Section 1 is a section on definitions and I will not bore the House by going into the different Acts that are cited but I would make the point that in 1981 this House consolidated the social welfare legislation right back for many years before that. Hundreds of Acts were brought together in the Social Welfare (Consolidation) Act, 1981. I was Minister at the time and put a great deal of work into it. I suggested that there should be a review of this consolidation legislation at regular intervals so that we would never again have to consult so many pieces of legislation. It is time we had another look at our social welfare legislation. I suggested a five year interval might be appropriate for further consolidation but next year it will be seven years since we undertook such a review. Therefore it is appropriate that we look again at this legislation and we will undertake that task. We have a lot of work on hand for early in the year and we hope to be able to get this consolidation review under way as the year progresses. It is important to keep this legislation up to date. It gives Deputies a chance to get an overview of the legislation.
Social Welfare (No. 2) Bill, 1987: Committee Stage.
I have one query on the definition section. What comes under the definition of a "person"? I presume that includes a body corporate. If so, does it include directors, managers, officers or agents of a body corporate? This will be relevant when we come to imprisoning because we will not be able to imprison corporations and yet we will need to do something about employer abuse.
The board of directors.
We will come to that in more detail later but for the purposes of the legislation a "person" is not a body corporate but where it is used in the section dealing with fraud, it covers both. As I said, we will deal with that in more detail when we come to the relevant sections.
Amendment No. 1 in the name of Deputy Mitchell. In relation to other amendments and suggested groupings it is proposed to take amendments Nos. 2, 3, 4 and 5 which are related. Amendment No. 1a is an alternative to amendment No. 1, amendment No. 2a is an alternative to amendment No. 2, amendment No. 3a is an alternative to amendment No. 3. Amendments Nos. 1, 1a, 2, 2a, 3, 3a, 4 and 5 may be taken together by agreement. Is that agreed? Agreed.
I move amendment No. 1:
In page 3, to delete lines 26 to 28, and substitute the following:
"(3) A person who fails to comply with this section or regulations made hereunder shall be guilty of an offence and shall be liable——
(a) on summary conviction to a fine not exceeding £1,000 or (at the discretion of the court) to imprisonment for a term not exceeding one year, or to both such fine and such imprisonment, or
(b) on conviction on indictment, to a fine not exceeding £10,000 or (at the discretion of the court) to imprisonment for a term not exceeding three years, or to both such fine and such imprisonment.".
One area in which the Minister has moved very definitely is that of abuse, and he has my wholehearted support, but I do not believe enough has been done yet. In a radio interview last Sunday the Minister admitted he was surprised by the extent of the abuse in the social welfare system which is unravelling. I am not the least surprised because it is very evident and people have been saying it in the streets for years. The situation has not got better; it has got worse. At least now the problem is being tackled. This was started by Deputy Hussey in her short term as Minister for Social Welfare and it is being continued by the present Minister.
However, we cannot just rely on inspectors catching these people, because given the number of people in the social welfare system, even if there are hundreds of inspectors they will only be able to touch the tip of the iceberg. We need to have effective penalties. Take the £1,000 fine on an employer who fails to comply with sections 2, 3, 4, 5 or 6 in this Bill, or parts of the Social Welfare (Consolidation) Act, 1981. A fine of £1,000 is nothing, because the employer's social welfare contribution for a person on the average industrial wage of around £10,000 would be £1,230 a year. Even if the maximum fine of £1,000 were imposed, it would be less than the employer's contribution for one employee on the average industrial wage. That is why I believe we must have stronger penalties.
I would like to see some of these criminal employers put behind bars because with a few very well publicised examples there would be a very quick and major shake-up of the system. We need a few Lester Piggots among the employers abusing the social welfare system. A few people, no matter who their contacts are, what influence they have, or what money they have, should, like Lester Piggot, be hauled before the court. There has been a big shake-up in the horse breeding industry in England so far as defrauding the revenue is concerned. That is what we need, but that would not go down very well here because the prisons are only for gurriers, for the working classes. That is the way they are looked at.
It is about time we put behind bars a few of these so called high-class criminals because they are not only defrauding the Revenue and the Department of Social Welfare, but they are defrauding ordinary workers. They are also walking many workers into fraud with the result that a lot of money is being diverted from the poor. I do not believe any public representative can be unaware of this fraud and there is a particular responsibility on us as legislators to legislate against in particular employers who seek to defraud the system.
When tabling these amendments I considered deleting all reference to fines and mentioning only prison sentences to indicate to the courts that we in this House want to see employers who are defrauding the system behind bars. However, I decided to put down an amendment to the Minister's proposal and to add to the £1,000 fine — the limit which the District Court can impose under the Constitution a 12 month sentence — the longest sentence the District Court can impose — or both. I also decided to add a further paragraph which would have employers go before judge and jury and if convicted on indictment to be subject to a fine not exceeding £10,000 or to imprisonment for a term not exceeding three years or to both. That is a reasonable proposal. I do not believe these penalties are too severe because of the amount of money of which these people are defrauding the Department of Social Welfare. They are quite small figures and the only question is whether we should be more specific in relation to each case. Should we take into consideration each employee, each time and each week that the system is defrauded?
Deputy Wyse put down three amendments which are more modest. I urge him to withdraw them and to accept the amendments I am proposing because I have good reason to believe the Minister is not unhappy about them. Similar amendments are tabled to sections 2, 3, 4 and 5——
On a point of order, I did not see those amendments.
