The most controversial part of this Social Welfare Bill is undoubtedly the decision to bring the self-employed into the PRSI system. My immediate reaction to the development was, spare us from more Government involvement in our lives. There is no doubt we are going to have more Government involvement, an all-embracing State involvement in our daily lives. We are certainly going to have more State involvement financially which I will prove in a few moments.
Having listened to many of the speakers today, it is an entirely legitimate argument for the 800,000 PAYE workers to moan and complain about the disastrous high levels of PRSI and income tax they have to endure and it is equally legitimate for them to expect that the 240,000 self-employed be "penalised" just as they are. The facts are entirely different. Even for the PAYE sector who pay crippling PRSI payments, the State will have to bail out the pensions by a subvention of over 40 per cent of the total moneys collected, even under the heading of PRSI. That is a feature of pension schemes not alone here but in every other democracy also. What will the State indebtedness be in respect of such a retirement pension scheme when another 230,000 or 240,000 participants appear in the system in ten years' time? That is the central question. Instead of this Social Welfare Bill benefiting the Exchequer, there will be an enormous and an alarming drain on our resources in ten years' time and onwards. There will be a smaller drain on the resources in three years' time when the widows' and orphans' pensions become payable. After ten years that will constitute an enormous drain.
Let me address the core problem in relation to the subject matter before us — how to get self-employed persons to organise their retirement affairs without imposing a huge cost on the Exchequer. Most speakers referred to that matter but it appeared they side-stepped the issue to some extent. Of their very nature self-employed persons, through their enterprise and commitment, must take big risks, of that there is no doubt. They make a huge investment of their time, energy, finance and expertise. Of course, some self-employed people make real money. The types of people who spring immediately to mind are Ryanair, Smurfit, Ben Dunne, those type of people who make real money whereas the vast majority of the self-employed in the industrial and services areas are merely ticking over.
It appears that every conceivable hurdle is placed in their way, from difficulties in relation to planning permission, VAT, crippling bank interest rates, fluctuating exchange rates, labour problems to security — the list is endless for those people, it is like the Litany of the Saints. The imposition of PRSI contributions on top of all of those can mean the straw that broke the camel's back, which cannot be far off for many. If, as a nation, we accept that personal motivation is manifested through hard work, high risk-taking, high levels of expertise, the qualities which will lead eventually to real jobs being created — not Jobsearch jobs but real ones — surely we should not paralyse the very people who might just provide those jobs. It is important that we should give that category a chance to show their mettle. Why did the Government not adopt the sensible approach, allowing the self-employed the facility to look after their retirement without any State involvement whatsoever? This is possible.
That brings me to the imposition of PRSI contributions on the farming community. I get the whiff of a scheme with an in-built pre-determined yield factor whereby, irrespective of whether there is income sufficient to meet this charge, it will be collected. I view the flat-rate of PRSI contributions levied on small farmers as totally obnoxious. There is no reference whatever to ability to pay, something the Minister and his other Cabinet colleagues went to great lengths to point out in the course of the farm taxation discussions over the past couple of years. At that time the central principle advocated was that any such charge must be based on ability to pay.
When the present Government assumed office they abolished the proposals for the imposition of a land tax, deciding that people should pay on the basis of accounts to be prepared to prove their ability to pay or otherwise. I ask: why is not that central principle being deployed in regard to the flat-rate contribution particularly as it pertains to the farming community? It appears there is no concern for the poor financial standing of many thousands of small farmers. I am sufficiently experienced to know that there is a big difference between them and their larger counterparts. In so saying I am not trying to side-step the argument that taxes should be paid, that health contributions should be paid and I shall revert to them later.
If one takes a recent statistic of the Agricultural Institute, they were able to show independently of the Government, the Opposition, indeed of the farming organisations themselves, that almost 50 per cent of farmers' incomes amounted to between £2,500 and £3,000 the year before last. That represents approximately £50 a week. I understand there are approximately 14,000 farmers drawing the dole — farmers just beyond eligibility for small farmer's assistance — who I understand will be exempt. However, I estimate that there are at least another 25,000 farmers of the type about whom I speak, who have no other income, who are certainly not in the large farmer category and yet are not eligible to draw the dole. It appears that very soon they will receive a demand for £208 per annum. I can guarantee that that demand will amount to £208 for the first year only. I have every reason to believe that that amount will be increased as time goes by. Some people might say in a somewhat flippant fashion: what is £208? To a person independently assessed as earning less than £50 a week, who because of mik quotas, and so on, is not allowed to expand even if he was able to — that £208 constitutes a fair imposition.
