This is a very simple section which makes provision for an increase in the earnings ceiling for the pay related social insurance contribution from the existing level of £15,500 of reckonable earnings to £16,200 with effect from 6 April. The increase in revenue generated by this measure is expected to be some £2 million in the curent year. I see this as a reasonable increase. Let us consider the increases in the ceiling of contributions for the past number of years. In 1983 there was an increase from £9,500 to £13,000 — £3,500 or 36.8 per cent; in 1984 there was no increase; in 1985 there was an increase of 6.1 per cent; in 1986 there was an increase of 6.5 per cent; in 1987 there was an increase of 5.4 per cent and in 1988 there is a 4.5 per cent increase, the lowest in recent years. Deputy Mitchell's amendments No. 16, 17 and 18 are related. The first line of amendment No. 16 reads: "In page 5, lines 1 to 10, to delete subsection (1), and substitute the following:". That would have the effect of deleting the increase in the ceiling of £16,200, and I could not accept this amendment as it is phrased at present.
Social Welfare Bill, 1988: Committee Stage (Resumed).
On a point of order, in view of the fact that the debate on the Committee Stage is to be curtailed. I should like to ask the Minister to be brief in his replies. I get the impression that the Government have decided to engage in a filibuster to try to prevent us reaching some of our amendments. Bearing in mind that the Minister is getting co-operation from us in regard to this debate will he agree to be brief and not as longwinded as he has been?
I must point out to the Deputy that the debate on Committee Stage has just got underway.
We have another two hours to go and we have only reached amendment No. 6.
The Deputy was absent for some time during the debate last night — I have no doubt it was for a very good reason — and during that time other Members raised points which I am endeavouring to answer.
I was absent for one hour but this morning the Minister, and his backbenchers, are filibustering.
Why did Deputy Mitchell agree to the guillotine motion?
The changes suggested by Members in their amendments are major ones and I must respond to them. If the House accepted the amendments serious difficulties for the financing of the social welfare system would arise. About three minutes before the Adjournment last night I commenced my reply to the many points made in support of these amendments. The suggestion in amendment No. 16 is that we should exempt a portion of income or make no exemption or different exemptions and that we should give power to make regulations, subject to the approval of the Houses of the Oireachtas. I do not have any objection to that principle although other Members may object to dealing with such matters in that fashion. It would give the Minister flexibility and make the system more efficient.
However, another amendment proposes major changes to section 6. For example, amendment No. 17 proposes the introduction of a turnover tax which will have wide implications. If we adopt amendment No. 16 there will be serious cost implications. For instance, to exempt the first £1,000 would involve a cost of £125 million on the social insurance fund. Exemption of the first £2,000 would involve a cost of £237 million and an exemption of the first £3,000 would involve a cost of £339 million. I mention those costs to give an indication of the implications of accepting that amendment. However, I will be reviewing that area but I must point out that a major change is involved. I am sure the House would like an opportunity to discuss the implications of such a change in a full debate.
A fundamental purpose of the social welfare system is to provide a comprehensive system of occupational protection for workers and their families. The system is also designed to ensure the widest community support for people who cannot meet their needs through their own resources. The system is funded on a tripartite basis by contributions from employers and employees and a subvention by the general Exchequer. Employer contributions are an integral part of this system and they reflect employer obligations as employers and are required by internationally-accepted standards of worker protection. It is important to realise that the contribution by employers is a standard part of social security systems.
PRSI contributions by employers in respect of their workers represent a net cost rather than a gross one in most cases. This arises for two reasons. First, the cost of employer contributions is reduced through being fully deductible for tax purposes, as part of overall wage costs; this tax relief is a direct Exchequer subsidy to employers towards the cost of their wage bill and associated labour costs. Secondly, employers generally would have to make some provision in any event for worker pension, sick-pay, maternity and occupational injury. The social insurance provisions for these risks effectively spread the insurance cover across all employers in direct proportion to the size of their workforce.
Employer and employee contributions have traditionally been based on employee earnings. This provides a readily identifiable yardstick and facilitates collection of contributions due. The amendment proposes to restructure the employer's contribution to one based on turnover rather than on payroll. The effect of the proposal, if it were to be done on a neutral cost basis, would be to reduce the PRSI burden for certain firms and increase it for others. In general capital intensive firms would end up paying more and labour intensive firms would pay less.
Proposals on these or similar lines have been discussed and considered at a number of different levels in recent years. The main argument put forward for a change of this kind is that the present system is a disincentive to employers to take on extra employees because of the additional PRSI costs involved. There are a number of general points that might be made in relation to that, as follows: (i), in gross terms, employers' PRSI costs only amount to about 7 per cent of overall labour costs and are equivalent to a small percentage of turnover for most industrial sectors. The net cost is even lower when other factors are taken into account; (ii), decisions by employers to hire new employees as opposed to working more overtime are far more likely to be influenced in the first instance by market demand and by the prevailing wage levels and income taxation than by the marginal impact of their extra PRSI liability; (iii), labour costs in general and employers statutory social security contributions in particular are low in Ireland when compared with most European and OECD countries. Therefore, labour intensive industries in Ireland should already enjoy a significant competitive advantage in relation to this factor at least. The most recently published OECD comparisons indicate that Government revenue from social welfare contributions amounts to only 5.74 per cent of GDP compared with the EC average of 12.05 per cent and an OECD average of 9.21 per cent. The employers' element of PRSI contributions, currently 12.33 per cent is the third lowest in the EC and, (iv), any shortfall in social insurance arising from modifications made to the PRSI system would have to be made good through either a higher Exchequer subvention to the fund or through increased PRSI rates. An increased Exchequer subvention would necessitate additional borrowing or increases in general taxation and higher employee contributions would reduce the disposable income of the PAYE sector which already contributes heavily to tax revenue. An increase in the general level of taxation would be likely to result in demands for compensatory wage increases which would in turn negate any possible employment gains.
While employers' PRSI contributions are generally classed in economic terms as a disincentive affecting labour, there is in fact no agreement among economists as to how the direct effect of PRSI changes on employment should be measured. Pay-related social insurance contributions were introduced in this country in 1979. This resulted in significant reductions in the level of contributions paid by employers in respect of workers in low paid employment as compared with the flat-rate system before that in force.
The Commission on Social Welfare examined the effects of these reductions and stated in their report that there was no conclusive evidence that they led to an increase in employment. The report further stated that the more limited argument in favour of a reduction in pay-related social insurance in labour-intensive industries is questionable in that there is little proof that this would actually have direct effects on employment. The commission recommended the continuation of the present system with some modifications as in their view it offers the broadest, most clearly indentifiable and most predictable base available.
This issue was also examined by the National Economic and Social Council in early 1986. The council were particularly struck by the absence of conclusive evidence on the likely employment impact of reducing employers' PRSI contributions and this was an over-riding factor in determining attitudes towards the proposal. The general feeling was that if the proposal were to be justified on employment creation grounds there would need to be a greater degree of certainty about its likely employment effects.
Various international studies have been carried out and these have come up with broadly similar conclusions. A number of reports and studies on the question of having a contribution based on value added as a new basis for calculating social security contributions have been made in recent years. However, there are major questions about its practicability and suitability which have yet to be answered. Among more important points which have been made are reservations that such a system would actually reduce costs in labour-intensive sectors; secondly, whether the value added system is appropriate for the services sector; thirdly, a system of contributions based on value added would mean that persons who do not employ staff, such as self-employed, some wholesalers, members of the professions, would be liable for contributions; fourthly, the practical difficulties in implementing such a system.
Overall, most Council of Europe countries have serious reservations about this reform, doubting whether such a system would succeed in reducing the burden on labour-intensive firms. Others stress the risk of fraud and point out that it could also have economic side effects such as price rises. The various expert studies of this proposed system carried out at European level have also failed to show that it would relieve the burden on labour-intensive firms. On the other hand, it is argued that it might lead to a fall in investment by penalising the most productive firms, with possible serious effects on employment and consumption. For these reasons, most countries have shown no desire to introduce this new basis for the calculation of contributions.
Reports so far indicate the need for an in-depth study of the matter at European level before any move in the direction proposed by this amendment could be recommended. In addition to the global issues identified above, there is the more specific one, namely, that such a radical change in the financing of social security could not be adopted without detailed examination of the definition and calculation of turnover, which is not a straightforward matter.
There is no definition of turnover in legislation. It is generally taken to mean the value of goods and services to a third party, excluding VAT. The proposed amendment would require that a watertight definition of turnover was drawn up to exclude the possibilities of abuse. It is not clear that such a definition would not still be open to manipulation. The proposal to base the employer contribution on turnover could also inhibit growth and productivity and could pose considerable problems for industry.
The main criticisms of Irish industry is that they are not competitive enough and Deputy Mitchell's proposal could lead to a further deterioration here. There are superficial attractions in a system which would transfer more of the financing burden from labour-intensive to capital-intensive industry but any proposal on these lines would need to be closely examined from an economic point of view and capital-intensive industries which are operating in a very competitive environment could be damaged as a result.