A supplementary list has just been issued. These amendments relate only to the provisions in the Bill before the House today. I was looking through the Social Welfare (Consolidation) Act, 1981 — which is very complex legislation — and I ask the Minister to accept my amendments. I acknowledge what he said about a total review of the 1981 Act after seven years but, in the context of the first Social Welfare Bill for 1988, he should update and increase penalties both in terms of fines and prison sentences in relation to other fraud in the social welfare system. If we can make these amendments stick, we will be doing a very good day's work for the less well off in society.
I asked the Minister yesterday what it would cost to raise the basic social welfare payments to £45, £50 or £60 per week. Even to raise such payments to £45 per week would cost about £60 million in a full year.
That is just for unemployment assistance.
Yes, but we must do something about people living on £35 per week. Even £45 per week is a small amount and I know it would be very costly to implement but we must find the money. We can do so by more effective pursuit of fraud throughout the system. On Second Stage yesterday, I made certain suggestions which I will be following up. I hope the Minister will do the same and that a united message goes out from all sides of the House that, whatever our other disagreements, we are at one in condemning without reservation fraud in the social welfare system. The most pernicious area of fraud is that perpetrated by employers.
As promised yesterday, I welcome the Minister's decision to extend temporary payments. Naturally I am very pleased as I may have helped him along the road in that respect. I assure him I will be watching him very closely coming up to March when I hope he will replace the payments with something more permanent.
We will be supporting Deputy Mitchell's amendments in relation to the very important subject of fraud and the manner in which it should be dealt with. It is certainly much stronger than the amendment tabled by the Progressive Democrats; a fine of £1,000 on an employer is not enough. I recently heard where an employer walked away from a case where a sum of £90,000 in social welfare moneys was not returned to the Department. People think that if a company goes into liquidation or receivership the money will eventually be repaid but very often there is nothing in the kitty for anybody. That happens very frequently and when one considers the penalties that can be imposed on individuals for minor offences in relation to drawing benefits to which they are not entitled or where people are disqualified for lengthy periods because of breaches of regulations, it is obvious they must be matched by severe penalties on employers. As I said yesterday, if there were no dishonest employers there would be very few, if any, dishonest employees. The encouragement that social welfare recipients get from unscrupulous employers creates many of the existing problems. This places emphasis on that subject and I hope the Minister will accept the amendment because it will correct many of the anomalies.
The car disc insurance system was introduced during the term of the previous Government. A notice must be affixed to the window of the car giving the name of the insurance company and the dates for which the car is insured. That effectively improved the situation in regard to the level of abuse of insurance in the motor industry. Before the PRSI system came into operation an employee had a stamp inserted on a card every week, the stamps were bought in the post office and at the end of a year the employee could go to his employer and ask for his card which would then be returned to the employment exchange. If the card was not returned the responsibility rested with the manager or the staff in the local employment exchange to visit the company concerned and insist on the cards being returned within a specified time. The introduction of PRSI did away with that and also the policing of the system in regard to weekly contributions. The arrears accumulate and very often employers effectively use the money which should be returned to the Department as a cash flow. The arrears become so huge that it is the lesser of two evils to close down or to go into liquidation.
I suggest that there should be a receipt systems which would not present major problems in so far as records are now computerised. It should be possible for an employee to ask for and receive a receipt for the moneys that were supposed to have been returned on his behalf. As I said yesterday the P60 is only a piece of paper. It is not worth anything because anybody can make out a P60. The P60 is only effective when the moneys have been returned on behalf of the contributor. Perhaps the Minister could introduce a regulation which would ensure that employers would be obliged to post on the company's notice board or other prominent place a receipt showing that the social welfare payments on behalf of the employees had been returned to the Department. I do not think that would require an amendment to the Act. I suggest this could be done under powers vested in the Minister in one or other of the Social Welfare Acts. In conclusion I ask the Minister to consider those points.
I am prepared to withdraw my amendment in favour of Deputy Mitchell's amendment. I am well aware that abuse is being carried out by some employers, not all employers. We have quite a number of cowboy type operators who impress upon their employees that they will be employed at £80 per week and that they can sign on for the dole for the other £80 or whatever they are entitled to. This creates very unfair competition for honest to God employers.
I believe that insurance companies have a very big part to play in the fight against abuse. Around the country we have people, small builders and the like, employing people at £50 to £80 per week in the black economy. I cannot understand how an insurance company could issue a policy that covers perhaps 20 people without having the names and addresses of the people insured. Insurance companies have a part to play in bringing to an end abuse by some employers. If an insurance company is issuing a liability policy, they should know exactly the names and addresses of the people to be covered under the policy. In this way insurance companies could help to eliminate abuse.
I know it is frustrating for the Minister to try to counteract abuse. There are so many forms of abuse. I recall some years ago going to the Minister's predecessor to complain about a company in the Cork area working for a State body who were part and parcel of this type of abuse. When we tried to check them out we discovered they had disappeared. I know that this company were working for the Department of Posts and Telegraphs in the GPO in Cork and doing highly technical work. They were employing people who were also in receipt of unemployment assistance. I ask the Minister to consider involving the insurance companies in trying to track down and eliminate the awful abuse that exists and is being promoted by some employers.