If I have read the provisions of the Bill correctly I understand there is also a certain category of farmer whose enterprise has not yet been brought to the notice of the Revenue Commissioners, who have not completed farm profile forms for submission to the Revenue Commissioners who, incidentally, have not the staff to process such applications. I understand they remain in a heap in the office of the Revenue Commissioners. I notice a hazy mention in the Bill that the vast majority of small farmers below that latter category will be subjected to the attitude: well, if we know they are eligible, as such, we will charge them £104 annually. I happen to represent an area with a predominence of that category of farmer. The only way one will ever ascertain exactly the family income of any particular farmer is by way of prepared accounts. Therefore, I must conclude that what this Government and the Department of Social Welfare are now attempting to do is to bring every farmer within the tax net. They know in their hearts and souls that there is a certain percentage of farmers only with taxable incomes. I am not making a case, nor could anybody in all equity in their favour.
Are we now moving in the direction in which the Departments of Social Welfare and Finance — in order to prove that that bottom category of 25,000 farmers is eligible or ineligible and in order to get this Bill from the Department of Social Welfare towards the cost of their retirement pension — might cause them to expend as much as £500 or £600 on a group of accountants, appeals, inspectors and so on. I want to put on the record that this constitutes a most dangerous development. It should be remembered that these people represent a more numerous category than any other self-employed category at present. I cannot understand why people are not much more concerned about it. Equally I believe they will become concerned, and very quickly. There is no other system the Department of Social Welfare can legitimately bring into being which will prove conclusively that they should be exempt from PRSI contributions. The only way that can be done in farming is on a flat rate — which is what is proposed — or by asking people to declare their incomes. The only way that can be established is through the production of prepared accounts to the Revenue Commissioners.
Whatever has been the growth of the accountancy profession to date — and there has been considerable growth because of their involvement in all aspects of our lives nowadays which appear to rotate around accountants of one type or another — it is my belief that they are in for a bonanza. As we say in my part of the country, they will have the time of Reilly in their involvement with this scheme.
I worry enormously about this proposed flat rate contribution, leaving aside altogether ability to pay or otherwise. It is my belief that we are now constructing a platform which can easily be boarded by any Minister for Finance once the system is established. If it happens that figures are tight before a particular budget, you can wheel this model out as easily as you like and slap another few quid on to it. Once this model is put in place it is something that will be wheeled out very often in the years to come.
Let us stick to the small farm category for the moment. They are not often talked about on the Floor of this House and I believe that that category of people deserve better than that. Every family are subjected to financial constraints, irrespective of where they live or who they are. Many small farmers have loans, are under stocked or work on poor land but they also have the financial burdens that families everywhere have, burdens such as health, education and clothing. Their costs are much the same but the problem is that their earning capacity is not great and will not be great. I was in the company of some 200 farmers in a part of my constituency the other night. The only reason they had come together in that one place was to talk of the problem whereby they have to pour their milk down the drain because of the super-levy. It would be very difficult to get them excited about a new Bill or about a demand that was likely to come through their door for a contribution towards retirement pensions at a time when things are going so badly for them. I believe that what the majority of that category of farmer wants is leadership which will point the way to methods that will improve their income as opposed to penalising them as this Bill will obviously do.
Larger farmers will pay more PRSI in relative terms for the same income than PAYE workers will pay and for a much reduced and curtailed benefit scheme. It is a major omission that invalidity and disability pensions are not to be part of this scheme. Even though I am completely against the concept of the Bill for the reasons I have mentioned, I welcome one part of it. I welcome the fact that widows and orphans pensions will be paid after three years contributions. This is something which was very badly needed. As Deputy Wyse said, sufficient attention has not been paid to the question of getting the self employed to fund their own pension schemes so that the Government and the State can be kept out of it altogether. That is no place for them when one considers the huge financial loss that most economic commentators tell us will develop in this scheme after year ten.
I am a bit cynical about why the scheme was brought in at this time. Various assessments have been done on what the income from this scheme will be after a year or so. These assessments vary from between £25 million to £50 million. I do not have the figures at my disposal so I do not know which is right but if one were to do a quick sum it would certainly appear that between £35 million and £40 million will come from the self-employed by way of contributions through the PRSI system. If we assume that that money keeps coming in and increases every year obviously in the short term it will be a nice financial boost for the Government. The widows and orphans pensions will, numerically speaking, be very small. Therefore, there will be no great drain in the system for ten years. One can imagine the amount of money — and I have to call it "funny" money at this stage — that will be in circulation for some other purpose. I should like to know how the fund managers in the Department propose to invest that money. What will be done with it for ten years, what return are we likely to get from it, how will the fund be managed or will it go into general taxation? Many people want to know the answers to those questions.
I am cynical about this scheme because I believe that when the sums were being done for the budget, because of an agreement reached to placate the unions, when the national plan was being hammered out, the attitude was, screw the self-employed irrespective of whether it is good for the economy. In other words a deal has to be done at all costs. I contend that this PRSI on the self-employed, bearing in mind the reasons I have given to the House about why I am opposed to it, is not really a pension fund at all that it is direct tax. Because many of the self employed outside of the farming area altogether who are trying to create jobs for themselves and for others are beset by a multiplicity of problems already, this is something some of them at least could well do without.
