope the Minister will be able to clarify these queries. I look for some financial examples in tabular form which will give indications of the various categories. Apparently, we have two new categories being created by means of this draft order.

A very relevant phrase is used in the first paragraph of the Minister's statement, "derives from public concern". That is a clear example of a Government not leading, a Government following; a Government with an eye to what is happening and what the views coming from the community are.

Dr. FitzGerald

It is a change for Fianna Fáil.

Mr. C. Murphy

The Minister will have his opportunity again and I hope he will allow me my opportunity now. The Government now see that the people are becoming very dissatisfied, that unrest is creeping into the community. We saw some of this unrest last night. The Government are reacting to a different form of unrest, an unrest amongst workers whose stamp has become so costly. It has become so costly that they are beginning to complain about the burden of having to carry some of the less fortunate. This draft order appears to be an effort to appease those and at the same time trying to get a delicate balance between the workers who are paying heavy stamp taxation weekly and those in receipt of benefits.

The Government always tried to play up to the people. The Minister has taken responsibility for the drafting of this statement and I take it that the phrase I have mentioned was not put in at the behest of those who drafted the order but at the behest of the Minister and the Government. This has always been their criterion, playing up to the public, trying to have it both ways. Time is running out but nevertheless for the sake of those who will obtain an income which will be affected by this draft order I want the Minister to clarify the points I made. I would be obliged if he would set out some financial statements, tabular examples, which would be a guideline for those who may have to interpret this order at clinics for the many people who ask for help concerning their social welfare payments. Hundreds who are unemployed and in need call to us and they are in that position because of the lack of ability by the Government to lead and provide jobs for our work force.

We have heard the news of a fertiliser plant closing down and workers coming on to the live register soon. This indicates how long the Government have been in not taking the advice we gave them on the many occasions the words "fertiliser industry" were used. The writing was on the wall. Why was a subsidy not introduced? Up to 300 workers will come on to the live register after 21st June.

An Ceann Comhairle

The Deputy was good enough to say that he would confine himself to the motion but he is now straying very much from it to another matter.

Mr. C. Murphy

I hope to anchor it with the permission of the Chair. The workers in the fertiliser plant feel they will be unemployed on or after 21st June and I should like to know if they will be subject to the draft.

Mr. Callanan

I come from a rural constituency which has a number of big towns. There is much unemployment in those towns at present and for this reason I will be asked questions about this order. I would like to be in a position to explain to the people the terms of the order. However, I am slightly puzzled. Am I to take it that an unemployed person cannot get more than 85 per cent of his net take home earnings? Does this apply to the people in the lower income bracket? The sum of £50 has been mentioned. Under the old system a person in the lower income group might get something more than what he was earning between redundancy payments, pay-related benefit and social welfare.

I was disappointed that no indication was given as to the size of the redundancy fund and the pay-related benefit fund. Workers who are questioning these funds point out that they are carrying the unfortunate people who cannot get employment. I should like to make it clear that the majority of the unemployed want to get jobs. If it happens that a vacancy occurs in any area all the unemployed try to get that job. To say that the worker has to carry the unemployed is true but that does not mean that the worker is against the unemployed person. However, the workers are discontented because of the huge amount of money that is taken out of their weekly pay packet. They must get up every morning to go to work while the unemployed person can sleep it out even though he does not want to be unemployed. This order was necessary to clear the air but the unemployed are now getting the first indication that the benefit will only be 85 per cent of their take home pay.

There are other classes that you may come into. We will be questioned and, personally, I do not feel qualified to answer without further explanation from the Minister. If the Minister for Labour coupled with this an indication that he would do something about the appalling position of the unemployed it would be more helpful. This may appear irrelevant but it is connected with unemployment. If the Minister would extend the £15 that he is giving in certain categories right across the board to anybody who would employ somebody and take him off the unemployed list, that would be a desirable development that I would like to see. It is unfortunate that what we are doing is merely cushioning people against unemployment but we are making no genuine attempt to get them off the unemployment register or the dole queue. That is what we want to do.