The section which Deputy Mitchell's amendment refers to concerns the notification by employers of the commencement of employment. That obviously relates to collusion between the employer and employee on the nondeduction and non-return of PRSI contributions and does not relate to the issue where an employer deducts the PRSI from the employee but fails to return it. That is a separate issue which we can deal with later on. With regard to the issue of collusion between the employer and employee, there are a number of points that have to be kept in mind. By and large an employee will agree to that type of arrangement with reluctance. In the first place, the employees are deprived of the social welfare cover they would have if deductions were being made.
Secondly, it has to be kept in mind that the broader effect of this abuse is that many companies who operate within the law, pay decent wages and return deductions are at a disadvantage and in many cases cannot compete. I know, for instance, that is a particular problem for companies who operate in the security area. I had occasion to raise this matter with Dublin Corporation. Companies employed by Dublin Corporation were operating in that way and they took steps to rectify the situation. The abuses have a wider effect than simply the non-return of money which the State is entitled to.
However, I am not convinced that all of the money, whatever amount it may be, that is saved as a result of ending abuse of one kind or another will be retained in the social welfare system and used exclusively to assist those on social welfare. We have to accept that this Government and previous Governments, where savings have been made, have tended to reduce the budget accordingly. This applies not only to social welfare but to local authorities, the health services and various other areas in which they have been forced to reduce their expenditure. The money saved has not been used to develop other aspects of the service but has been whipped off and used for other purposes. I certainly am concerned that that may be the case with regard to social welfare.
I wish to raise a number of points on the amendment and the section. The section does not refer to conviction on indictment. I wonder whether the section, in fact, excludes conviction on indictment and if this amendment is accepted will that be the case? In addition may I ask if the summary conviction carries a fine of £1,000 is it possible to increase that amount beyond £1,000 or is there some limit which the District Court can apply in terms of fines? If the reference to a fine was deleted what options would be open to a court? Would the court be bound to find the person either guilty and send them to prison or not guilty because the judge felt the offence did not warrant prison and had not the option to impose a fine and therefore had to let them go. I would appreciate it if the Minister could clarify that.
I also want to ask why is it that in section 2(1) the Minister takes the power where he "may require an employer to notify him of the date" rather than making it mandatory that he "shall require an employer". In relation to section 2(2) could the Minister explain what circumstances he has in mind where no notification may be required? I said last night — and the Minister denied it — that the powers being taken in relation to abuse by employers were more apparent than real. By using the word "may" instead of the word "small" and by limiting the circumstances in which no notification may be required, which is clearly implied in this section, the section is not as strong as it is made out to be. I support Deputy Mitchell's amendment but I am not entirely certain that prison is the answer for everything. Imprisonment is used far too much in our courts.
It is really for the working class only.
Exactly and it is used far too freely in relation to most of the people who come before our courts. I want to ask the Minister if it is possible to increase the fines beyond £1,000 in that section and whether the section excludes the possibility of bringing people before a higher court.
I want to make one or two points on this section. I support the amendment. I see the objective of the section but I find it very hard to understand how the Department intend to police this. The Minister will be aware of a very bad case where an inspector who was inspecting alleged misuse by somebody who was allegedly working and drawing at the same time misinformed the person of the source of her allegation. How does the Minister intend to police this? I will not go into this any further this morning because I have already made my protest on that point.
The House should be very concerned about the fact that the Department of Social Welfare have one accountant only employed even though that Department have a turnover of £2.6 billion. That is very worrying. We can pass all the legislation we like to prevent collusion and everything else but if we do not have the staff to police and pursue this we will be in great difficulty. On Saturday a man who is receiving £37 per week unemployment assistance — it may now be £42 — came to me. He is living on his own and he is actually burning his sofa because he cannot get an entitlement to the free fuel scheme. We can pass all the legislation we want but unless it is implemented, pursued and policed there is no point in passing it.
It is very easy for collusion to exist if one accountant only is employed by the Department. The Comptroller and Auditor General drew the attention of the Committee of Public Accounts to the fact that approximately £750,000 has gone astray in internal fraud in the Minister's Department. That is the amount that has been discovered to date and it is in addition to the fraud that goes on outside the Department. If we are really concerned about cutting out fraud, collusion and rip-offs in the Department of Social Welfare, which is the biggest spending Department of State, then sufficient staff and resources should be allocated to the Department to police it. It is nothing short of outrageous that a Department of State with an enormous turnover of £2.6 billion should employ one accountant only. If I recall correctly, the reason one accountant is employed is because the Committee of Public Accounts drew the attention of the Accounting Officer of the Department to the fact that there had been none employed in the past. The Minister needs to give his attention to this. If we are serious about cutting out waste we should not ask the poor man who has to burn his sofa to do without his fuel. We should look at the internal control within the Department where much waste, fraud and abuse could be cut out. I ask the Minister to give his attention to this.
Whatever the justification for more accountants in the Department, I want first to congratulate the Minister — and I may be unique on this side of the House in doing so — for the work he has obviously put into combating the abuse of social welfare. While I am very concerned about the abuse that is prevalent in this area, like everybody else I am concerned also that the people who are in genuine need of social welfare should have enough to live on. I am not anti-anybody in the social welfare area but I am unashamedly antiabuse. I have to take a small bow——
A big bow.
Thank you, Deputy Mitchell. I will leave a large brandy for you in the bar.
It is the festive season.