A recently published ILO study entitled Into the twenty-first century: The development of social security discusses the economic effects of social security contributions and a quotation from that report is relevant to the general issue under discussions. The quotation is as follows:
We are well aware that employers feel that the high social security contributions they are compelled to pay raise their costs of production and thus reduce their competitiveness with producers in countries where employers do not have to pay such contributions or else pay them at a much lower level. Thus, it is argued that high social security contributions are in part responsible for the present high level of unemployment in industrialised countries. This question has been extensively studied in a number of countries. While it is true that employers might achieve a short-term gain if these contributions were lowered, it is not likely that this gain would be sustained in the longer term. What was gained in lower contributions is likely to be paid out sooner or later in higher wages and salaries or in other wage costs. If the argument were sound, countries within the European Community with low social security contributions would, over the years, have made great gains at the expense of countries with high social security contributions. But this does not appear to have happened as a matter of history. The essential point is that it is total labour costs which affect competitiveness, and social contributions are only part of those costs. International comparisons do not support the argument that there is any significant connection between social security contributions and high total labour costs.
Is it true that higher employers' contributions particularly damage labour-intensive firms and encourage the replacement of labour with capital? First, it should be pointed out that firms making capital goods also have to pay the same high employers' contributions. Capital-intensive firms pay high employers' contributions indirectly on their raw materials, plant and energy. Secondly, high employers' contributions may well cause cash wages to be lower than would otherwise be the case, so that total labour costs are not, in fact, increased by employers' contributions. Thirdly, in so far as high employers' contributions encourage all firms to use more capital-intensive methods of production, this applies to labour-intensive firms as well. This encouragement of investment may lead them to produce at lower cost and thus to be more competitive in world markets. For these reasons, the argument has little credibility.
The question of employer contributions was also examined by the Commission on Taxation. The Commission on Taxation recommended the introduction of a social security tax to be levied on all income, without a ceiling, including realised capital gains and taxable gifts and inheritances. The Commission on Social Welfare rejected this proposal in favour of the present arrangements but did, however, recommend a widening of the base for social security. Deputies will realise that in this Bill we are now taking this step.
The Commission on Taxation considered that compulsory social insurance contributions were more appropriately regarded as a tax. They considered that the maintenance of completely separate social insurance contributions which apply to some incomes and not to others was inequitable and unnecessary. In present circumstances, they recommended that the rate of social security tax should be about 5 per cent and that the balance of the fund should be raised from indirect taxation.
The main benefits of the new system as seen by the Commission on Taxation were first, a simpler system for employers and public administrators; secondly, a more equitable system and also a redistribution of the nominal tax burden from employees to the self-employed; from the lowest paid to the higher paid and so on.
The Commission on Social Welfare also carried out an analysis and identified the following problems with the proposal. Some of these are valid in the case of the amendment we are considering now for a levy based on turnover. These problems were, first, many employments would not have an income as the basis for calculating liability under the levy; secondly, the income base for calculating the yield to the social insurance fund would be much more uncertain than under the present arrangements; thirdly, if income were the basis of the levy it might leave considerable scope for complex disagreement, as in the case of taxation, between contributors and the State about their income and this could lead to delays in assessment, appeals against assessment and so on; fourthly, the abandonment of the present system in favour of a levy on all income raises questions of equity. The levy proposed might result in employers paying less than at present and this, when taken with the very modest contribution of corporation tax to total tax yield, was not seen as justifiable; fifthly, the Commission on Taxation, while recommending a social security tax on all income and accepting the levy as an earmarked tax, gave no views as to whether and on what basis contributors would be entitled to benefits. The Commission on Taxation left unanswered the complex questions regarding the basis of social security levy entitlement as it would be in their scenario and yet argued for an earmarked levy; finally, in 1983-84, a 5 per cent levy would have yielded an estimated £410 million less than the existing funding system. There would have been a significant shortfall to the fund.
This is a very major proposal from the Deputy and I have given the main reasons why I believe it would have to be examined at considerable length and in details. For that reason I cannot accept the amendment as proposed here, while I have a certain sympathy with the Deputy in the areas at which he is trying to get. In relation to the question of exempting portion of income at some future stage when the information is available, I have no objection to taking powers, by regulation to make such arrangements. I can assure the Deputy that I will be examining these questions in considerable detail.
The introduction of PRSI for the self-employed is a major administrative undertaking which involves a lot of time on the part of officials in my Department and of the Revenue Commissioners. We are also committed to transferring the sick pay scheme to employers which is another huge administrative undertaking. Deputies should bear in mind that only a certain amount can be done immediately. Nevertheless, I appreciate the difficulties and perhaps Deputy Jim Mitchell would like to introduce an amendment on Report Stage which would give powers to the Minister in the future to make some of these arrangements. I would look sympathetically on such an amendment.
I am very depressed by the Minister's response. One of the problems afflicting this country is that the whole body politic and the trade unions seem to be trapped in a conservative, old fashioned way of thinking and are not prepared to look at new ways of solving our problems.
In a recent OECD report — to which the Minister did not refer — it was indicated that the Irish taxation cum social welfare system is the one most biased against employment in the OECD. Is it any wonder, therfore, that we also have the highest rate of unemployment in the OECD? What further depresses me is that the budget, the Social Welfare Bill and the Programme for National Recovery have not only ignored unemployment but have worsened it.
I accept some of the Minister's arguments about the deficiencies of the social security levy on turnover as proposed by me, that is if the proposal was taken in isolation. Unfortunately, we have to operate within the parameters of the Social Welfare Bill in this debate. Amendments Nos. 16 and 17 are only two parts of an overall urgent and decisive package of reforms, the next legs of which would come in the Finance Bill to which I will briefly refer in a moment, and other matters which we discussed yesterday in relation to the reform of the family income supplement. The amendments debated yesterday would have had the effect of making employment for the low paid more attractive and removed a lot of the disincentives to employment which still exist and which the amendments regarding family income supplement would have eased.
Amendment No. 16 gives the Minister optional powers although I know there is a deficiency in it because the Minister needs to get his new limit of £16,200 into operation immediately. Perhaps I will not press this amendment but introduce one tomorrow on Report Stage which does exactly the same as amendment No. 16 but which also provides for the £16,200 limit immediately. The effect of this amendment will be to give the Minister power to exempt, say, the first £2,000 of income. The Minister has thrown out distorted and misleading figures. He gave enormous figures for the exemption of the first £2,000. Before I tabled this amendment, I took the precaution of putting questions to the Minister for Finance to find out the cost of such exemptions and how we could alternatively fund them. My proposal will not cost the Exchequer any money, it is simply rejigging the social insurance rates and exemptions in a way that will yield the same amount of money as at present and will allow a concession which would greatly facilitate those on low incomes and, therefore, remove one of the disincentives and major anomalies in the system whereby, in certain categories, people are better off out of work than employed. That is especially the case if you have a lot of children because under social welfare you get an allowance for each child which is not the case in the taxation system. A married man with seven or eight children has the very same tax free allowance as one with no children. One must also take into account that his differential rent, family income supplement and medical card are judged on gross — not net — pay. When such a person compares the money received from both systems he can be at a very major disadvantage if he is working.
During the past few months at least four people came to me to say that they were giving up their jobs, in spite of the fact that there are 250,000 people unemployed, because they found they would be better off on social welfare. I went through the figures with each person and I found they were right. Amendment No. 16, together with the amendments relating to the family income supplement, would better the position of those on relatively low pay, at least they would have more take home pay. Those amendments ought to be accepted and the principle extended to differential rent calculations and medical cards. We are not forcing anything on the Minister, we are giving him an optional power. Amendment No. 17 is a very radical proposal but that is what is needed to create employment or, more correctly, remove all the inhibitions to job creation.
The Minister said that a 5 per cent levy would yield £415 million less than the present fund. This is typical of the way he plucks figures out of the air. It is a load of rubbish. If you abandoned all existing contributions from employers and employees, which yield £900 million, and imposed a 5 per cent levy, you would then be £450 million short. Those are the Minister's views but that is not what is proposed. Amendment No. 17 describes it as an alternative to all or part of the total sum payable. It is clearly intended that he would reduce the employers' contribution by an equal amount to that used on the level of turnover.
The Minister for Finance, in replies to me some weeks ago, said that the turnover base was £6,000 million. Therefore, a 2½ per cent levy on turnover would yield £150 million. Remember that these are not my figures but those of the Minister for Finance. A 5 per cent levy would yield £300 million which is precisely half the total sum we get from the employers' contribution at present, which is approximately £600 million. A 5 per cent levy would allow for a halving of the employers' contribution. The process is complex and technical but there are simple ways of looking at it. Let us take two different employers. Employers A has ten people employed earning £20,000 per year which means that his total pay roll is £200,000. Employer B has 20 people employed who are earning £10,000 per year and his total payroll is also £20,000 per year. Both have the same payroll but one man employs twice as many as the other. Who pays the most tax? The answer is: the man who employs more people.
