Expenditure in 1991 was some £283 million above expenditure in 1990. These levels of increase are due to increasing numbers of recipients of various schemes and the increases in the rates of payments and other improvements which have been provided for. The social welfare improvements in this year's budget will cost £85 million in 1992 and £162 million in a full year.
The vast bulk of the additional resources for social welfare at budget time go towards improving the general level of basic social welfare payments. This means that the scope for any additional improvements in schemes is limited, unless savings can be found within the system to finance such improvements. Whether we like it or not, we are faced with a very severe financial situation and all areas of public expenditure have been and are being constrained by these financial difficulties.
The single greatest constraint on the social welfare system is, of course, the level of unemployment. Rising unemployment increases social welfare expenditure while at the same time reducing the income from PRSI contributions. Expenditure on unemployment payments in 1992 will be around £940 million. Our ability to get to grips with the problem of unemployment is central to our ability to maintain and improve the level of our social welfare services.
The dilemma facing the Government in the type of situation we find ourselves in is whether to maintain the present system, "come hell or high water", unchanged in all respects or to examine the possibilities of redirecting resources within the system to people on the lowest income levels. There is a number of measures in this Bill which attempt on a modest scale to do the latter. They are, as I will outline, specific measures related to specific schemes and the underlying purpose is to target scarce resources in the most effective way towards people in greatest need and to tackle misuse of the system where this occurs.
I see it as my first priority to ensure that people who depend on social welfare, and particularly those at lower income levels, are protected and, where possible, have their living standards improved.
I referred earlier to the complexity of the social welfare system and the multiplicity of schemes and services which now exist. In this regard, I would like to inform the House that work has already commenced in my Department on a new social welfare consolidation Bill which I am keen to bring before the House by the end of this year. A new consolidation Bill is overdue in view of the many amendments and extensions to the social welfare system since the last consolidation took place in 1981.
It is not surprising that the complexity I have referred to exists in a system which has evolved under different Governments in response to a wide range of problems and to provide for very diverse groups of people. Nevertheless, despite the multiplicity of schemes, some people are missed by the system.
Furthermore, there are poverty traps and disincentives within the system. These require to be addressed by specific measures which sometimes add further to the level of complexity. One of my aims will be to try to ensure that the system caters for everybody who needs it and that it actively encourages enterprise and enables people to improve their situation. A more simplified and streamlined system of benefit entitlement and greater integration of the tax and social welfare systems are a prerequisite for this and I will be actively seeking ways of achieving this.
The main purpose of the Bill is to provide for an increase of 4 per cent from next July in the weekly rates of social insurance and social assistance payments; to provide for a special increase of 6 per cent from next July in all short term rates of payment; to provide for amendment to and rationalisation of certain schemes arising from Government consideration last year of the 1992 Estimates for Social Welfare; to provide for greater standardisation between schemes and improved administration generally; and to provide for certain amendments to the Pensions Act, 1990, in relation to occupational pensions.
The increase in weekly rates of social welfare payments provided for in this Bill are evidence of the Government's commitment to protect the position of those dependent on social welfare. That commitment is laid down in the Programme for Economic and Social Progress and we are honouring it.
The 4 per cent general increase will ensure that for the fifth successive year since 1987 increases in social welfare payments will keep ahead of inflation.
In addition, we are continuing the policy adopted in recent years of giving extra increases to those on the lowest social welfare payments. From July next, those on weekly short term payments will get an extra 2 per cent on top of the general 4 per cent increase.
This additional increase is a significant step towards achieving another commitment in the Programme for Economic and Social Progress which is to meet by 1993 the priority rates set by the Commission on Social Welfare. Since last July, all long term rates have either reached or exceeded those priority rates. The additional 2 per cent increase for short term rates provided for in this Bill leaves us well placed to achieve our target next year.
Let us look at the impact of these increases for different benefit types and family situations: a married man with three children on short term unemployment assistance will have his weekly payment increased from £119 to £124.80, i.e., £5.80 per week; a married man with five children on long term unemployment assistance will get an increase of £6 per week, from £148 to £154; the personal rate of disability benefit will increase by £3 per week from £50 to £53. A married man with three children will get an increase of £5.80 per week; a married couple, one under 66, in receipt of old age (non-contributory) pension will receive an increase of £8.50, i.e., from £83 to £91.50. This is because the increase of pension for a spouse under 66, which currently is 50 per cent of the personal rate, is being increased to the level of the adult dependant allowance for social assistance schemes generally, i.e. £34.30; and a couple getting a retirement pension or old age (contributory) pension will receive an increase of £4.40 per week.