I have to take a small bow for identifying the abuses which have been prevalent in this area. I have no doubt that my friends on the loony left will attack me for my remarks but nevertheless I stand over them. I want to congratulate the Sunday Independent and the Evening Herald for the series of investigative articles they printed earlier this year which undoubtedly helped to focus the attention of the Department on the charade that exists in this country. I have suggested that the abuse in the social welfare area is of the order of 10 per cent. Craig Gardner were commissioned to do a survey on the level of abuse and I understand from my source — which is fairly reliable — that fraud of the order of 9 per cent has been uncovered. My source also suggests that the report is so damning it will not be published. The survey found horrendous abuses in the area of social welfare, so much so that it focused the Minister's mind on stemming it and he has done so very successfully.
I have to contrast the recent disclosure that fraud of the order of £36 million has been discovered with the pathetic figures given by the Minister's predecessors, Deputy Barry Desmond and Deputy Gemma Hussey, who said very defensively that the abuse in the social welfare area amounted to £4 million. How could any Minister and Department have been so much out of touch with reality? Were they unaware of the abuses or did the Department put their heads in the sand and pretend it was not happening? The dogs in the street knew it was happening. There are so many fiddlers in this country that we could have a national orchestra in every county. The national emblem of the country is the harp and it should be changed to the fiddle. I welcome the disclosure that the Department have very belatedly found out that this exists in the country. I would also refer to their lack of knowledge. I refer back to the disclosures in 1983-84 of the itinerant lady who was claiming for 83 children and who had 13 children's allowances books. That lady came from my town and she was doing the same in England where she is currently arraigned on charges of defrauding the State of £250,000. The Department were totally unaware of that situation until a young Garda stopped her in Bray. That was how they became aware of it.
I should like to ask the Minister what plans he has for increasing the special investigation unit, or has he any plans to disband it early in the New Year. The special investigation unit have been the source of embarrassment to the Department and have been instrumental in unearthening many large scale frauds particularly in the area of cross-Border fraud which is prevalent. Despite measures taken last year to cope with that problem, the level of cross-Border fraud in my own town of Dundalk continues to run at £200,000 per annum. This is money taken by North of Ireland bandits off the backs of the PAYE workers. Jail is too good for people who rip money off the Irish economy and the over-burdened PAYE workers. I fear for the continuation of the special investigation unit. Apparently, there is a reluctance to acknowledge the work these people do within the Department of Social Welfare. They have been downgraded. What is needed is the involvement of more special investigation unit workers in every county if we are really sincere about stopping the abuses of working and signing. The abuses are currently running in excess of £200 million at a time when we are closing hospitals, when we cannot give old people a hospital bed in which to die with dignity, when we are closing schools and seriously curtailing the national school programme. Surely the way to find money is to wipe out all the abuses that are prevalent in this country.
I should like to ask the Minister when will the report by Craig Gardner be published. When will he increase the special investigation unit and how many jobs will be created in that area? I also want him to look at the position of people who are living in England and who are also claiming social welfare in this country. If £36 million has been saved, it is only the tip of the iceberg. How much more can be saved by continued surveillance which can only be given — if the Minister is sincere in his efforts to curb social welfare — by increasing the special investigation unit? The figures announced recently are very revealing.
A figure of 18,000 people had their dole stopped as a result of interviews and 11,445 voluntarily stopped signing. That is horrifying. In Dublin City Council we had 29 employees sacked for signing and working and yet in Dublin city and county we have only ten special investigation unit officers investigating dole frauds. What we need is an army of special investigation unit officers if we are serious about stopping this abuse. I call on the Minister to continue to support the special investigation unit and to upgrade them within the Department in order to cope with the appalling problem of social welfare abuse.
I want to make a few brief points. I will be very brief because the sections on which I want to make a contribution at this stage are sections 8, 9, 10, 11, 12 and 16. In relation to the basic thrust of the sections we are discussing and the amendments I would like to make a few brief points.
First, the entire country is being done a grave disservice by speeches like the one we have just heard. I am afraid I cannot join in congratulating those sections of the media to which the Deputy has just referred who produced what can only be described as phoney figures. In that respect I will be very explicit. I understood that when these articles referred to were put under scrutiny by others — and I was one of the people who discussed them on radio — the only source was an authoritative source within the Department.
I very much believe in the freedom of information and I remember requesting the Minister of the day to state explicitly on whose authority the interviews were given and if the interviews were accurate. A person within the employment of the Department of Social Welfare leaked irresponsibly a number of figures to a journalist which were not available for scrutiny and examination by elected Members of this House. I want to be fair to the Minister. I do not believe he said that there was a figure of £36 million in fraud. I would find it equally interesting to know — perhaps because we are approaching Christmas — why the figure of £200 million has been used.
The Minister is under an obligation to those who are in genuine need, and in receipt of social welfare benefits of one kind or another, to publish not only the recommendations of the Craig Gardner report but to publish the report in full except where it makes individual cases identifiable. The reason this should be done is that in every country in the European Community where they have studied the operation of social welfare, social welfare fraud has been identified as being in the very sophisticated category. This is a very tiny proportion of the total sums that are transferred. We are entitled to see the report to identify the model cases which can be addressed by way of legislation.