I think this effort should be made right across the board. Deputy Fitzgerald pointed that out forcibly when this matter was debated previously—that the benefit should not be confined to certain classes of employers and employees. I have met business people who told me that if they got the £15 they could employ extra young people but they do not get it. I would ask the Minister for Labour to consider that. While we do not oppose the present order, we would like to have a better explanation of how it will apply across the board. Suppose a person is earning £40 a week as net take-home pay, what would he be entitled to if he becomes unemployed? What would he be entitled to if the figure is £50 a week and so on? The kind of explanation we have got does not appeal to me. My intelligence may be limited but I should like to be able to explain to the ordinary unemployed person what category he would fit into.

Anything else that I might say has already been said on this side but I appeal to the Minister for Labour to do something quickly to help the young people who are coming on the labour market. What is being done is good but it would be much better if the £15 were given to anybody who would employ somebody and take him off the dole queue. This is very important. I should also like to know the size of the redundancy fund because this has not been stated. We are not opposing this order but it is complicated and we would like the Minister to define clearly the different classes of unemployed persons.

Mr. G. Fitzgerald

Could the Minister before replying say if in the case of redundancies notified prior to 21st June where employment goes on after that date such people will be caught under this order?

Dr. FitzGerald

It is a question of when the claim was made in respect of being redundant, not the notification of redundancy. Liability of the fund arises at the point when a claim is made. I should like to thank the House for the constructive nature of the brief interventions made in the debate. I think I detected a certain embarrassment on the other side of the House because what we are doing here is remedying defects in an enormously complex system devised by the previous Government which has turned out to be absurdly intricate—as can be seen from what has to be done to remedy even a small defect—and also to be open to serious abuses. We inherited a series of different codes in this country relating to the distribution of income. There is the income tax code which is not simple; there is the social assistance code and the home assistance system as well as the social insurance system which has been extended in recent years by provisions for redundancy and pay-related benefit. The process by which these systems have come into being has been a higgledy-piggledy one. Each of them has been tackled separately by a particular Minister in a particular Department seeking to solve a particular aspect of the problem. Unfortunately, in the period when the main blunders were made between 1967 and 1972, towards the end of the Fianna Fáil period in Government there was no overall view of the whole system. Nobody in that Government sat down, when they came to deal with redundancy and pay-related benefits and matters of this kind individually, to add up the sum total of what these different schemes would yield in particular instances. Each social evil was tackled in its own way but, unfortunately, by different Departments.

There was no overall co-ordination and this tended to intensify the problems already existing even before these schemes came in as a result of having a number of different systems of income distribution. The situation was already complex before 1967 but it was certainly complicated further by these two further pieces of legislation which were not co-ordinated with each other or with the existing system. At no point did anybody try to assess the net effect for an individual. This is a typical problem of the bureaucratic process and in Ireland it was compounded by the fact that the system in certain Government Departments involves minimal co-ordination except at Government level and if the Government do not do the co-ordinating and try to ensure that the different things the Ministers are doing add up correctly, the administrative system will not easily do it because of the way Departments tend to operate.

Perhaps our whole system involves an excessive burden of co-ordination on Government. But that is the system we have and if the Government are not up to their co-ordinating role you get a mess and we inherited the mess. We inherited a system of income distribution which is enormously complex although the task to be performed is a relatively simple one. The aim of all these systems is the single one, I suppose, of ensuring that if an individual or family income falls below a certain level in relation to the number of dependants, that income is supplemented by the State to prevent serious poverty occurring. It should have been possible to achieve that simple aim by a simple system of income transfers. But, because we inherited a range of different systems, because schemes were never co-ordinated and because the previous Government compounded the errors of the past by introducing two further schemes without any attempt to co-ordinate them, we ended up with the absurd position in which under the Fianna Fáil schemes as they actually operated, for example, a survey carried out some time ago——

Mr. G. Fitzgerald

Would the Minister mind coming to the draft order?

Dr. FitzGerald

I am answering points made in the debate.

Mr. G. Fitzgerald

The points made were relevant to the order. The odd time the Minister comes to the House we would ask him to do something positive.