There is another point I should like to mention. We have had a concept for 100 years or more about our social welfare code, the concept that there would always be a fund available for people when they got old, a fund that would be there by right. People, especially those at the lower end of the scale, expect after giving a lifetime to whatever area of activity they have worked in to get a pension when they retire. Many people can well afford to pay for their pensions and do not care if there was never a State pension scheme. Such people should be allowed to pay for their pensions but they should never have access to State funding for this purpose. However, there are many others who, for one reason or another, never aspire to having a good income in their life, many through no fault of their own. Their understanding of the non-contributory pension is that if they spent their years toiling, rearing their families and doing all the things families should do, that system of non-contributory pension should be there for them.
I am beginning to understand that what the Government are at is that these will be the last ten years of non-contributory pension for anybody. In our efforts to reduce the £330 million drain on the Exchequer, which I acknowledge is very high and which funds the non-contributory area, I hope that as a country and a Parliament we will never lose sight of the fact that there are certain people who will always have to get non-contributory old age pensions. I do not want to see the day when some social welfare office will say: "I am terribly sorry but because you did not join this Government scheme you are not entitled to anything and because you did not contribute you are not going to get a pension." I hope that neither the Minister nor anybody else in the Department of Social Welfare will bring it that far. If there was a very imaginative scheme whereby the pressure would be put on the self-employed who are able to pay to organise their own retirement schemes I would fully accept that if they did not do so they should not be a drain on the State afterwards. I want to point out clearly the difference between those who have had a reasonable income during their working lives and those who for one reason or another cannot make ends meet.
A few unusual things are going to happen concerning property owners when this scheme comes in, if it does. In rural Ireland, at least, when the head of the household, the father or mother, becomes a pensioner it is normal practice to transfer the farm to the son or daughter, for two reasons. One is to allow the older generation to become eligible for the pension and the second is that the time has come to hand over to the younger generation. As somebody who has been very closely involved with the whole question of inheritance over the last four or five years, I take particular pride in the fact that the Government of which I was a member brought in the stamp duty exemption. We had courses organised all over the country. It proved beyond a shadow of a doubt that if the incentives were right land would be transferred at least five to seven years sooner than would be normally expected. From the point of view of our being an agricultural country, that is of benefit.
There will be a unique situation now in that there will be no pressure whatsoever on fathers or mothers to transfer the land because they will have the contributory old age pension. I can see many problems arising in that land will not transfer until the old farmer is called to his or her eternal reward. That creates a huge problem for young people coming into agriculture. I ask the Minister to look at that part of the legislation because it will create a great amount of trouble. Some people asked me if I was advocating a system, in times of great financial stringency, whereby people would divest themselves of a great deal of property and at the same time claim non-contributory old age pensions. I am not doing that. It is time that as a Government and a Parliament we addressed that matter. Of course, there are people who divested themselves of their property and were able to claim that they were entitled to the non-contributory old age pension. The area of inheritance should be tied up in such a way that people will have to get rid of their property perhaps seven years before they can claim a pension. If they have paid into a private pension fund they will not have to be looked after with a non-contributory pension. When one puts the argument together, we are going down the wrong road with regard to the PRSI contributions.
There are a few other matters to which I would like to address myself. I notice, from reading the list of exemptions contained in the Bill, that it has been decided to exempt widows and deserted wives who are recipients of deserted wife's allowances. I welcome that. It is very important because there is a great trauma involved with such categories of people. There is great psychological pressure on them and it ill behoves us to ask that category of person to contribute to the retirement pension scheme.
The family income supplement is another aspect that should be given greater attention. I have a bee in my bonnet about the prescribed relative's allowance. I notice, particularly in rural Ireland, that the prescribed relative's allowance is paid to the pensioner, not to the relative. There must be a new riding instruction from the Department of Social Welfare because I see many such allowances being withdrawn on the basis that the prescribed relative is not available to look after the pensioner. If you have ten, 15 or 20 acres of land which the Department knew about when they were sanctioning the pension — and there would not be great income from that — surely it is not too much to expect that the person who is looking after the old age pensioner should be allowed to do a small bit, as we say, outside on the farm? I know what is behind this. It is just another cutback, but it is a sore and niggling one.
The question of means testing cuts across all parties. I have never before had a chance in the House to mention this. There is a great case for rationalising means testing. I could count at least 12 or 14 different types of means tests involving different types of benefit. It amazes me that there cannot be rationalisation to reduce the band to three or four. There is no valid reason why that should not happen. A point was raised by Deputies Dennehy and Bell regarding persons being in receipt of unemployment assistance and being allowed to do some work. I sincerely hope that some Minister at some time will change the present system. I hear on the grapevine that it may be proposed to reduce the normal rate of social welfare benefit over a period of time to allow the person involved to do whatever he or she likes during the week. There are a thousand reasons for that being a good development. I sincerely hope that it will be put into effect.