Secondly, I support those Deputies who are asking for heavier penalties and disincentives for collusion between employers and employees in abusing the Social Welfare Acts. It is very interesting that there is a deafening silence from what I might call the loony right about a far more dangerous activity that is going on. For example, this Bill deals with fraud in the earlier sections. It goes on to deal with invalidity, disability and the changed qualification for maternity benefit in the same context as fraud, which I think is unfortunate. It is singularly silent on the relationship between employers and the State. My question to those on the right is this: what of the moneys that were deducted from the wages of employees and were not handed over to the State? When will we see action on that?
In my own constituency there are people facing into Christmas who are in the gravest difficulties because their contributions were not paid over to the State. To tell those people that they can apply for supplementary welfare allowance is not the answer. The money was deducted from their wages and the employers who did not hand it over to the State behaved not only illegally but callously towards people who were working for them. I cannot see why a Bill such as this could not have addressed this question of the employers' relationship to the State, although I accept it deals with the employer who is involved in collusion.
I am aware of a company that was in difficulties in relation to liquidity and was advised by a State agency to delay paying over the contributions and Government taxes. The Government agency was asking the company if they had thought about holding the money back so as to stay viable for a while. There will be a very dangerous confrontation in this country if people say that abuses are taking place disparately across the system among all social welfare recipients. I know that is not what Deputy McGahon said; he said he is in favour of genuine people. Nevertheless the stigma is falling on everybody. We need to be able to identify sources of sophisticated fraud. I am talking about fraud in all its senses because there is other fraud which is not identified in this Bill.
I wish to point out to the Minister that the World Health Organisation and a number of other bodies have drawn attention to the increasing amount of illness that is stemming from long-term structural unemployment. Studies have been carried out, for example, in Newcastle-upon-Tyne which clearly show the longer a person is unemployed — say, after two years — the probability of their being involved in sickness and different kinds of incapacity very significantly increases. When discussing this Bill we should bear in mind that a certain amount of the increase in the number of people who are drawing benefits is due to the hopelessness and absence of morale that is created by long-term endemic unemployment and poverty in society. We have to realise that the Members of this Dáil have failed abjectly to provide those people with employment and an organised planned economy that could give them some prospects of employment. They are forced into receiving social welfare. They will now have to suffer the burden of an additional stigma which is being directed against them, and I am sure every well-meaning person in this House would not want that to happen.
When we are addressing these problems we should concentrate on the ones we are aware of, on where the money is being collected and not being returned to the State. The Minister should tell the House how much is held back every week from the State by people who do not hand over their contributions. If we knew that, we would have a far less emotive debate. Deputy Mitchell is correct in speaking about the lack of sanction in low level disincentives for collusion. I share the view of Deputy De Rossa with regard to prisons. Middle-class people are more terrified of prison than those we have been sending indiscriminately to prison for years. Perhaps those people need to be frightened.
The Minister should consider another range of options beyond this Bill, in consultation with his colleague, the Minister for Industry and Commerce. I ask this House is it correct for the State to continue giving grants, incentives, loan subsidies, depreciation allowances and training allowances to companies that it knows are not paying over their contributions to the State? Is it not an effective disincentive to say that any company that does not pay over to the State the money it has collected from workers' wages by way of contribution shall not be entitled for ten years to any benefit from the State out of the £1.245 billion that is transferred from public taxation every year for our industrial policy? Is it not proper to say that if you have not even the basic morality and respect for the State to pay over what you are collecting from your workers, you have no right to come back with your begging bowl to the panoply of agencies that exist and to squander the taxpayers' money?
We have heard very wideranging views in this debate, all of which are very relevant to this section. We are taking a number of amendments together. The section is designed to discourage collusion between employers and employees in cases of suspected fraud. Section 2(1) enables the Minister for Social Welfare to require employers to notify him of the commencement of employment of each new employee. The wording in the Bill is that he may be required to do so. Deputy De Rossa asked why the wording is "he may be required" rather than "he shall be required." The reason is that there is a large number of employers who are honest, who return the contributions regularly and consistently, with whom we have no problem and to whose companies the inspectors have free access. We do not want to create an expansion of bureaucracy. On the other hand, if there is a very simple system which could apply right across the board, then that is another matter. We could work out the detail of the matter by regulation. The reason the word "may" is inserted is that there will be some flexibility in the matter.
From what Deputies have said there are various ways in which this can be done, some of which may be administratively more efficient and more effective than others. The feeling of the House generally is that something should be done about this matter and Deputies would welcome the most efficient way of doing it because it will cost the taxpayer less.
If an employer receives a P.45 when a person comes from another employment it is clear that the person has been in another employment, immediately beforehand. If he does not receive that form then there is a greater need to introduce some measure such as, for instance, a requirement to notify the employment exchange that somebody has been taken on. That may be adequate. I am not saying what is the best method but my officials are at present working on the matter and when we have this enabling power we will then be able to come up with the appropriate regulations.
The section also provides that employers who fail to provide such notification shall be guilty of an offence and shall be liable, on summary conviction, to a fine not exceeding £1,000. Deputy Mitchell's amendments relate to this matter. A number of Deputies have suggested that there be as many options as possible. It was even hinted that the proposal of a heavy prison sentence is not adequate because the courts do not tend to impose it and, therefore, we should propose a heavy fine also. I accept Deputy Mitchell's amendment and I think it has the agreement of the House. I recognise that Deputy Wyse has withdrawn his amendment on the grounds that he will accept the level of penalty which is proposed in Deputy Mitchell's amendment.