Dr. FitzGerald

In replying to the debate I like to answer points made by Deputies opposite and to be allowed to answer them. We had a series of complaints about abuses, of the Government being negligent, undue complexity of the system and so on and nobody would have detected—but it is my job to point it out—that all these complexities and the abuses derive from the system as built up under previous Governments and particularly in the last five years when the Government were running down and the co-ordinating function was not being undertaken properly.

Mr. C. Murphy

May I ask the Minister——

An Ceann Comhairle

The Minister must be allowed to make his speech and the Chair will allow relevant questions when he concludes.

Mr. G. Fitzgerald

Is there any way in which we can get a clear and relevant statement from the Minister on the order we are now discussing?

An Ceann Comhairle

That is not a point of order, Deputy. Let us hear the Minister out. Relevant questions may be put at the end.

Mr. C. Murphy

Would the factor of the extra 35,000 unemployed have over-burdened the system and would the Minister take responsibility for this 35,000?

An Ceann Comhairle

Order.

Dr. FitzGerald

The problem we are dealing with is not one which arises because of a financial problem of the fund. There was a problem and there is a problem. That was tackled by the increase in payments. I will come back to the fund in due course and explain it.

We are dealing with a problem which arises because under the systems invented by Fianna Fáil people can end up receiving substantially more take home pay as a result of being unemployed than when they were employed. That Fianna Fáil series of systems which cumulated in this effect is a bad one and we have to reform it. It is as simple as that. To give and example, out of just over 50 people sampled in Dublin some time ago, who were fully unemployed, it was found that of 52, 30 had net weekly disposable incomes which were higher than their preunemployment net disposable incomes—almost 60 per cent.

Mr. Colley

When was this made?

Dr. FitzGerald

In January.

Mr. Colley

Of this year?

Dr. FitzGerald

Sorry, made in December, just at the turn of the year.

Mr. Colley

Was the Parliamentary Secretary aware of that when the statement was made that no such thing occurred?

Mr. G. Fitzgerald

The Minister was.

Dr. FitzGerald

The survey has given us the data on which to take the decisions announced in the budget which we are now implementing. Indeed, for people on redundancy payment in this sample—a small sample but it is an indication of what can happen under the system which Fianna Fáil had left us with—the average take home pay of unemployed was 38 per cent more than when employed. Of this the tax rebate represented 17 per cent or about half of the excess. So there is a problem. We have inherited this problem and we have to resolve it. It cannot be resolved by a simple piece of drafting, because the hotch-potch of legislation we have inherited is so enormously complex that there is no simple way of remedying it here. I hope that in due course we can devise an income maintenance system to replace what we have inherited from the previous Government.

Mr. G. Fitzgerald

The Government will not be in office long enough.

Dr. FitzGerald

It will be simple, but the system that we have inherited is so complex and has built up over such a long period that the process of reforming it fundamentally will be a major one.

Mr. G. Fitzgerald

Even the Minister's colleague is laughing at him.

(Interruptions.)

An Ceann Comhairle

Order.

Dr. FitzGerald

As Fianna Fáil were unable to begin reforming it in all the years in office and did nothing except complicate it and make it worse and introduce the possibility of serious abuse, they are in no position to complain if it takes some time to set right the errors of the past.

Mr. G. Fitzgerald

We had fellows like the Minister taking legal action.

Dr. FitzGerald

The background to this, because the Opposition in many speeches they have made, while making relevant and useful points, did seek to leave an impression that it was this Government who had created the mess, is that we inherited the mess and are seeking to clear it up. There has been public concern about the way in which the Fianna Fáil systems added up to a situation in which there could be abuse. That public concern is one to which this Government responded. Deputy C. Murphy seems to suggest that for a Government to respond to public concern in regard to abuses is in some way a bad thing. Perhaps if the previous Government had been more responsive to public opinion we would not have had some of these difficulties.