The increases in weekly rates of payment are provided for in sections 3 and 4 of the Bill.
Section 5 provides for the extension of the over 80 allowance to invalidity pensions from April 1992.
Section 6 provides for an increase in the weekly income limits for family income supplement purposes from July 1992. This means that the limits below which families can qualify for family income supplement will be increased to £215 a week for a four child family and £294 a week for an eight or more child family. These increases are designed to improve the incentive to work for people at levels of earnings covered by the scheme.
Sections 7, 8 and 9 provide for increases in the ceilings for PRSI contributions and in the weekly earnings disregard for pay-related benefit.
Sections 10 and 11 provide for a modification in the contribution conditions for entitlement to retirement and contributory old age pensions through the introduction of an alternative method of satisfying the "yearly average" test. At present a yearly average of 48 contributions must be paid or credited from 1953 or from date of entry into insurance, if later than 1953, in order to qualify for a maximum rate pension. Where the average lies between 20 and 48, reduced rates of pension are payable.
The establishment and verification of a person's insurance record over a 40 year period can be difficult in view of changes in the social insurance system over the period. The PRSI system was introduced in 1979 and since then insured workers have been paying contributions through the income tax system on an earnings related basis. Insurance records over this period can be readily established. It is reasonable that where a person has a full record since 1979 they should be able to qualify for a full pension. The Government have, therefore, proposed that a person should be able to qualify for a maximum rate pension if the average of 48 contributions is satisfied since 6 April 1979.
I would emphasise that the new measure is not an extra hurdle but an alternative which some people will find easier to satisfy and which will result in quicker and simpler adjudication of pensions claims. The appropriate conditions for entitlement to pension is among the issues being addressed by the National Pensions Board. The question of further amendments to the contribution conditions will be considered when the National Pensions Board publish their final report.
There are a number of other changes affecting pension schemes in sections 12 to 18 of the Bill, the details of which are explained in the Explanatory Memorandum.
Section 19 of the Bill concerns maternity allowance. In relation to this let me say, first, that there has been a considerable amount of misunderstanding of this provision in some of the comments which have been made about the Bill.
Essentially what is being provided for is the amalgamation of the two existing maternity allowance schemes into one scheme. The new scheme will cover not only women who are covered by the Maternity Protection of Employees Act, Department of Labour legislation, but others who are covered by the social insurance system but not by that Act.
Since April 1991 employees earning over £25 a week are covered by the social insurance system. This has brought a large number of part-time workers, mainly women, within the scope of the system. They will now be covered for maternity allowance, whether their conditions of employment are such that they come within the scope of the Maternity Protection of Employees Act. Maternity allowance will be payable for 14 weeks as at present at a standard rate of 70 per cent of reckonable weekly earnings subject to a minimum amount to be prescribed in regulations. This minimum will take account of the fact that women on low earnings who were not previously covered by social insurance will now be covered.
Sections 20 to 24 provide for the standardising and streamlining of existing arrangements and powers to pursue liable relatives for the maintenance of their families. Since 1989 provision has been made for imposing a liability on the spouse of a recipient of deserted wives payments or supplementary welfare allowance to contribute towards such payments. Recipients of such payments are liable to transfer certain maintenance payments received to the Minister for Social Welfare or to the health board, as appropriate. The new provisions will also provide for the granting of attachment of earnings orders in appropriate cases.
Sections 25 and 26 of the Bill refer to the deserted wife's benefit scheme. It was announced at the time of publication of the 1992 Estimates that the Government have decided to apply an earnings limit for entitlement to deserted wife's benefit. I would emphasise that this measure will only apply to new claimants for deserted wife's benefit and the deserted wife's allowance scheme is not affected in any way.