This whole area refers to the penalties which exist at present. These amendments are designed to close loopholes so that the other powers can come into being. As an example, Section 114 of the Social Welfare (Consolidation) Act, 1981, states:
If any person (a) wilfully delays or obstructs an inspector in the exercise of any power under this section or, (b) refuses or neglects to answer any question or to furnish any information or to produce any document when required to do so under the section, or (e) conceals or prevents or attempts to conceal or prevent any person from appearing before or being examined by a person appointed under the section, he shall be guilty of an offence under this section and shall be liable (i) on summary conviction, to a fine not exceeding £500 or to imprisonment for a term not exceeding one year or to both such fines and such imprisonment, or (ii) on conviction on indictment, to a fine not exceeding £2,000 or (at the discretion of the court) to imprisonment for a term not exceeding two years, or to both such fine and such imprisonment,
In relation to what Deputy De Rossa said, £1,000 is the limit for the District Court and that is the reason for its use in this connection. These are existing penalties.
Deputy Mitchell's amendment proposes imprisonment for a period not exceeding three years, which is one year more than is provided for in other parts of the legislation, and a fine on conviction on indictment not exceeding £10,000. I propose in the next Social Welfare Bill early in the New Year to bring in a similar level of penalty in those different areas. I will accept the amendment now and will register it by further amendments in the Social Welfare Bill. I agree entirely with the sentiments which have been so eloquently expressed by many Deputies this morning.
Section 115 of the Social Welfare (Consolidation) Act deals with offences, including offences relating to bodies corporate. Subsection (1) (b) states:
If any person, for the purpose of obtaining any benefit or other payment under this Part, whether for himself or some other person, or for any purpose connected with this Part—
(i) knowingly makes any false statement or false representation or knowingly conceals any material fact, or
(ii) produces or furnishes, or causes or knowingly allows to be produced or furnished, any document or information which he knows to be false in a material particular,
he shall be guilty of an offence.
It is provided in section 114(1)(c) that an employer or any servant or agent of an employer who aids, abets, counsels or procures an employee in the employment of that employer to commit any offence under paragraph (a) or (b) shall be guilty of an offence.
This section also provides that a person found guilty of an offence shall be liable on summary conviction to a fine not exceeding £1,000 or a year in prison and on conviction on indictment £3,000 or two years imprisonment. Similar penalties are also provided for in respect of offences where any employer fails to pay at or within a prescribed time any employment contributions which he is liable to pay.
In relation to fraudulent claims for unemployment assistance, the appointment and duties of social welfare officers in relation to claims for unemployment assistance are dealt with in section 143(1)(a) of the Consolidation Act. This section is the equivalent of section 114 which covers unemployment benefit. Similar offences are specified in this section and the penalties provided are the same as those in section 114.
Section 144 deals with false statements and offences. Subsection (1) provides that if, for the purpose of obtaining for himself or any other person a qualification certificate or any payment of unemployment assistance, a person makes a false or misleading statement or representation, then that person commits an offence. The section also provides that an employer or servant or agent of an employer who aids, abets, counsels or procures an employee in the employment of that employer to commit an offence under subsection (1) shall be guilty of an offence. The penalties are similar to those I mentioned earlier, that is, £1,000 and one year and £3,000 and two years.
The current position is that in investigating cases of suspected fraud, officers of the inspection branch visit employers to inspect wages records to obtain evidence. In the absence of such evidence a formal statement is sought from the employer which includes information in relation to payments made to the employee. Where the employer co-operates in the investigation no direct action is taken against him or her. If the employer refuses to co-operate and there are no wages records available, further action can only be taken if the social welfare inspector has actually seen the employee at work, although evidence of this nature is difficult to obtain. In the absence of such evidence no further action is possible. Where evidence is available, however, and the investigation is frustrated by a lack of co-operation on the employer's part, procedures are considered variously on other grounds such as obstruction, failure to provide relevant documentation on request, giving false or misleading information or whatever other grounds prove feasible in the case.
Deputy Higgins mentioned a case in Galway concerning a person who was employed but whose employer did not pay the money. I can assure the Deputy that once there is reasonable evidence that this person was in employment he will get the full benefits due. I accept that there may be a short term problem but that is the procedure. In that sense the employee is protected but obviously there is initial inconvenience because there must be at least some evidence of the fact that the person was working in that employment for a period. If the Deputy will give me the details I will be glad to follow it up as a matter or urgency, particularly in view of the fact that Christmas is approaching.
Further action is possible where the employer has failed to make payment of appropriate amounts of PRSI contributions to the Revenue Commissioners. In all such cases, regardless of whether co-operation is given, the details of the case are provided to the local district inspector of taxes. In addition to pursuit of arrears, the Commissioners are then in a position to proceed with prosecutions for failure to make payment and, where applicable, for failure to submit the end of year return form, P.35. Successful prosecution results in the employer being included in the annual list of tax defaulters published by the Commissioners under the 1983 Finance Act. In approximately half the fraud cases which come to light, employers are found to have operated PRSI correctly. This provides a further means of detection in that a computer check is made to detect overlap between details on the employer's end of year return and the records of unemployment payments made by the Department.