The system is complex certainly, and I agree with Deputies who feel a need to have its effects explained more simply. The technical legal terminology cannot be simplified, given what we have inherited, but that does not mean we cannot produce a leaflet which will help Deputies and others concerned with the problems to explain what is involved. The basic principle is simple enough. It is that the take home pay that people would have, the amount of disposable income available to them unemployed, should not exceed 85 per cent of the disposable income when they were employed. That is the simple principle. There are difficulties about applying it in every aspect. There are certain exceptions to it which I mentioned in my speech. I have mentioned all of them as far as I know, and these could be mentioned in the leaflet. They include the case, for example, that I mentioned, of somebody who is in receipt of unemployment benefit or assistance and nothing else, and because of the number of children that comes out at more than 85 per cent of his pretax income when in employment. That will not be reduced in that case.

There are also other problems in relation to short-time working, but in general the principle being applied is a simple one in so far as it can be applied given the administrative complexity of what we have inherited. I should also mention that the work to be done on this would be done by social welfare officers administering the order in the employment officers of the Department of Social Welfare, so that personnel officers in individual firms will not have the job, as heretofore, of administering weekly redundancy payments, so that from the point of view of the firm's concern the position will be somewhat simpler. They will not have to cope with the complexities in question.

Deputy C. Murphy raised a point that it might be unfair to fix the 85 per cent limit in relation to the last week's earnings. That is not in fact what is being done. What we said in the budget speech was that we related to the disposable income immediately prior to unemployment, in contrast to the Fianna Fáil system which went back to a previous year, so that it went back to 1974-75.

Mr. G. Fitzgerald

On a point of correction, the system referred to by the Minister refers to a different scheme. Could I ask the Minister——

Dr. FitzGerald

The Deputy may be right.

An Ceann Comhairle

The Deputy has made his point.

Dr. FitzGerald

We have to see here that what we are doing with this is a composite action which affects redundancy and pay-related and it is with its overall effects that we are concerned here.

Mr. G. Fitzgerald

To keep the Government on the right road——

An Ceann Comhairle

Order.

Dr. FitzGerald

I want to say to Deputy C. Murphy——

Mr. C. Murphy

I looked for clarification and I hope the Minister will correct the statement he made a moment ago.

Dr. FitzGerald

I hope the Deputy will let me complete the statement. I have got only half way through it. Deputy C. Murphy thought that the calculation was on the last week's earnings. What we said was that it would be related to earnings immediately prior to unemployment. I did not mean the last week's earnings. That is taking the word "immediately" too literally. That would be unfair. In fact it is related to the average earnings in the employment year to date which, I think is a fairer system. Deputy C. Murphy is right on that point. That is what we have done.

Several Deputies raised the question of the rightness or otherwise of including the tax rebates in this. They are not included. Then there is a situation in which people can in fact still end up better off and would in a number of instances end up better off unemployed than employed. I think there is a concensus in the House, and certainly in the country, that the purpose of our income maintenance system must be to prevent poverty, to catch people who fall out of employment and prevent them falling into poverty, but not to leave them better off and with a demoralising incentive not to work. If you are going to exclude the tax rebate from this new provision people are going to end up better off because of the tax rebate for quite a long period after unemployment. That would be undesirable. The tax rebate therefore has to be included here if the purpose of this is to be achieved. I do not think the Opposition are serious in suggesting that it should be excluded, because it would undermine the effect of this. I do not think they want basically to maintain the present system under which some people could be better off out of work than at work.

Mr. G. Fitzgerald

Is it correct to say that tax is being used twice against them?

Dr. FitzGerald

I could not follow the Deputy's argument on that point. If I am a little slow to answer it in detail I will come back at the end if there is a point I have not answered adequately. I must try to maintain my train of thought. The basic issue here is to ensure that the 85 per cent limit is operative in relation to all payments received from the State so as to eliminate any disincentive effect that might be there. If the tax rebate is not included that cannot be achieved. Deputy Brennan was worried about delays in regard to the tax rebate calculation. In fact it takes only four weeks from the date of application to clarify a pay tax refund. The provisions are quite clear that the day does not extend beyond this limit and there is no problem and Deputy Brennan was incorrect in that.

The question about the redundancy fund which Deputies have asked is quite a fair question. I did not deal with it in the opening statement. As what is being done is not related to the question of balancing the fund, the motivation for and purpose of it are quite different.