The deserted wife's benefit scheme is somewhat unusual and unique in a social insurance context. It is unusual to be able to insure oneself against deserting one's spouse. The scheme applies to women only and further improvements in regard to equal treatment between men and women will undoubtedly require rationalisation of the present arrangements. Also, there are obvious inconsistencies between the benefits available under this scheme and those available under the social assistance lone parent's allowance and the deserted wife's allowance scheme, which are both means tested
Recipients of deserted wife's benefit can have additional income which does not affect their benefit. The measure now proposed is to restrict entitlement to benefit to persons at or above average earnings of around £12,000 a year. I envisage a tapered withdrawal of benefit at around this level. The details will be spelt out in regulations.
Section 27 is largely a consolidation measure in that it replaces the unemployment assistance chapter of the Social Welfare Acts. It also contains a number of amendments, most notably the abolition of the requirement to have a qualification certificate before being able to claim unemployment assistance. The qualification certificate is essentially a statement of a person's means. The requirement to have a qualification certificate makes the procedure for claiming unemployment assistance somewhat cumbersome and the abolition of the certificate will streamline the application process.
Section 27 also provides for the linking of claims which are separated by a period during which the claimant is attending a FÁS course, including a course the duration of which exceeds 52 weeks; and the assessment of earnings from insurable employment in determining entitlement to unemployment assistance.
In relation to this last point, under present arrangements, earnings from employment are exempted in determining means for unemployment assistance purposes. This means that a person can work for a number of days in a week and qualify for unemployment assistance for the remaining days, regardless of the amount of his earnings for the days worked. On the other hand, a person on unemployment assistance who engages in self-employment has his earnings from self-employment assessed. I think we have to have a consistent approach on this. What the amendment will achieve is that broadly the arrangements which apply where a person takes up employment as an employee will be the same as those which already apply where a person engages in self-employment.
I take the point which has been made by some commentators about the need to create incentives for unemployed people to take up employment or self-employment. I am very much in favour of providing incentives and encouragement to people to improve their situation and reduce their dependency on the State welfare system.
I think, however, that this is a broader issue and needs to be tackled in a more comprehensive way. Attempts have been made over the years through various special schemes to encourage the long term unemployed in this way with very limited success. For example, the part-time job incentive scheme provides a weekly payment to long term unemployed people who cease claiming unemployment assistance and take up part-time employment. The take up of the scheme since 1986 has been extremely disappointing. I will be looking at further ways in which the system can be made more responsive to the needs in this area.
Section 28 provides for certain amendments to the unemployment benefit arrangements which arise from the inclusion of part-time workers in the social insurance system from 6 April 1991. Any employee earning over £25 a week is now covered by the social insurance system and from January 1993 will be entitled to short-time benefits on foot of their contributions after April 1991.
The unemployment benefit scheme is intended to compensate for unemployment lost. A person who habitually works on a part-time basis and who suffers unemployment will, under the arrangements I am proposing, be eligible for unemployment benefit at a level related to the employment which he has lost. A person whose habitual pattern of work over a lengthy period is, say, three days a week and who loses his job should qualify for benefit for those three days and not for days which are not normally working days for him.
The introduction of an additional condition for unemployment benefit where a person must have suffered a substantial loss of employment in order to qualify for benefit, is designed to address this issue. Clearly there is great variety in the patterns of part-time working and I am taking power in regulations to specify what a substantial loss of employment will involve in particular types of situations.
Sections 29 and 31 of the Bill provide for taking account of redundancy payments in determining entitlement to unemployment assistance. The social insurance fund, which is financed by PRSI contributions and an Exchequer subvention, is there for people who, through no fault of their own, become unemployed and are in need of income support. That is essentially the purpose of the social insurance system — to provide for contingencies such as involuntary unemployment.
It is not uncommon for redundancy packages to be negotiated on the basis of an automatic right to unemployment benefit for 15 months. As Deputies are aware, severance packages can involve substantial sums of money. The question is whether the social insurance fund, which is there to provide income support in certain circumstances, should in effect be part of such packages.
I have no doubt that in some instances the social insurance fund is being used to top-up redundancy packages whether of a voluntary nature or otherwise. My Department are aware of situations where severance packages, which did not even qualify as redundancy, were openly advertised within companies on the basis of an automatic right to a weekly top-up payment in the form of unemployment benefit.
