asked the Minister for Social Welfare the measures, if any, he intends to introduce in the future to help to alleviate the poverty trap as it presently exists.
Ceisteanna—Questions. Oral Answers. - Poverty Trap Alleviation.
7.
The poverty trap is caused by a very complex interaction between the social welfare system, the taxation system and health, education and housing entitlements. As far as social welfare is concerned, the modifications to the pay-related benefit scheme and the introduction of the family income supplement were intended to alleviate some of the problems. The proposed child benefit scheme will help to neutralise the relative positions of families at work and those in receipt of social welfare payments by giving a much larger monthly payment for children regardless of the employment status of the family.
Further alleviating measures will be considered in the light of the forthcoming report from the Commission on Social Welfare who are carrying out a detailed examination of this whole area.
The Minister said that the introduction of the family income supplement was intended to alleviate some of the problems. Would the Minister clearly admit that the family income supplement has failed?
The question of the unemployment and poverty traps is very much broader than the family income supplement. It relates to the question of income tax payments, especially by a married couple. It also relates to the impact of PRSI payments, medical card limits and the cut-off point in relation to them and to local authority housing rents being increased as earnings increase. As Deputies are aware, there is a lack of coordination of the ways in which benefits are withdrawn and taxes are imposed. As a result, many anomalies can arise and as a consequence we have poverty and unemployment traps.
There is a very urgent need for to look at the interaction between taxation, welfare, health eligibility and the payments of rent for housing throughout the country. Some excellent work has been done by the National Economic and Social Council and the Commission on Social Welfare in this area. I will endeavour to remove many of these anomalies and the first major step will be the child benefit scheme which will directly effect 470,000 families rather than the 5,000 or 6,000 affected by the FIS.
I am glad the Minister has conceded that the whole question of the poverty trap is much broader than could be solved by such a thing as the FIS.
A question. please, Deputy.
Seeing there is an interaction of various factors such as increasing PRSI payments when wage increases are granted, there is the problem of increased PAYE payments, and as cognisance is not taken of the fact that these people are being taxed on their gross salary — in effect we are talking about the PRSI payments being a tax on a tax — I am sure the Minister will admit that there is an anomaly——
A question, please, Deputy. You cannot make a long statement.
The Minister was very long winded. He went round in circles. Not alone did he indulge in verbal histrionics but he did some physical gymnastics as well. Would the Minister not agree that something should be done about PRSI increases and taxation on gross income? This can mean that families with increased wages can end up with less take home money but because they got these wage increases they are no longer eligible for medical cards because of the stringent cut-off point. I do not expect the Minister to solve the problems of the Minister for Finance since he is not able to solve his own——
The Deputy cannot make a long case and then ask the Minister if he agrees with it. That is not a question.
Does the Minister intend to do anything about PRSI increases?
With the PRSI ceiling at £13,800 a year, one has an arbitrary cut-off point and that is an indication of where the trap can develop. We have arbitrary cut-off points on medical card eligibility and income tax thresholds where a person's income can increase but he is worse off. Social Welfare payments are based on the number of children in the family whereas the number of children in the family is not taken into account for ordinary wage and salary earners. This means that considerable distortions can arise in this area. In my view the most important development will be the introduction of the child benefit scheme. This scheme will level things much more effectively and we will have to examine the question of phasing and tapering some of the eligibility limits. That would make the system fairer but it cannot be done while there are hundreds and thousands of people outside the PRSI and income tax frameworks. That is a very big problem, as Deputies will appreciate.
That is——
No interruptions during Priority Question Time, please.