The condition of the fund does not come directly into it but Deputies have asked what is the position and certainly they are entitled to know.

The increase in the contribution levied some time ago related to a situation where the fund was incurring an increasing debt. Following the increased contributions borrowings stopped, at the time of the increase in contribution, at a figure of £4,180,000. Since then there has been no further recourse to borrowing but repayments of that sum to the Exchequer have not yet commenced because of a certain volume of arrears of rebate claims on hands which are being undertaken. These arrears have been reduced substantially but it has not been possible yet to reduce borrowings which remain at £4,180,000. It is clearly impossible to say how long it would take to get the fund solvent again. The best assessment one can make is that this might happen some time in the latter half of next year. The exact date may be influenced to some degree by the effects of what we are doing here today. Certainly that is not the primary purpose of it; it would not be greatly influenced by it. It would be some date probably in the second half of 1977.

Of course that depends on the rate of fresh redundancies. The position here is somewhat encouraging in that at a date this year the redundancy rate is significantly lower than last year. It is down by something over a quarter. If the present rate is maintained, not allowing for any further fall in the rate in the second half of the year—which in view of the general world economic situation is probable—on the present rate without any allowance for any further decline, there might be approximately 14,000 redundancies against 19,200 last year. The economic and employment situation is clearly improving to that extent but not enormously rapidly and the position of redundancies remains serious, as Deputies are certainly aware.

Of course, there is no question of increasing the stamp. The increase that has taken place was sufficient to bring the fund into solvency at some point in the second half of next year so that there is not an issue of increasing the stamp again at this stage. The increase that has been undertaken appears to be achieving that purpose.

I was asked for EEC comparisons. The redundancy schemes in other EEC countries are in many ways very different from ours. There is no easy comparison. The simplest comparison would be one with Britain. Our position is that we have a lump sum with no limit on the number of weeks' pay. In Britain it is limited to 20 weeks' pay. We have a system of weekly payments and Britain has none. Of course, the ceiling in Britain is very much higher because wages generally in Britain remain somewhat higher than here. The redundancy scheme, as such, here is in those respects more favourable. With regard to other EEC countries there is no easy comparison, certainly none I can make on my feet at the end of a short debate.

Deputies have suggested that the scheme needs to be reviewed. That is probably right. It needs to be reviewed both in itself because there are a number of anomalies in it arising from the way in which it was prepared and drafted, but also because it is a part of an income maintenance system which, as I mentioned earlier, got out of hand because of being developed on different lines by different Departments under the previous Government, and there is a need for an overall review. I certainly accept that.

Mr. C. Murphy

And the huge increases numerically.

Dr. FitzGerald

No matter what the numerical increase is or is not it does not create the abuse. The abuse arises from the combination of a number of different schemes affecting any one individual and, of course, from the levels of benefit. It is true, of course, that the increases in benefit that have taken place under the Coalition have created part of the problem.

Mr. Colley

Oh, that is a new version. Minutes ago the Minister was saying it was all Fianna Fáil's fault.

Dr. FitzGerald

The basic system was incoherent, as devised by the previous Government, totally different schemes unrelated to each other and therefore open to abuse.

Mr. Colley

Whose fault was it? The Minister should make up his mind.

Dr. FitzGerald

The increased number of unemployed is totally irrelevant to the question of abuse arising in an individual case. The level of payments is relevant to it, of course, and the fact that under the National Coalition social welfare benefits have been increased——

Mr. G. Fitzgerald

I think the Minister is tired.

Dr. FitzGerald

——is something that will have to be taken into account. But Fianna Fáil I take it, are not objecting to the increases, as such. Or are they?

Mr. G. Fitzgerald

The only thing we are objecting to is the increase in unemployment.

Dr. FitzGerald

Certainly they are in no position to object to the complexity of the scheme or its potential for abuse considering they invented it.