I am concerned about these trends. The approach provided for in the Bill is, in my view, a reasonable one, namely, that in determining entitlement to income support in post-redundancy or voluntary severance situations, some account should be taken of the amount of redundancy payment received. It is proposed that in the case of persons under the age of 55 years who receive a severence payment in excess of a fixed level, a disqualification from the receipt of unemployment benefit will apply for up to a maximum of nine weeks. The level of severance payment will be specified in regulations. I am satisfied, however, the the principle underlying this provision is reasonable.
Also, under present arrangements, people who leave employment voluntarily can also be entitled to unemployment payments but are subject to a disqualification period of up to six weeks. This Bill proposes to extend that period up to nine weeks and, as I have said, to apply it to severance situations in certain circumstances.
To summarise, the proposals provided for in these sections of the Bill are as follows: the period of disqualification from receiving unemployment benefit for up to six weeks in certain circumstances is being extended to nine weeks in order to bring it into line with the disqualification period applicable in the case of disability benefit. In addition, the claimant's overall entitlement to unemployment benefit is being reduced by the period of the disqualification; as I have already indicated, the circumstances giving rise to a period of disqualification from receiving unemployment benefit is being extended to include the situation where a person receives a payment under the Redundancy Payments Acts or by way of a separate agreement with his employer which is in excess of an amount to be prescribed in regulations, and the new arrangements will not apply in the case of those 55 years of age or over.
The purpose of section 30 is to apply the same conditions to week on/week off working as apply to short-time working within a week. The effect will be that pay-related benefit will not be payable in the week on/week off situation.
Short-time working as generally understood usually takes the form of a short working week, i.e. a two or three day working week, on a systematic basis for a certain period of time. Workers in that situation are entitled to sign on and receive unemployment benefit for the days of the week on which they are not working. Entitlement to unemployment benefit is, however, subject to certain restrictions. Since 1983, the amount of unemployment benefit payable for each day of unemployment is calculated at one-fifth of the weekly rate, instead of one-sixth, and pay-related benefit is not payable.
In recent years some industries faced with reduced demand have operated a week on/week off or similar pattern of work. Indeed, there have been instances of firms switching from a short working week to a week on/week off situation. The restrictions on the amount of unemployment benefit and pay-related benefit payable in the case of short-time workers do not at present apply to those working week on/week off. As the two patterns of working are for practical purposes identical, there is an obvious anomaly here which needs to be addressed.
Section 32 of the Bill provides for a change in the contribution conditions for disability benefit. At present to qualify for disability benefit a person must have a minimum number of paid contributions at any time since entry into insurance — 39 for short term disability benefit or 260 for long term disability benefit — and a minimum of 39 contributions paid or credited in the governing contribution year. It is now proposed that, with certain exceptions to be specified in regulations, at least 13 of the 39 contributions in the governing contribution year will have to be paid rather than credited.
The basis for this proposal is that the disability benefit scheme is essentially for people who have recently been at work and paying PRSI contributions and who then fall sick. The requirement to have a minimum number of paid contributions in the governing contribution year is designed to establish a recent attachment to the workforce for people applying for disability benefit. Under present arrangements, it is possible for a person to qualify for disability benefit on the basis of credited contributions even though he has not been in employment for a very long time, has effectively lost any attachment to the workforce and perhaps has no intention to seek paid employment. The revised condition will have the effect of directing the scheme more effectively at those for whom it was intended.
The section provides that the new condition will not apply to certain circumstances to be specified in regulations. The new condition will apply at the initial stage of qualification for disability benefit. Once a person qualifies and continues to be sick they will remain on disability benefit as they do at present. Similarly, persons on unemployment benefit will have a recent record of paid contributions and will be able to qualify for disability benefit should they fall ill.
After a certain point, however, it should not be possible to qualify for what is a short term insurance payment on the basis essentially of a record of credited contributions. The regulations to be made under this section will ensure that any person with a genuine recent record of paid contributions, who is still effectively within the social insurance system, will not be affected by the new condition.
Section 34 provides for the discontinuance of pay-related benefit payable with disability benefit for new claimants from a date to be appointed. Pay-related benefit under present arrangements is paid in addition to flat-rate disability benefit after the third week of illness. The value of pay-related benefit has been greatly reduced over the recent years. Furthermore, as announced at the publication of the 1992 Estimates in December last, the Government have decided that responsibility for short term sickness payments should be transferred to employers through a scheme of statutory sick pay. In order for employers to participate in this type of arrangement, the rates of benefit require to be simplified and streamlined.