It is an absurdity that we actually tax employers on the number of people they employ. Is it any wonder that we have 20 per cent unemployment on top of accumulating and growing emigration? We also had a trend in recent years, which the Minister did not refer to, as a way of bypassing social insurance, tax and other social legislation, whereby people were employed by "contract", or "consultancy" or in the black economy. If an employer wants a job done and he employs somebody legitimately he has an immediate overhead of 12½ per cent. This is a 12½ per cent tax on employment. He also has to cope with the provisions of the Unfair Dismissals Act, the Terms and Conditions of Employment Act, the Maternity Allowances Act, the Equality Acts and all other desirable legislation. If he employs by contract — for example, Miss McGeever of RTE — or by consultancy, he can evade social insurance contributions. Those two methods of bypassing are, at present, legitimate ways of evading the legislation passed by this House.
The black economy option which is frequently used, or, alternatively the option of employing people and paying them high car expenses, travelling expenses, or meal allowances rather than salary is another way of getting out of the social insurance contribution or reducing it. The Minister referred to the loopholes in what I am proposing, without referring to the incredible loopholes and problems in the present system, but all the loopholes which I have just mentioned would be set at nought by a levy on turnover.
The Minister referred to the difficulty of defining "turnover". The Minister for Finance has no difficulty whatsoever. He had no difficulty in the sixties when there was a 2½ per cent turnover tax which nearly brought down another minority Government. The Minister is quoted as saying that this might push up prices. It will not push up prices. If you are reducing the employers' contribution by the same amount as you take in in the social security levy, you are taking the same net sum from industry in general. You are doing it in a different way which is more conducive to creating employment. The employers' contribution being reduced by the same amount as the social security levy raises means that there would be a neutral effect on prices but you would have the benefit of the dynamics of a lesser tax on employment.
The arguments for this are self-evident. I couched this amendment which the Minister has described as radical in a way that does not force the Minister. It does not say the Minister "shall" but the Minister "may" and it gives him the optional power of considering all the pros and cons before he draws up regulations. It also gives him the power to decide the parameters of "turnover" with the consent of the Minister of Finance. The proposed amendment states:
When making regulations under this section the Minister, with the consent of the Minister of Finance, shall define inter alia the amount of the percentage, the manner of computation of turnover and the date or dates for payment of the levy.
I am very disappointed with the Minister's response. It is clear that by the end of this year, whatever successes the Government may have in reducing the budget deficit or the overall borrowing requirement — that has to be done — we will have higher unemployment and higher emigration. We will have more poverty and more despair. It behoves all of us in this House not to address this matter in a meaningless or in a longfingering way, but to look at a whole series of radical measures which will create jobs.
Following the Chancellor's budget of last week, across the water and in Northern Ireland there has been a dramatic reduction in tax. Some people may think that the reduction, especially at the top level, is too dramatic but it is something that we have got to live and compete with and we cannot ignore it. If we ignore it the disadvantages that are already a feature of our economy in relation to employment creation will be exacerbated and worsened.
We must address urgently all the inhibitions to employment. While it is outside the remit of this Bill I cannot ignore the enormous disincentive involved by the penal rates of income tax charged to people who are working. Very few people want to take promotion because two-thirds of the extra money they would receive would go straight to the Government. If they work overtime, two-thirds goes to the Government. Nobody feels like working and everybody is deflated and demotivated. That creates it own dynamics. It depresses effort, enthusiasm and interest. These are the road blocks. It is as if we left trees lying about after the latest hurricane to block roads and still expected cars to get through without removing the road blocks. They will not get through and the road to job creation is blocked along the way by a lot of garbage and debris. Among the debris are our taxation system and our social insurance system.
I urge the Minister to reconsider the amendment. Amendment No. 17 merely gives him optional power to consider substituting a social security levy for the employers' contribution. I do not think this should be seen in isolation. It is one of three amendments taken together and it is very significant in relation to employment creation. This must be considered in a wider context.
I should like to see the Finance Bill, which is due on 8 April, containing even more radical proposals. One proposal which I would welcome, although my view might not be shared by all my colleagues, is provision for a significant property tax, the income to be used for a decisive reduction in income tax. We penalise labour. As the OECD say, we have the regime which is most biased against employment, yet we have the least tax on property. There are straws in the wind but my guess is that the Government will avoid anything at all controversial. Meanwhile unemployment will continue to rise. These are the sorts of radical proposals which must be considered.
Do I take it from Deputy Mitchell's earlier remarks that he wishes to withdraw amendment No 16?
Yes, I will withdraw amendment No. 16 but I give notice that I will be tabling a similar amendment on Report Stage.
How stand amendments Nos. 17 and 18?
They still stand. I move amendment No. 17:
In page 5, between lines 10 and 11, to insert the following subsection:
"(2) Section 9 of the Principal Act is hereby amended by the insertion after subsection (1) of the following subsection:
‘(1A) (a) As an alternative to all or part of the total sum payable as employers' contributions in any contributory year, the Minister may, by regulation, require the payment by companies of a levy (in this Act referred to as the "Social Security Levy") based on a percentage of turnover of the company.
(b) When making regulations under this section the Minister, with the consent of the Minister for Finance, shall define inter alia the amount of the percentage, the manner of computation of turnover and the date or dates for payment of the levy.
(c) Any regulations made under this section (including this subsection) may be revoked or amended.
(d) Where regulations under this subsection are proposed to be made, a draft of the proposed regulations shall be laid before each House of the Oireachtas, and no such regulation shall be made until a resolution approving the draft has been passed by each such House.'.".
It is evident from the points raised during this debate that this is a very complex area which needs a great deal of careful thought. The Commission on Taxation and the Commission on Social Welfare disagreed about what should be done because of the effects on different people. The Commission on Social Welfare were particularly concerned about the protection of employees in any new arrangements. Last night we had a very useful discussion on the family income supplement, rents and medical cards. We will come back to those matters on Report Stage.
I should emphasise that employers' PRSI contributions here are among the lowest in Europe. I have every desire to reduce the burden on both employees an employers. The percentage increase in the ceiling is only 4.5 per cent, the lowest increase for many years.
It is 50 per cent higher than the rates of increase for social welfare recipients.
It brings in £2 million this year as against expenditure of £101 million in a full year. I should not like it to be thought that we are imposing exceptionally high charges on employers. Deputies may not be aware that employers on the Continent also pay for children's allowances in many cases and they seem to be able to meet these kinds of costs in addition to the normal social security costs at a considerably higher level. We must keep this question in context. Any consideration must be based on ensuring that there is a solid social security system for employees.
The Deputy mentioned the family income supplement as an incentive to employment. The results of a review will be available reasonably soon and it will then be possible to look more comprehensively at this question. In the meantime we will consider it again before Report Stage. The Deputy is anxious to facilitate employees on lower incomes. I gave the actual figures involved in exempting certain income from PRSI. We could just exempt people from contributing under a certain income level, say, £1,000 to £2,000. Our whole system is based on employment of 18 hours or more per week. If it is below 18 hours it is regarded as being of inconsiderable extent. If we based the system on the amount of money rather than hours it would have enormous ramifications for the whole system of benefits, entitlements and contributions.
I am sympathetic to what the Deputy says about people on the lowest incomes and we will have to look at the question of whether the system should change in that direction. Any such change would have to be considered and debated very fully because it would have enormous implications and would remove certain people from the system. I see the protection of employees as my principal responsibility. I know the Deputy is taking a global view of changes in our society and I am happy to look at the matter in this context. However, I will always have to stand very firmly behind the employee and make sure that he or she is fully protected.
The Deputy referred to people employed on a contract or consultancy basis. By extending PRSI to the self-employed we are taking most of these people into the sytem. The Minister for Finance is introducing self-assessment and a much more vigorous and comprehensive system of ensuring that tax will be paid. This will involve a whole new collection system for PRSI.
All Members of this House would like to see more people employed in labour-intensive industries and to facilitate that development in every possible way. Obviously there would then be an increased cost for those industries which were subject to turnover tax. I can think of some where it would have an immediate impact and if we think back to the arguments on turnover tax they will come to mind fairly quickly. I think it would be better to examine these points in considerable detail before coming back to the House with proposals. That sort of change would require the introduction of a major Bill which would have to be fully considered by this House.
As a result of the recent budget, 63 per cent of taxpayers will now be paying tax at the 35 per cent rate. Therefore, major changes are taking place on that side also. I should mention that if the upper ceiling were to be removed entirely, which is now the case in the United Kingdom, the extra income generated would be £79 million in a full year. That would allow a reduction of approximately 1 per cent in employers' PRSI rates. That is another direction which it is suggested we should take from time to time but one can see also that it would have its implications in that those paying the higher rates of tax would also be paying higher rates of PRSI. I think the Deputy agrees that this would involve a major change. He says that we should be looking ahead but in looking ahead in that way we would have to ensure that any arrangements to be made would be fully discussed and considered before being adopted.