On the question Deputy Brennan raised of the possibility of an abuse of people who are about to retire being made redundant, it is true that there is a possibility of abuse there. We need more information on that. Some work is in hand, through data processing, to try to establish the scale of what we might call late redundancies. It is a somewhat difficult abuse to correct. Of course, there is an element of control over it because redundancy is payable only when an employer lets somebody go and does not replace him. Obviously it can arise in a limited number of cases only. We need to know in how many cases. That information will have to be extracted and is being undertaken at present. I am not saying it will be easy, in so far as the emergence of that study is concerned, to find a way of dealing with it which would be humane and would not create more hardship. Certainly it is something which needs to be looked at.

I hope I have answered all of the points raised but if Deputies want to put questions which I have not answered, I will be very glad to try to deal with them if it is within the limits of my competence.

Mr. G. Fitzgerald

There is one question the Minister has not answered because I do not think he has a grasp of this document at all. He has been skirting around it. I did not ask nor did I complain about the tax being taken into consideration in assessing the 85 per cent. What I did ask the Minister was: is it not correct that the tax is being used twice against the individual because, in the first place, his net weekly earnings, presumably after tax, while he is still working are taken into consideration? There he has paid his tax to the State and it is after payment of that tax that his weekly earnings are then reckoned. When it comes to seeking the 85 per cent subsequently the refund of that tax is taken in as part of his 85 per cent of total. Does not that mean that, on both occasions, his income tax payment is being used against him, or that this Minister, or the Minister responsible, is doubly taxing the unemployed person? That is basically what is happening.

Dr. FitzGerald

I certainly cannot follow that it is doubly taxing the unemployed person.

Mr. G. Fitzgerald

Is that not the position?

Dr. FitzGerald

The problem is that we have to try to ensure that the net effect of a combination of a number of different schemes—tax rebates, redundancy payments, pay-related and so on—does not leave somebody better off than previously. There should be some differential as a limited disincentive and 15 per cent is modest for that purpose. Either one takes in the tax rebate or one does not. If one does not one will end up, in quite a number of cases, with the situation that people are paid more for not working. I take it Fianna Fáil are not proposing that. Therefore, the tax rebate must be taken into account in calculating the 85 per cent.

Whether the administrative process we employ involves reducing redundancy, pay-related or the tax rebate, is a question of administrative organisation. The principle involved is that the total sum received from the State should not exceed 85 per cent of the disposable income while at work immediately before unemployment occurred. The method by which one modifies the different payments to produce a cumulative figure within that limit is a question of administrative process and what is the most effective way to do so. To argue that people are being doubly taxed in those circumstances is quite irrational and is an argument I do not think public opinion will follow the Deputy on.

Mr. G. Fitzgerald

The Minister is obviously out of touch. The Minister says the 85 per cent is completely from State schemes. That is not entirely correct because part of that 85 per cent may be made up of a refund of tax——

Dr. FitzGerald

That is what I said.

Mr. G. Fitzgerald

The Minister should let me finish. It is made up of part of a refund of tax to which an individual becomes entitled. This is not a State fund. This is his own money being refunded.

Dr. FitzGerald

It is not. It is a State refund anyway.

Mr. G. Fitzgerald

As far as income tax refund is concerned, it is not a State contribution; it is a refund to an individual of his entitlement under the income tax code.

An Ceann Comhairle

This is becoming argumentative.

Mr. G. Fitzgerald

The reality of the position is this: that that individual's tax is being taken from him while he is still working. Does the Minister follow me as far as there?

Dr. FitzGerald

I follow the Deputy the whole way except at his conclusion.

Mr. G. Fitzgerald

It is not my conclusion. It is harsh reality that the unemployed person is now being doubly taxed.

An Ceann Comhairle

Order. I allowed the Deputy to put a question but this is developing into an argument and, indeed, a debate.

Dr. FitzGerald

I do not think the Deputy would get very far with that argument. The position is that either you take it into account in calculating the total amount and you then reduce one or other, or a number of elements, by the amount necessary to get it down to 85 per cent or you do not. If you say that the tax refund has to be paid regardless, then people will end up being paid more for not working. The Deputy is not advocating that.