That is the general background against which we are proposing these new measures to plug the loopholes which we have found to exist. Deputies have raised various questions which I will attempt to answer as well as I can. Deputy Mitchell talked about the desirability of putting people behind bars, saying that we need a few Lester Piggotts to scare people off. Public perceptions and attitudes to fraud and abuse are very important. Perhaps we are getting to the stage where there is a somewhat clearer definition.
It is good that Members should consider these different elements. We have been talking about the sum of £36 million which I express as savings. I cannot say how much is due to people who suddenly decided they wanted to go back to work and how much is due to other factors. A very high proportion of it relates to abuse of some sort and unwarranted claiming. There is a certain hard core element, as well as abuse of the scheme by long-term malingering. Then there is the question of providing opportunities which may result in savings to us. We would not regard that as fraud. There is a need for a major shift in public thinking in relation to fraud. We have to get it across that it is the taxpayers' money at the end of the day. If everybody could get that clear in their minds we would have a better attitude to it. We want to give resources to the people who need them. Everybody agrees with that. We have to try to ensure that waste, abuse and fraud are reduced to the smallest amount possible. We vote the moneys generally for the elderly, the sick, the infirm and the unemployed and those are the categories to which the money should go. The money for these people is being bled away by people abusing the system. We must tackle that problem vigorously and we must be seen to be tackling it. If I seek money for other things, it must be obvious that our house is in order in that respect. The people who cheat are defrauding the sick, the elderly and the infirm and this in turn creates a heavy burden on the taxpayer. To contain expenditure on social welfare we must curtail abuses so that we will have the money to give assistance to those who need it. There is not a bottomless pit of money and the bulk of the £2.6 million comes from the PAYE sector. I mentioned the question of the public attitude to fraud because in the consultants' survey it was shown that a quarter of the people surveyed claimed to know instances where people were abusing the system but did not report them. Nowadays, people are more inclined to report instances of abuse. Perhaps it is a sign of our maturity that we are prepared to recognise and stamp out abuse and to alleviate hardship.
I welcome the contributions of Deputies on this issue. It is perhaps because this is my second time as Minister in this Department and because computerisation has progressed in the interim, that I can now tackle things more vigorously than was the case heretofore. I accept the amendments Deputy Mitchell has put down.
I thank Deputy Bell for mentioning the £10 and £20 alleviating payments, although I am a little disappointed that the media did not highlight that as much as they highlight abuses. The £10 and £20 alleviating payments will continue to be made. These cater for specific areas of hardship and I am pleased to be able to continue them. I assure the Deputy that I will do my best in this area in the budget.
Deputy Bell also mentioned the card disc and its value and how much good it has done in helping to reduce abuse in that area. The Deputy pointed to the fact that under the old system the employee could see the card, and that it was a big advantage to be able to see the card with the stamps on it. However, this was a very expensive and inefficient system in many other respects. I agree with Deputy Bell that there is a need for the employee to have some control over it. The Deputy mentioned a sort of receipt system for employees just to show that the money had been paid in and he suggested that this kind of thing might be done by regulation. I will certainly have a look at that idea.
I do not know if insurance companies would be willing to pass information on to me as suggested by Deputy Wyse. The Deputy gave, as an example, a company providing services in the GPO in Cork and employing people in receipt of unemployment payments. This has been a fairly widespread practice. It has been widespread in semi-State bodies, local authorities and public bodies generally but we will have to stamp it out. We will give special attention to public bodies with a view to this.
Deputy De Rossa mentioned a case of which I was aware and I was very glad to see action being taken there. What is the point of the Dáil doing work in this respect if management and public service bodies are prepared to collude in cheating the system? These measures will apply equally to people in public service bodies, so they had better get their house in order. The stronger penalties agreed by all sides of the House will apply and nobody will be prosecuted quicker than a public service employer found to be in breach of the rules. The example should come from the public service and it does not in many instances. We will give a lot of attention to that area. Even since the debate here last night, Deputies would be surprised at the numbers of people who have contacted the Department alleging abuses. In practice, at least one in three of such allegations turns out to be valid. In some cases, a person may have an arrangement with the Department about which the informer does not know, but it is extraordinary what publicity can do.
Deputy Wyse says he will withdraw his amendment in favour of the stronger amendment. Deputy De Rossa mentioned that the section relates particularly to collusion and highlighted the fact that employees are deprived of cover as a result of this kind of collusion and that very often they do not realise it. That is how we sometimes discover cases of fraud. I remember the case of a solicitor recently who was prosecuted. It came to light that an employee fell ill. He went seeking disability benefit and discovered there was no record at all of his having paid contributions. The inspectors went out to check on the matter. Of course, in such circumstances, the individual tends to become irate immediately, feeling that he should have his benefit paid immediately. The inspectors followed the matter up quickly. They went to check the place of business and the home of the person concerned which was also a farm. The man was there and, from the reports given to me, it appears he said: "Not only am I here but I have been here for the past five years, I have been here all this time and, if you want me to prove it I will get my brother who is on the farm. He has been here for the same length of time." Of course it transpired that his brother did not figure on the records either. That was a case that arose in court recently and is just one example. There are other cases of people who would not be due any benefit subsequently because they might have been in collusion. This is something about which Deputy De Rossa spoke.
Deputy De Rossa mentioned security companies. Undoubtedly, they present a special problem and we will be devoting a great deal of attention to them. There are cases where this cheating and fraud is fairly extensive. I know the industry generally is very anxious to see something done about it because, at the end of the day, it does not make a decent job for anybody; it involves cheating of taxpayers, of the individual and of competitors.