I would like to make a few points in connection with the proposal put forward by Deputy Mitchell. It is an interesting proposal in that it attempts to address the problem of labour-intensive industries having to pay a fairly high tax or levy on payroll. Capital intensive industries, such as in the financial or trading company areas, have very high turnovers and small workforces. As I have said, the proposal is interesting in so far as it attempts to deal with that problem but I am not convinced that the intent would be met by what is being proposed.
The proposal that the levy be applied on turnover would leave the system open to a considerable amount of manipulation by employers. We know from experience that where there are opportunities for financial gain through manipulation of the tax system, the social insurance system, the VAT system or any other system they will be taken. All sorts of things are done within the tax and VAT system so that companies can gain financially. We would provide more scope for evasion by applying social insurance on the basis of turnover but the point which the Minister made in relation to the protection of employees has to remain uppermost in the minds of Deputies in this House. It must be made quite clear that the present levy of 12.5 per cent on payroll is not a levy on everything which a company takes in, it is simply a levy on what they pay out by way of payroll and is part of the social wage. It is part of the contract that an employee will get X number of pounds into their hands while 12.5 per cent will be paid on their behalf into the social insurance fund.
There would be strong representations made by the trade unions to employers if that position were moved away from and I have no doubt that there would be a demand made that that portion of the social wage would be paid out in cash to the employee if it was not going to be paid into the social insurance fund. Whether it would assist in having a neutral position as between labour-intensive industries and capital intensive industries is open to question. The question as to whether we should adopt the position of giving a greater emphasis to one or the other needs to be debated very deeply. I am not happy that it would be in the best interests of the working class to have a reversion to labour-intensive industry. Traditionally, labour-intensive industries are lowly paid and have the worst working conditions. If this country is to trade effectively internationally we must encourage companies to invest in the latest technology and in the best possible productive ways in producing products which we could sell on the international market. There is no other way to compete effectively. As I have said, there should be much debate on what needs to be done.
I would like to see a situation where the tax system and the social insurance system was neutral as between labour and capital intensive industries but I do not believe that what is being proposed here today would achieve that. As I have said, it would lead to many difficulties in both collection and assessment. One further point I would like to make on this is that there is a need to ensure that whatever changes are made, their effect will not be to reduce in any way the social insurance fund which is essential in order to maintain payments to those on unemployment benefit, disability benefit, pensions and so forth.
Let me make one final point. I made a similar point earlier on the question of pensions for self-employed in that the system needed to be neutral as between labour and capital intensive industries. We are going to introduce a system in which the self-employed would pay a 3 per cent levy on their income as assessed. At present an employee pays at the rate of 6.6 per cent. Therefore a disparity exists which we will attempt later on to rectify. I simply make that point to highlight that it is necessary to ensure that we do not go overboard as regards one or the other. We should try to achieve a neutral position as between labour and capital intensive industries. If certain areas need to be encouraged to invest in technology we should find ways other than fiddling around with the social insurance system to do this.
There are two points I would like to make. I agree with what Deputy De Rossa has said about this proposal. This proposal is an interesting one and looking at it from a number of angles, it could possibly be developed in a different way. I too, am opposed to dealing with payments based on turnover. At the moment we have quite a lot of difficulties in relation to P60s and P45s which are based on a simple pay roll. If one were to get into the area of turnover it would be a real landmine area and we would increase the abuses by employers, or at the least, this would be put into the area of accountants seeking ways and means to avoid or reduce payments. I appreciate that the Minister has increased the penalties and hopefully this will improve the position in relation to abuses but the whole area of issuing P60s and P45s in relation to the records that apply to workers should be tightened up.
In relation to labour intensive industries I would have liked to have seen reliefs for that sector as that sector includes some of our oldest industries such as footwear, clothing and textile industries which are very labour intensive. As Deputy De Rossa said, these are the industries in which there are the lowest levels of earnings and the conditions of employment are lowest. I am opposed to any change from the present system.
The comments have highlighted what I said at the beginning about the reluctance of those who are supposed to be radical to look at truly unconservative solutions of our problems. An article by Paul Tansey in the business section of The Sunday Tribune on 6 March last dealt with manufacturing output which has increased by 30 per cent in the last two years and pointed out that despite this employment continues to fall. The article is headed, “Output Grows but Labour is Waiting.” The business community have huge reasons for not employing people. We have a very big employment problem and in the future we will have a crisis relating to increasing dependency. We will have more and more unemployed and more and more elderly people and fewer contributors. There will be a major crisis if we do not do something now. There is no doubt that the base for the social insurance contribution which the employers contribution provides is too narrow a base and provides many more loopholes for evasion that the ones which Deputy De Rossa and Deputy Bell outlined. Of course the proposal has some defects. Any proposal will have drawbacks but I strongly contend that my proposal will have fewer drawbacks than the drawbacks in the present system. We have a very serious unemployment problem which is getting worse. Although Paul Tansey is not everybody's favourite economist, in the article in The Sunday Tribune he raised the pertinent questions. Why with our present surging exports and manufacturing output are we still having declining employment? It is because the overall regime of tax and social welfare and other social legislation, and our remoteness from the continental market have combined to create a major problem. We must sort out these problems. The proposal to give the Minister power if he wishes to substitute a social security level on turnover is the first of a series of radical steps to be taken this year in order to begin tackling the unemployment problem.
My proposal is relevant to surging trade figures. Why is unemployment increasing when we consider our surging surplus and the balance of trade that we have had since 1985, compared with our balance of trade deficit of £1,500 million five years ago? This is explained to some extent by the fact that our 10 per cent manufacturing profits tax is being used by international companies so as to minimise the value of their imports from other companies in the same group and to maximise the export value of their goods to other companies in the same group with the effect that higher profits are got here and there are artificially inflated export figures. The fact that they pay 10 per cent tax on their profits here means that they can evade 50 per cent elsewhere. That is legitimate but while we are committed to a 10 per cent profits tax until the year 2,000, I do not see why companies like that should not be asked to pay something towards the social cost of unemployment and towards our social welfare system. There is no doubt that companies like that, in addition to companies who are employing capital more than labour should have to bear a fair share of the total cost. That would be nearer the neutral effect which Deputy De Rossa spoke about, than our present situation.
Deputy Mitchell is given to colourful phrasing and his way of describing things is a bit strange. In my local paper he has described the Bill as a product of apathy. I thought the paper had got it wrong and had misquoted him but Deputy Mitchell now tells us that all the trade unions, the employers and ourselves are trapped in conservative thinking. I presume that is everybody except himself. That is a very wide ranging comment with which I could not agree. There is need for change and change is coming about.
I note that in Deputy Mitchell's amendment the employee is not being catered for. It is clear that it is not geared to protecting the employee but to protecting the employer. There has to be a balance and employees must be protected. It is ludicrous to suggest that these amendments would stamp out fiddling. What will stamp out fiddling are proper legislation and proper fines and penalties for both employees and employers who breach the regulations and co-operation between trade unions and employers as is happening now. The building craft unions have got together with employers on the sites and they have put up a special fund to try to eliminate fiddling. Likewise the Minister is proposing fairly radical changes in the penalties. We need this because raising or lowering the limits will not change the fiddler's attitude and the same scope will be there for fiddling.
The Deputy said the Minister quoted enormous figures when dealing with exemptions. The Minister rightly quoted enormous figures because the cost would be enormous. The figure given was £125 million for the £1,000 exemption, and multiply that. These are enormous figures and that the Minister quotes them is not strange.
One of the most dangerous things in this proposal is the overall levy on companies which will penalise the efficient, successful company. It is difficult enough at the moment to trade and I take Deputy De Rossa's point that it is not always the labour intensive industry which is the good one to work for or pays well. Traditionally industries such as the clothing industry and others pay poorly. A more efficient company who will invest in machinery and equipment will be a good employer in most cases. We could penalise these people who are efficient and prepared to invest in research, development and so on, because Mr. Tansey or somebody else has told Deputy Mitchell he should do it. There is a grave danger which I mentioned last week when what seemed like a new proposal for loans instead of supplementary benefit was made. I said it was directly from the new British proposal——
That is not true.
Lest there be any denial, we had a leaflet here last week showing this new, radical thinking Deputy Mitchell had come up with and he said he was disappointed this had not been done. Britain introduced that.
It was not the same thing.
It was introduced specifically to cut the amount of money being paid to social welfare recipients. That was stated honestly in Britain, unlike the way it was put across to us here. We should not grab at everything that is happening across the water. Some of it may be good, some of it is bad but not let us grab everything in that fashion.