Therefore, he must draw the conclusion that the tax refund has to be taken into account. The question of which of the different refunds, or payments, whatever you like to call them, are modified to get down to the 85 per cent is a matter of administrative organisation. You can do it one way or the other way. Obviously one tries to do it the simplest way. The Deputies who earlier on said we should make it simple should not try to complicate the thing further by suggesting even more difficult and complex ways of doing what we have tried to do as simply as these schemes we have inherited from the previous Government permit us to do.

I believe I have dealt with all the points raised in the debate. I might sum up by saying that this is an important reform. It is important not merely for its own sake in so far as it will eliminate a disincentive to work, an incentive for people not to work because that only affects, as Deputies have properly said, a relatively small group of people who are not strongly motivated to work. Most workers want to work and they will not be put off by this. Indeed, there are cases of workers who despite the anomalies we inherited, have nonetheless gone looking for work even though if they got work they would have slightly less income. Most workers are primarily concerned with working but there is a marginal group, obviously, in any society of people, who can be influenced into not working if you pay them enough not to work. We obviously have to avoid that.

That is not the sole problem here. A broader problem arises because of the public concern to which the abuses deriving from these systems inherited from the previous Government have given rise. That public concern can be generalised towards social welfare as a whole. One of the things we have to concern ourselves about in a period of economic recession in particular is that we do not, by any defect in the administrative processes which we have, allow a public opinion to emerge which is selfish and hostile to the need for the redistribution of wealth to those who need it or to allow abuses to exist here or in the dole, where we have had to act as well, to undermine confidence and trust in the social welfare system and to turn our people, who have hitherto loyally accepted the need for redistribution of wealth at their own personal, material expense, to think selfishly. If people see somebody getting something that they think is unfair and unjust then they will resent that and resist it and their resentment will be against the whole social welfare system. It is important, therefore, that we institute reforms of this kind to ensure that an abuse in one small area affecting a very small group of people should not lead to general resentment and undermine confidence, trust and support for our social welfare system which, God knows, even today after three years of Coalition Government contains many defects still to be remedied.

Mr. Colley

The Minister stated repeatedly that the problem sought to be dealt with here was inherited by the Government from the Fianna Fáil system. He also stated there was a survey done in either January of this year or December last which showed a certain proportion of people getting more by not working than by working. Could he state if he has any evidence that under the previous Fianna Fáil Government people were receiving more by not working than by working?

Dr. FitzGerald

I could go back over the figures and could easily find cases where this happened.

Mr. Colley

Has the Minister any such evidence?

Dr. FitzGerald

As the Deputy's Government did not bother to carry out any survey to find out what was happening you cannot carry out a retrospective survey in relation to what was happening years ago.

Mr. Colley

The Minister has no evidence.

Dr. FitzGerald

There is no difficulty whatever in calculating out from the actual benefits in individual cases where people who had a certain income would have been in those circumstances better off because the previous Government totally failed to safeguard the system against this abuse and because at certain levels any system, if there is not such a control, can lead to abuse. The scale of abuse will depend in one element to the level of benefits. If you draw up a series of incoherent schemes unrelated to each other and with no controlled system or a controlled system as limited as what was there previously, which in fact did not take account of disposal after tax income but gave people full pre-tax income, then you get abuses. The previous Government have to accept responsibility for introducing a serious of incoherent, unrelated schemes without adequate co-ordination. It has been necessary for us to put this right.

Mr. Colley

We may take it that the Minister is saying that he has no evidence of abuse under Fianna Fáil. That is what all that amounts to. Perhaps the Minister might also enlighten us, while I am sure the House appreciated his presence, why it was left to him and not to a member of the Labour Party to deal with this matter?

Dr. FitzGerald

The Minister for Labour, as the Deputy is aware, is at present engaged in the International Labour Conference in Geneva.

Mr. Colley

One would have thought that the Parliamentary Secretary to the Minister for Social Welfare would have been very appropriate in view of all his statements which are totally contradictory to what the Minister has been telling the House.

Dr. FitzGerald

In an harmonious Government like ours we offer to help each other in matters of this kind and I simply offered to help the Minister for Labour.

Question put and agreed to.