Deputy De Rossa raised the question of options. There are options. Under the provisions of this Bill the court would have an option of providing community service orders as well. Perhaps more should be done in that respect. Probably Deputy Mitchell wants to see people behind bars for a start anyway ——
Just a few high profile ones for a start.
Perhaps, yes, but thereafter perhaps they should do some work for the community. I remember in 1984 when I was in Finland and engaged in agricultural research, seeing a bank manager painting the railings of the airport on foot of a community service order. Ever since I have been very keen to see the implementation of community service orders.
It will not happen here.
Deputy McGahon might be surprised yet. As people have said here, when a person is jailed, again it is the State that pays. I agree with Deputy Mitchell that there is a need to make examples of some people. The implementation of the community service order represents another option which might be considered. At present there are imprisonment, fines and community service orders. What is now needed is to have some people engage in community work on foot of such community service orders.
Deputy De Rossa referred to the usage of the words "may require an employer." I have explained what I have in mind there.
Deputy Gay Mitchell asked how this would be policed and mentioned one bad experience he had had which, to the best of my knowledge, was an isolated incident. I followed it up for the Deputy at the time. I agree with him that it should not have happened, it did, but represented an isolated incident. The Deputy also raised the question of the accountant. We have only one qualified accountant and he has been with us for the past few months only. I agree that it is important to have the services of a qualified accountant. On the other hand, I might add that we have people very experienced in operating controls, computer systems and so on. We will bear the Deputy's suggestion in mind. As I have said, we acquired the services of one qualified accountant recently and we will bear in mind the further need in so far as such may obtain.
Deputy Gay Mitchell talked about the method of policing. One simple method is to be obliged to inform the exchange if one does not have the other documentation. Having said that, there are other things needed to be done. There is need for a closer link between our work and that of the Revenue Commissioners in this area. We are working on that aspect. There is a joint study being undertaken in that area particularly in relation to RSI numbers. Our experience has been that people can have two or three RSI numbers. Obviously if one can have two RSI numbers, one can use one while one is at work and the other while drawing unemployment benefit. That does happen, we are finding that it is happening at present, and we are anxious to get it under control.
I thank Deputy McGahon for his congratulations on the work done to date. I must be careful not to delve too deeply into the abuse area. I want to keep within the context that it constitutes work we have to do. At the same time our main task is to cater for bona fide applicants.
Deputy McGahon raised a number of points and had been suggesting a figure of 10 per cent abuse. Following on the report of the consultants he thought that figure might be of the order of 9 per cent, claiming that he had some sort of inside information to that effect.
Would he bet on it, that is the question?
Look at what happened to poor Lester.
He would need to bet each way. The report of the surveys undertaken, which related to the greater Dublin area, showed that there was approximately 2 per cent hard core fraud. The Deputy may be getting his 9 per cent figure from a 7 per cent suspect figure mentioned. They could not verify whether they were substantiated but they represented suspect claims.
How do they know the percentage if they have not caught the people concerned?
They ascertained that from examination of individual cases which would then be followed up in so far as we would have information on them. This arose from their examinations, surveys or discussions with people. The difficulty of an officer in the employment exchange is that an individual may walk into the exchange claiming that he or she is not working. The officer may be suspicious of certain people and not at all suspicious of others but he is unable to go out and follow such persons to ascertain where they go. I imagine that is the type of thing Deputies have in mind, that they would suspect certain claimants.
Does the Minister acknowledge the value of the work carried out by the special investigation unit? Has he any plans to upgrade their work within his Department?
That is the next point I shall come to.
I might say to Deputy McGahon that he has had one winner, he was allowed in on a point of information which does not normally happen.
An abuse of the system.
That is why I have been saying that between 5 and 10 per cent of claimants engage in abuse at some time. However, that does not mean that one can multiply those figures by the total amount of money for the year in respect of that particular abuse.
How does the Minister reconcile that with the figures he gave yesterday about different results of disability benefit?
The difficulty is in endeavouring to reconcile all of these things for which there is no simple mathematical formula. I believe that, at a certain stage, one gets in and does something about it, one looks for savings. Whether they arise directly from fraud or indirectly does not matter so much provided one undertakes the task.
There has been £36 million saved so far this year. How much savings would that represent in a full year?
That is an interesting point. However, I am not an automatic computer, perhaps a mini one of some type, but I will give the Deputy a very interesting figure from the back of my head in relation to that.
Perhaps the Minister could have that figure for me this afternoon.
Probably that figure will not be calculated because ultimately it would be too theoretical——
Of course it will be calculated.
I will give the Deputy some information very relevant to it which is in relation to the people who ran away with the Jobsearch programme; we know the indirect effect of that——
Or who emigrated.
Those who had not emigrated over the past three years but who decided, on the day they were offered a job or other option, to emigrate. I would agree with Deputy Higgins that perhaps there was a small percentage who emigrated.
We said earlier that we anticipated in the budget savings of £11.5 million. At the end of the year we have actually got £18 million.
How much would that be at the end of the year?
As a result of the number of people who remained off — some have come back on so obviously they have not emigrated — the saving per week would represent an additional £1.26 million.
That would be approximately £65 million a year.
I would not advise the Deputy to start multiplying that by 52 or anything because that would be completely wrong.