I am fairly new at working at bringing in legislation. "Agreement in principle" is a term we meet in local authority. For a long time I have had a fear about giving the right to the Minister to bring in by regulation certain conditions down the line. I trust this Minister but changes could occur down along the line and it is right to have proper debate here if we are to have radical changes. Obviously, the Minister would be anxious to take the power to make his job easier but we must be careful about it. Generally I am surprised that the first part of the amendment has not been disallowed considering the way some amendments were treated yeaterday, as they would radically affect the income base for the Bill. However, I encourage debate on changes and we need to address any problems there, but I oppose these amendments as they are put down. I see no problem about coming back during the year and having further debate on some of the issues and I am sure the Minister will keep them in mind.
I want to take up a couple of points in relation to what Deputy Mitchell had to say. First, I did not say I was opposed to change. I made the point that there was merit in Deputy Mitchell's proposal in so far as it attempted to address a problem between the question of how you assist labour intensive industry while ensuring that capital intensive industry is not penalised. I would not regard that as a conservative position, but let me say to Deputy Mitchell that being radical does not necessarily mean you are being progressive.
True.
The Prime Minister of Britain and the Chancellor of Britain regard themselves as radical conservatives and have given themselves that title.
And conversely left wing on the media——
I agree entirely. Many people who label themselves left wing are some of the most conservative people I have met, but we must judge people by their works rather than what they label themselves as and I apply the same to Deputy Mitchell in his previous role as Minister——
Incarnation.
——in the previous Government. There has been something of a metamorphosis since he came to this side of the House.
The article he mentioned by Paul Tansey in The Sunday Tribune some weeks ago did not deal with social insurance. It dealt with why output was growing apace and employment falling and the writer came to no conclusions. He simply raised the question. My recollection of the article was that he left the question open as to whether the Government were pursuing the correct strategy in their approach to the national debt and a whole range of other issues but the question of social insurance was not referred to at all in that article. Perhaps the Deputy has the article there and can correct me.
The Deputy is right.
My recollection is it was not mentioned. The reason I put down for output rising and employment falling is simply that those who are investing in new technology are winning the markets. Those companies who are holding on to old fashioned methods and ways are in decline and shedding labour. This must be looked at very closely. I do not accept that fiddling around with social insurance is the way to tackle that problem. Perhaps the Deputy does not mean it to come across thus but it would appear he is arguing that the major cause of unemployment or loss of employment is the 12.5 per cent payroll tax which the employer pays. Again there is no evidence for that. There are plenty of complaints from employers about having to pay PRSI, but employers, like everybody else, will complain regardless of what has to be paid. That is the nature of things, but on that basis we should not run to start changing a system without giving due consideration to all the implications those changes might have.
My party are opposing this section. With 250,000 people unemployed plus emigration, I am amazed at the inclusion of this section in the Bill. It is sad that this section is included. It leaves me in no doubt where the Minister and his Government stand in relation to job creation. The only hope we have of reducing the social welfare bill is through employment. Yet there is a massive exodus of public and civil servants and the Government have gone to the extreme of borrowing huge amounts of money to finance it.
Our only hope is to create a climate whereby more people will be employed. This Government are going about it by increasing the tax on employment and this is ludicrous. I would ask the Minister to have another look at this section. I admit the percentage is small, 0.07 per cent, but at this time we should be creating incentives for employers to employ more people.
To keep the occupational injury fund solvent would take only a small amount of money from the central fund. We in the Progressive Democrats are opposed to any measures that will discourage people from creating employment. The Minister's logic is faulty in this respect and I am somewhat surprised at this.
What kind of money are we talking about. The only industries that are now creating employment are the small ones. Yet, these small employers have faced enough problems with employer liability insurance, many even being put out of business because of this terrible demand from insurance companies for employer liability. Here we have the Government again creating further problems for the men and women who are investing their life savings to try to create a little industry, thus giving further employment. The Minister should have another look at this. It is a principle rather than money that is concerned. The Government should be seen to be creating incentives for people to employ and not, as they have done this morning, creating further disincentives to employers. I ask the Minister to give this matter his serious consideration because this is a disincentive and will be recognised as such in the field of commerce.
This section provides for an increase of 0.07 per cent from 0.43 per cent to 0.5 per cent in the employers contribution to the occupational injuries fund with effect from 6 April 1988. On the introduction of the PRSI contribution system in April 1979 the rate of contribution was fixed at 0.45 per cent. The rate was temporarily reduced to 0.3 per cent in April 1981 as a result of accumulated reserves in the fund. This is the kind of fund that the Progressive Democrats are always looking for. In fact, the Deputy's colleague said that the social insurance fund was a nonsense and that there should be a fund that is self-financing and covers itself each year. That is what the occupational injuries fund is. Here we have financial responsibility on the part of the employers for their own occupational injuries fund so this should be straightforward Progressive Democrat stuff. That is what it is. We are all being responsible. If there are not as many accidents at work then not as much is paid. We have reduced it repeatedly when there were reserves in the fund.
As it happens, now there are more accidents at work and the responsibility is placed on the employers to meet the deficit which occurs in those circumstances. It was down as low as 0.3 per cent in April 1981 as a result of accumulated reserves in the fund. It was increased by 0.1 per cent in April 1984 and by a further 0.03 per cent from April 1986 to its current 0.43 per cent to maintain the solvency of the fund. I am sure Deputy Wyse likes those terms, to maintain the solvency of the fund. I hope the Deputy will let his colleagues know that what we are doing here is maintaining the solvency of the fund. That is what this is all about and that is why it is very hard to understand why the Progressive Democrats come in here and try to tell this House that we should find this money somewhere else. What about responsibility? Under the Act the employers have a responsibility for this fund; it is not part of the whole social insurance fund. They are relatively small amounts.
The Deputy asked what would be the additional yield of contribution income. It would be £3.1 million. The reduced rate of occupational injuries contribution payable in respect of civil servants, because that is also involved here, will also be increased from 6 April 1988 from 0.14 per cent to 0.16 per cent and will be brought into effect by regulations.
This is an adjustment to maintain solvency which we have all agreed we want to do. For a person on £10,000 per annum it would be £7 a year or approximately 13p a week to maintain solvency. At the maximum of £16,200 it would be just over £11 a year.
What is the occupational injuries fund about? It is about injuries that occur at work. We are back to responsibility on the shop floor, responsibility at work. Is the Deputy suggesting that that responsibility should be transferred to other taxpayers? This fund has always moved in such a direction and it covers such things as injury benefit. Approximately 26 per cent of the expenditure in 1987 was on injury benefit and 48.7 per cent of the cost of the fund went towards disablement benefit and death benefit. We are talking about serious injuries to workers in the workplace, not anywhere else. Surely the Deputy and his party believe in responsibility being carried by the employers in that case at least, whatever about any other circumstances? There are ways to reduce injuries and accidents at work. I know the Deputy's colleagues sitting close to him, Deputy Bell and Deputy De Rossa, will give him a list of ways in which the circumstances at work could be improved to reduce injuries. That can be done and if employers want to do it they have that option. That is one of the reasons it is important that the occupational injuries fund be strictly an employers' fund which is funded by them to cover their workers.
As I have said, the fund rises and falls from time to time depending on the extent of injuries or accumulated costs arising from those injuries. The increase is a very small one and I do not know why the Progressive Democrats want to oppose it. They say they want to oppose the whole section and to oppose this increase. They want to oppose it in principle. What is the principle? Surely the principle the Progressive Democrats are talking about is totally opposite to the principles they tell people about outside this House. They say outside the House that we should have solvency and financial responsibility and if there are other ways of reducing the cost, for instance, by reducing accidents then we should do that first. Is that not what the Progressive Democrats would tell us? Why then are they now saying that the ordinary taxpayer should carry these extra costs on the basis of principle? I do not understand that and needless to say I do not agree with it. I know it is part of the Progressive Democrats effort to try to create an impression publicly that they are against increases of any sort. Did they make a mistake? Does the Deputy want to go back and check with Deputy O'Malley, his party leader, to see did he flip on this, has he missed out on something? I cannot understand how he came to that conclusion.
The Minister was not thinking of that when he sat over here.
Acting Chairman
The Minister should be allowed to reply.
I do not know how the Deputy has come to such a conclusion. It would be grossly irresponsible of me as Minister for Social Welfare to come in here and say there is a deficit in this fund and I want to pass it on to the worker, the general taxpayer or somebody else. I am doing the fund a favour. Elsewhere there was £375,000 left over from a scheme which has been wound up that was contributed by employers to another scheme and I am taking power to transfer it into the occupational injuries fund. Employers alone contributed that money and when their fund is running at a deficit is it not reasonable to put it into their fund and let them have the benefit of it? The amount required is, therefore, reduced to that extent. As I have said, I cannot understand how the Progressive Democrats have got themselves into this situation but that is the case. If they wish to oppose the measure then we will just have to vote on it but perhaps the Deputy might wish to talk to his colleagues before he does so.
I support the Minister in his approach. Deputy Wyse is worried about the ecomomic factors involved. The Minister spoke of terms such as injury, disablement and death and these are frightening terms. In the past one of my duties was as industrial safety officer in a very large, reputable company. That brought me into immediate contact with industrialists generally, with training, with problems of industrial accidents and their results. There are still people who totally disregard their responsibilities and there are cowboy employers. It is only when you see the effects of these accidents and the pain and suffering caused as a result you realise that the economic factor is not very important. The cowboys must be forced to get their act together and to behave in a proper fashion. There are many ways, as the Minister has said, in which the situation can be improved and each improvement will mean that less money will be needed for this fund.
Deputy Wyse spoke about the numbers of unemployed, the desolation and so on and he used this opportunity to give a party political speech rather than to deal with the measure before us. There are hundreds of people who have been killed, disabled or badly injured at work. In many cases this reverts directly to the employer, to lack of training, lack of proper initiation courses and lack of direct supervision because of penny pinching. This proposal is to give a very small increase in the fund to ensure that there is a safety net for the people who are injured at work and I support the principle of the employer paying the contribution. The option lies with the employers to save on the fund, on proper procedures, proper training and proper working conditions. These things cannot be dodged and we need legislation to ensure that they are brought about.
Insurance costs are extremely high but that matter is being looked at in a separate area, particularly in the case of artificial costs where the money is not being paid to the people who are injured or to their dependants but to teams of lawyers and others. That matter comes under a separate section but it has to be dealt with also. Within industry the insurance costs could be kept down. The premiums are directly related to the number of accidents occurring, to their severity and the compensation paid. As I have said, the solution lies with the employers to control that fund and keep it down. The Minister emphasised that where there was overfunding the rate was cut. It is totally irrational now to complain about a very small increase in the percentage rate to compensate for the fund being down. We must be consistent. There was no objection to paying it back when the fund was over-subscribed.
I ask Deputy Wyse to withdraw his opposition to this measure. I appreciate that he may say it is a further tax on employment but it is a tax controllable by employers. If all employers became aware — many of them are not so aware — of the moves that could be taken to cut these costs we would have a better and a safer country for the industrial worker. I will at all times move to protect the industrial worker and I make no apologies to anybody or to any party for that. I will not listen to arguments about the numbers of unemployed or about anything else. There is totally irrational opposition to this section and I ask that it be withdrawn.
In my time I could probably claim to have dealt with more workers in a whole variety of different industries than most, if not all, other Deputies. During 25 years or so I have had very wide experience in dealing with legislation covering people at work. If there is anything that can be put into any Act which would strengthen that situation I would be very much in support of it. This fund is very important and it is very important that it be self-financing, otherwise, it will act as a disincentive to employers who do not comply with the relevant legislation to give the necessary protection to workers in their employment.
What is unfair about contributions to the fund is that employers who do comply with the regulations, who do provide proper safety footwear and clothing, who instal proper extraction fans where there may be dust and other materials which would affect workers' health, effectively must contribute the same as the cowboy employer who does not comply with any of the regulations. Unfortunately, the Department of Labour factory inspectorate division would find it almost impossible to deal with all of the factories, workshops and so on nationwide, or to cope effectively with the lack of proper equipment and facilities for industrial workers.
Therefore, I find myself taking a totally contrary view on this matter. I contend that there should be severe penalties imposed on employers who do not comply with the regulations. There are two Departments dealing with the important matter of the health of workers. Yet there is a certain lack of co-ordination between the two. I have never been satisfied that information furnished by the factory inspectorate division of the Department of Labour found its way to the Department of Social Welfare who must foot the bill or, indeed, vice versa. I suggest to the Minister that there should be more consultation in that respect. For example, before grants are paid to employers by the IDA or Fóir Teoranta, the Department of Labour should satisfy themselves that such employers have installed proper safety equipment for their employees.
I heard of a sad case only a few weeks ago of a relatively young man with eight children who, because his employer, a company in the bakery industry, would not instal essential extraction equipment, can no longer work, having been infected by flour, or baker's disease as it is called. That man will never work again. The bakers' union having complained, the Department sent an inspector on more than one occasion to that establishment. The inspector told the employer, backed up in writing, that he must instal proper extraction units but he failed to do so. It must be remembered that the fund will have to pay disablement and injury benefit to that man, his wife and eight children for as long as he continues to live. Yet that employer pays the same contribution as another baker down the street who has installed the proper facilities.
I concur fully with the Minister in this respect. We do not go far enough in implementing the relevant legislation in order to prevent injury or disease being occasioned at work where the proper safety equipment has not been provided. Penalties for non-compliance with the relevant regulations should be very severe because we are talking here about workers' health.
I appreciate the sentiments expressed by Deputy Wyse. Possibly he is looking at the matter from a totally different angle. However, had he spent 20 to 30 years, as I have, dealing with workers on the factory floor, seeing them being maimed, disfigured or crippled because of lack of proper safety equipment and compliance with the regulations, he might feel differently. Indeed, I might add that we are the worst offenders in all of Europe in regard to ensuring implementation of the relevant legislation.
Unlike the Minister I do not see a contradiction in the position of the Progressive Democrats in relation to this matter at all. It is clear to me that what is being argued is not so much against the increase as against the levy being there at all. That is quite in line with the position of the Progressive Democrats and, as far as I know, the Fine Gael argument as well — that labour should be deregulated, that we should remove all of the constraints on labour.
No.
I heard the Fine Gael spokesperson on labour speak to a meeting of a trade union association outside of congress, when he made it quite clear that he was unhappy with the degree to which labour is protected. He said he was unhappy with the obligation on employers to pay redundancy money, with employers being constrained by the legislation to unfair dismissal. He was also unhappy with the constraints on employers with regard to safety, social insurance and a whole range of other matters. That is the position of the Progressive Democrats as well. Therefore, it will be seen that there is no contradiction in the Progressive Democrats' argument here today. They are for deregulation of labour, in favour of circumstances in which an employer can hire and fire at will, with no responsibility to his employees because, of course, such would interfere with his profit margin.
Deputy Mitchell described these obstacles to employment as road blocks. To be honest, I would prefer to see my sons and daughters on the dole than working for some employers I have encountered.
I want to correct what Deputy De Rossa has said. First, because people may express anxiety about the overall effect of certain provisions does not mean they may want to throw out all of the provisions of the Bill with the bath water. I do not think anybody could possibly contend that Fine Gael are not committed to the welfare and protection of employment and employees. Our concern is to increase employment. If there are problems encountered in the implementation of some of the present arrangements, we should not be afraid to examine them and ascertain whether we can refine them somewhat so as to avoid some of their adverse effects. It is only fair that I should make that point in the light of what Deputy De Rossa has said.
Deputy De Rossa referred earlier to my former position as Minister. One of the problems I encountered as Minister, in charge of many State companies, was that of getting people to look at things differently, to change, in order to ensure their survival. In that sector each of the companies for which I was responsible, with the exception of B & I, is now in profit, doing very well, because with the co-operation of management and unions we got them to change. Similarly we must have the same open mind in regard to employment generally.
While I agree with many of the sentiments expressed by Deputies De Rossa and Bell, I sometimes cringe at their parties' unwillingness to face up to the need to change in certain respects. I have no quarrel at all with their intent or motivation. Indeed, I sometimes feel I would be more at home there——
Is that an offer?
Perhaps we will have a new Coalition. The contributions of both Deputies in this House are always constructive and worthy of attention. However, they may suspect the motives of those they believe to be on the Right wing.
I was somewhat surprised by the Minister's attitude to this question. He appeared to get very excited. We have had a very constructive practical debate so far. I can well understand the Minister's anxiety vis-à-vis the position of the Progressive Democrats but I should have expected him to adopt a more responsible approach. I did not come in here to make a political issue of any aspect of the Bill. We have not opposed all sections of the Bill. What we are talking about is creating the incentive for employment. I think that is a fair assumption in relation to the section. The Minister started shouting and screaming about solvency and things of that kind. I can well appreciate his U-turn. Even when he was sitting on the other side of the House, we were his target. He criticised our approach to different aspects of Government policy at that time. However, I am not going to deal with that now because it would only make the issue a political one.
I want to say to the Minister that I, too, worked on the factory floor, both as an employee and in management and I know the dangers workers are exposed to. I am fully aware, too, of the cowboy employer, the kind who was referred to by Deputy Dennehy, but I am aware also of the majority who are honest-to-God employers, who, every day, are spending, extending and trying to create more employment. Those are the people about whom I am really concerned. I know, and I am sure Deputy Dennehy and every other Deputy knows, that many people who had the ambition to start their own industries found, when they went to the insurance companies, that it was not possible to go ahead because of the cost of employer liability insurance. What have the Government done about that? Surely we are highlighting something by our opposition to this section.
I know that the amount of money involved is not substantial, the Minister said that, but it is not substantial either for a Government to prop up that fund as part of their contribution to creating the incentive for employment or to encouraging employers to create more employment. That is all our opposition to this section means. I was somewhat surprised that a political football was made of the whole matter and, worse still, that it was started by the Minister. I am surprised that he got so excited about it after our having had such a constructive discussion up to then.
The basic principle of my party is to try to create the incentive to invest and to employ. If the Minister wants to debate that we are always ready to do so. I was surprised that the Minister got so excited and made such a political issue of something which I felt the House should discuss when it was talking about creating incentives for employment. I have no intention of withdrawing my opposition to the section. It is our policy and we stand by it.
I want to assure the Deputy that I only get excited about money. As Minister for Social Welfare I need the money.
We are trying to provide it for you.
The fund will be short if we do not have the money. Incidentally, the amount currently paid out on an annual basis is £32 million so the total amount is not so consequential, it is very substantial. This brings me back to what Deputy Bell said about there being enormous scope for responsibility in industry. I agree with what Deputy Bell said — Deputy De Rossa referred to this also — that a great deal of work could be done in that area to ensure that those who contribute to the lack of safety in industry are made to bear the penalty for that, especially if they are flying in the face of the recommendations and advice made available to them.
We are talking about people in industry who die as a result of accidents or who are very seriously disabled and injured. Of course, there is far too much of that throughout industry and I agree with what Deputy Bell said in relation to that. The cost of that to the employer is £32 million a year but if he is responsible he can cut down on that. If we take £10,000 as an average salary, what is involved here is £7 per annum or 13p per week. The Deputy said that the reason the Progressive Democrats put this proposal forward is to encourage employment. I cannot see how 13p per week would encourage employment.
It is the principle we are trying to establish.
It is far more important to encourage people to be responsible and to ensure the solvency of the fund. It is also important that we have prudent management. I am sure that when the Deputy talks to his colleagues they will realise that things like prudent management and the solvency of the fund are important. That is why we have to go ahead with this measure.
Tá
- Abbott, Henry.
- Ahern, Bertie.
- Ahern, Dermot.
- Ahern, Michael.
- Barrett, Michael.
- Bell, Michael.
- Brady, Gerard.
- Brady, Vincent.
- Brennan, Matthew.
- Brennan, Séamus.
- Briscoe, Ben.
- Browne, John.
- Burke, Ray.
- Byrne, Hugh.
- Calleary, Seán.
- Collins, Gerard.
- Conaghan, Hugh.
- Connolly, Ger.
- Coughlan, Mary T.
- Cowen, Brian.
- Daly, Brendan.
- Davern, Noel.
- Dennehy, John.
- De Rossa, Proinsias.
- Desmond, Barry.
- de Valera, Síle.
- Doherty, Seán.
- Ellis, John.
- Fahey, Frank.
- Moynihan, Donal.
- Nolan, M.J.
- O'Dea, William Gerard.
- O'Donoghue, John.
- O'Hanlon, Rory.
- O'Keeffe, Batt.
- O'Kennedy, Michael.
- O'Leary, John.
- O'Rourke, Mary.
- O'Sullivan, Toddy.
- Quinn, Ruairí.
- Reynolds, Albert.
- Sherlock, Joe.
- Fahey, Jackie.
- Fitzgerald, Liam.
- Fitzpatrick, Dermot.
- Flood, Chris.
- Flynn, Pádraig.
- Foley, Denis.
- Gallagher, Denis.
- Gallagher, Pat the Cope.
- Geoghegan-Quinn, Máire.
- Haughey, Charles J.
- Higgins, Michael D.
- Hilliard, Colm Michael.
- Hyland, Liam.
- Jacob, Joe.
- Kavanagh, Liam.
- Kirk, Séamus.
- Kitt, Michael P.
- Lawlor, Liam.
- Lenihan, Brian.
- Leonard, Jimmy.
- Leyden, Terry.
- Lynch, Michael.
- Lyons, Denis.
- McCartan, Pat.
- McCarthy, Seán.
- McCreevy, Charlie.
- Mac Giolla, Tomás.
- MacSharry, Ray.
- Mooney, Mary.
- Morley, P.J.
- Smith, Michael.
- Spring, Dick.
- Stafford, John.
- Stagg, Emmet.
- Swift, Brian.
- Taylor, Mervyn.
- Treacy, Noel.
- Tunney, Jim.
- Wallace, Dan.
- Walsh, Joe.
- Walsh, Seán.
- Wilson, John P.
- Woods, Michael.
- Wright, G.V.
Níl
- Clohessy, Peadar.
- Colley, Anne.
- Gibbons, Martin Patrick.
- Harney, Mary.
- Keating, Michael.
- Kennedy, Geraldine.
- McCoy, John S.
- McDowell, Michael.
- O'Malley, Desmond J.
- O'Malley, Pat.
- Quill, Máirín.
- Wyse, Pearse.
I move amendment No. 19:
In page 5, before section 10, but in Part II, to insert the following new section:
10.—The increase in the prescribed relative allowance payable under sections 50 (ii), 51 (2), 81 (3), 86 (3), 91 (3) and 103 (2) of the Principal Act shall be paid directly to such prescribed relative.
In view of the restriction on time for the debate I will not make any comment on the amendment.
The amendment seeks to have the prescribed relative allowance paid directly to the prescribed relative. The prescribed relative allowance is an increase in pension payable to incapacitated pensioners who have living with them a prescribed relative who is providing full time care and attention to them. Apart from the prescribed relative the pensioner must be living alone or only with children under 18 or persons who are incapacitated. The prescribed relative must not be engaged in employment outside the home, must not be in receipt of, or entitled to, any other benefit, pension or allowance from the Department of Social Welfare and must not be a married person who is wholly or mainly maintained by his or her spouse.
Persons in respect of whom the allowance may be paid consist of a brother, a sister, a half-brother, a half-sister, a son, a daughter, a stepson, a stepdaughter, a grand-son, a grand-daughter, a son-in-law, a daughter-in-law, a nephew, a niece, a brother-in-law or a sister-in-law of the pensioner. The prescribed relative must not be a married person who is wholly or mainly maintained by their spouse.
The purpose of the scheme is to provide a measure of additional income maintenance to a pensioner towards the support of the relative who is looking after him in this way. It is akin to an increase in pension for an adult dependant except that the rate of the allowance is lower: £26.40 at present; £27.20 from July 1988 — the same rate applying in all cases.
Payment of the PRA is based on need: if the relative is working or on social welfare payment no allowance is paid. This is the basis for not paying an allowance in respect of a married daughter in the case where the pensioner is living with the family. The allowance is paid to the pensioner, not the relative, and was never intended to compensate the relative for the service which he or she is providing. Social welfare schemes are based on the criterion of providing income maintenance in situations of need, not on providing compensation to people for services rendered.
While it is accepted that people looking after pensioner relatives are in many cases saving the State the expense of providing institutional care, it does not follow that the State should provide a level of financial compensation to the relative for the service they provide. The general practice has been that families look after their aged relatives and it has never been accepted that the State should provide financial compensation for this. The social security system provides a measure of income support for various situations of perceived need with the fall-back of the supplementary welfare allowances scheme which is designed to ensure that no person falls below a certain minimum level of income.
It would be difficult in many cases where pensioners are being looked after by their families to justify, on grounds of need, the provision of additional financial compensation. The level of the non-contributory old age pension is £44, rising to £45.75 in July, and in a situation where a pensioner lives with his family only the pensioner's means are taken into account in determining the amount of pension payable. In many cases the value of the pension would be quite significant when measured against the additional cost of maintaining the pensioner in the family.
State support specifically for elderly persons in the home takes the form essentially of a variety of welfare services which are provided by the health boards. The main types of service available range from a home help service, a service provided by public health nurses, social workers employed by health boards, a meals-on-wheels service and other backup services for those in need.
The whole question of payment for looking after aged and disabled relatives in the community was examined by the Commission on Social Welfare. One of the main criticisms of the scheme was that the allowance is payable to the pensioner rather than directly to the caring relative. The commission made two recommendations in this context, first, that all means-tested social assistance payments should be unified in a single social assistance payment and, secondly, that prescribed relatives should be entitled to claim social assistance in their own right and that the prescribed relative allowance should, therefore, be abolished.
In this amendment the Deputy is, in effect, saying that it should be abolished in so far as the pensioner is concerned and transferred to the assisting relative. As I have outlined, that would involve a variety of changes. It would constitute a fairly major alteration. It would mean that the pensioners entitlement to the money they are at present receiving would be removed. The Deputy will realise that this is something which needs to be considered more generally, to decide exactly on what sort of social assistance payment should be payable, in what circumstances it should be payable and what would be the effect of making that transfer. It is something which I accept will have to be considered later, but which I am not in a position to undertake at this stage.
Let me put two brief examples to the Minister, although I am sure he has encountered such cases in his own work. Where a daughter is taking care of an elderly parent or parents, if she is in receipt of unemployment assistance then basically there is no problem. However, once the Department of Social Welfare discover that the person is taking care of an elderly relative then that person is automatically deemed not to be available for work — that magic phrase with which we all have to deal all the time. Such a person is thus automatically disqualified from receiving unemployment assistance. Is the Minister saying he would consider that people certified as taking care of elderly relatives are, therefore, entitled to claim and be paid unemployment assistance without having to tell lies? That is what is happening. Persons taking care of elderly parents have to tell lies in the employment exchange because if they say they are caring for the relatives they are automatically disqualified. They have no recourse, because they cannot appeal against that decision unless the situation changes.
At the moment in every area, I suggest, there is a shortage of geriatric beds and these are extremely expensive — this may not be the Minister's responsibility. To keep a patient in geriatric or day care centre on a permanent basis in any of the newer institutions costs from £500 to £600 a week. It would be preferable if these elderly people could be taken care of by a relative in the home and that that relative would, in his or her own right, be entitled to claim unemployment assistance. If that were so, the other allowance could quite easily be eliminated. I ask the Minister to give serious consideration to that matter on the basis of saving the State a great deal of money. I would much prefer to see these elderly people kept in their homes and taken care of by their own people.
I have a few points to make on this topic, some of which have already been covered by Deputy Bell. It is important to view this from the point of view of the pressure at present imposed on the health boards in respect of community care. The very niggardly allowance given to pensioners and the incapacitated to support those who are caring for them in the home is contradictory in the light of pressure on community care. The Minister for Health in his speech on the budget emphasised that health boards should ensure, under their budgets — cut back as they are — an attempt to develop community care facilities. If nobody is available to care for the elderly and the incapacitated in the home, then the whole basis of community care collapses. It is important, therefore, that adequate income be provided for those who make a decision to care for their parents or relatives who may be incapacitated. For that reason, there is need to look at this matter a little more closely.
The second aspect is that for a variety of reasons the majority of people who are prescribed relatives are women. We know, as has been mentioned on numerous occasions, the extent to which women are discriminated against in our society. To expect them, on the one hand, to take on the burden of caring for the elderly or incapacitated relatives and, on the other, to deny them an adequate income which would leave them with some dignity is wrong. We should do whatever we can to eliminate that.
The Minister mentioned that the recommendation from the Commission on Social Welfare was to provide for a unified social system scheme and that the prescribed relative scheme should be abolished and the person who would normally be the prescribed relative should qualify in his or her own right for social assistance. That would be a sensible way to approach the matter. Does the Minister intend to go in that direction? Can he indicate how soon he expects such a reform of the system will be introduced? Certainly, as long as I have been in this House the question of the prescribed relative's allowance has been raised on every occasion on which there has been a debate on social welfare. It is time we took the problem in hand to see how it can be remedied. One of the strongest points made to me with regard to the prescribed relative's allowance is the fact that it is not paid to the person who does the caring. Such people feel very sore about that, that because they take on that job they are then deprived of applying in their own right for assistance. Some get a supplementary welfare allowance but in some cases it is very little. That is not an adequate response to the problem. The supplementary welfare allowance scheme is intended as a safety net, to ensure that people who get into difficulties on a temporary basis can be assisted. It is not satisfactory to expect a person who is not only doing his or her relatives a service, but also the community, to live in this way without rights in relation to income.
At health board meetings the main factor in regard to this matter is the question of paying the amount directly to the person involved. I agree with that principle, particularly where elderly people are involved. They want to hold on to their money to bury themselves and they are reluctant to part with any of it. It is an emotive subject which has been regularly discussed. The Minister should look at the overall scheme to see what improvements can be made, particularly in line with the recommendations of the Commission on Social Welfare. The Minister said very clearly that this payment is not intended as compensation for anyone looking after their parents or other relatives. That distinction should be very clearly made. Perhaps the Minister will look into this matter over the next 12 months so that changes can take place.
There is general agreement about the desirability of doing something along these lines but we must be very careful not to pay people to look after their relatives as this could lead to all sort of problems. It must be a question of genuine need and the commission recommended that it should be a social assistance payment to a person in his or her own right but still based on need.
The transfer of £27.20 — from July — will probably be seen as inadequate in relation to social assistance. A number of elements in that respect need to be examined and I give the Deputy an undertaking that I will look seriously at this. I accept the point he is making but I am sure he also recognises that, in making a case like that, we must ensure that it would achieve the objective that the commission and the Deputy have in mind.
Amendment No. 20 has been ruled out of order.
It is difficult to understand why this amendment was ruled out of order on the basis that it would involve extra costs.
I do not rule amendments out of order.
I know but——
It means that the person would get a separate personal rate which would involve higher costs.
Basically, the amendment only called for the payment to be transferred. The payment made to a separated wife of her part of her husband's social welfare benefit is made by the health board. Instead of having to queue at the employment exchange, collect her money for herself and her children and then proceed to the health board to collect another £10, the amendment merely wants her to receive the two payments in the one office. I am not suggesting that there should be additional payments and, therefore, I do not understand why the amendment was ruled out of order.
The Ceann Comhairle adjudicates on these matters. It is possible that where one administrative exercise is changed to another it might require expenditure. If that were so, it would be a potential charge and would be ruled out of order.
The effect of the amendment would be that the wife would become due for the personal rate, plus an allowance for the children, whereas she would have been on a dependant rate in the other case. I know the Deputy did not have this in mind but that would be its effect.
That is not what the amendment says.
It might be redrafted for Report Stage.
I am sorry to have taken up the time of the House.
Not at all. Deputy Bell is perfectly entitled — indeed obligated — to search for the truth and he made a perfectly valid point. It has been suggested that there will be an opportunity of presenting his amendment in an acceptable form on Report Stage.
I move amendment No. 21:
In page 5, paragraph (b), line 40, after "(d)" to insert "or (e)".
This is a technical amendment.
Amendment No. 22 is in the names of Deputies Mac Giolla, De Rossa, Sherlock and McCartan. Amendments Nos. 23, 24 and 25 are related and may be discussed together.
I move amendment No. 22:
In page 5, paragraph (b), to delete lines 41 to 43 and in page 6 to delete lines 1 to 7 and substitute the following:
"‘reckonable emoluments' in relation to a self-employed contributor, means gross emoluments;".
To some extent, the amendments are slightly crude because of the difficulty of dealing with a Bill in a restricted way. There are too many exclusions of certain incomes in relation to assessing the contribution to the self-employed pension fund and that is why we are putting forward these amendments. Perhaps the Minister will indicate his attitude to them.
I am very conscious of the restrictions on time in regard to discussing this amendment. We have just got social insurance for the self-employed and last night on the first amendment there was a preliminary discussion——
It was a very lengthy discussion.
I deliberately held back my contribution until now but, unfortunately, I will not get a chance to make it. The proposal by the Minister will cost the PAYE sector tens of millions of pounds. The Minister may intend to increase the rates following the review provided for in the Bill between September and December 1990 but, unquestionably, any reading of the report of the National Pensions Board indicates that at 5 per cent, the prevailing rate, a 90 per cent collection success would be needed to break even at present costs. The Minister may say we have gone beyond that and brought in unearned income as well. I am making allowances for that but in relation to income tax, health contributions and the youth employment levy, the success rate in collection is below 25 per cent. In this case there will be a commitment to the self-employed sector to eligibility in the years to come which will cost a fortune.
I agree with the principle. I have no problem with the principle but we should be getting a contribution from the self-employed towards the cost of what are now non-contributory pensions. The principal objective of the Minister when he made his announcement on 29 July was to reduce the net outflow from the Exchequer on pensions in general by getting a net contribution from the self-employed. It will cost us a fortune. It is misconceived and ill thought out and that is why I hope my amendment which I will re-enter on Report Stage which calls for an actuarial report after three years and that no entitlements should accrue until that actuarial report arises will be accepted then.
I would like to disagree with what the Deputy has said on the question of cost. We went into this in great detail earlier. The Deputy has got his figures wrong and is worrying unduly.
As have the National Pensions Board.
There will not be a problem in that sense. The Government are taking a very practical approach which I believe will be very successful.
I am now required to put the following question in accordance with the Resolution of the Dáil of this day: "That the amendments set down by the Minister for Social Welfare and not disposed of are hereby made to the Bill and that the Bill, as amended, is hereby agreed to in Committee and is reported to the House."
I want to put on record my protest at the inadequate amount of time which has been provided to discuss this important Bill and I would——
It is not appropriate to do so now. Is the question agreed to?
I would like to give notice that I will be tabling amendments on Report Stage similar to the ones which I put down on Committee Stage.
When is it proposed to take Report Stage?
Tomorrow.
Is that agreed? Agreed.