Vol. 432 No. 4
14 Mr. Gilmore asked the Minister for Social Welfare the proposals, if any, he has for the examination of the closer integration of the tax and social welfare systems, which was promised in the Fianna Fáil and Labour Programme for a Partnership Government, 1993-1997; and if he will make a statement on the matter.
15 Mr. M. McDowell asked the Minister for Social Welfare the steps, if any, which are in train or which are proposed for a closer co-ordination of the tax and social welfare systems; and if he will make a statement on the matter.
22 Mr. O'Malley asked the Minister for Social Welfare the steps, if any, which are in train, or which are proposed, for a closer co-ordination of the tax and social welfare systems; and if he will make a statement on the matter.
37 Mr. Molloy asked the Minister for Social Welfare the steps, if any, which are in train or which are proposed for a closer co-ordination of the tax and social welfare systems; and if he will make a statement on the matter.
39 Mr. Clohessy asked the Minister for Social Welfare the progress, if any, that has been made in the integration of the tax and social welfare systems as promised in the Fianna Fáil and Labour Programme for a Partnership Government 1993-1997.
48 Mr. Crowley asked the Minister for Social Welfare the progress, if any, that has been made on his plans to integrate the social welfare and the taxation systems.
I propose to take Questions Nos. 14, 15, 22, 37, 39 and 48 together. The Programme for a Partnership Government contains a commitment to examine intensively the closer integration of the tax and social welfare systems, in consultation with the social partners and the National Economic and Social Forum. The Minister of State at the Department of Social Welfare has been given special responsibility in this regard.
He intends to establish an expert working group to carry out this examination. A considerable amount of preparatory work has been done in this regard and the Minister of State intends to announce the composition and terms of reference of the working group later this month. It is intended that the group will produce an interim report later this year with a view to possible changes in the context of the 1994 budget.
Will the Minister indicate what he regards as the most important benefit that will derive from the integration of the tax and social welfare systems? Will he identify, in particular, the poverty traps that he expects to eliminate in the next budget as a result of the expert working group's report?
The Commission on Taxation recommended that the two systems be integrated and simplified as far as possible. In integrating the two systems, income and welfare payments will be considered as income.
Some of the issues that have been touched on today come into play. The commission considered the question of child benefit and how it can be targeted effectively but, if I recall correctly, they did not reach a conclusion on that. The poverty traps which are inevitably created by going some distance and then stopping apply to social welfare as well as to taxation and even though a tapering off is provided at the point at which it stops there are difficulties. A wide range of issues have to be tackled by the expert working group and I am interested in what their findings will be. We may find that it will be very difficult to bring all the aspects together and make a theoretical model that will meet all situations without creating other kinds of hardship. That is the purpose of the review.
We look forward to the establishment of that group who will produce an interim report this year. Does the Minister envisage that the Revenue Commissioners will merge with the Department of Social Welfare to ease the existing complicated arrangements?
Increasingly we work with the Revenue Commissioners and there is an exchange of information on areas that affect both Departments. However, I do not envisage a situation where the two Departments would come together. The Deputy mentioned the complex nature of social welfare but as long as you put people first the system will be complex. If the system is put first, it is easy to simplify it. While we are trying to simplify the system in a number of ways we put people first and we have to deal with the complexities of people's lives, starting from an early age right up to their old age, whether they are at work or out of work, lone parents or people with disabilities. You cannot apply the same system to everybody. A classic example is that the elderly, almost by definition, need more heatand consequently their requirements are different. Over the years Members have tried to respond to that and consequently this has created more complexities. I make no particular apologies for the complexity of the system. Everywhere I visit, I find that social welfare systems are complex, even though they do things differently from the way we do in many cases. This comes from trying to meet the needs of people and by being what I like to call "customer oriented", which is putting the people first.
I appreciate that the system is complex. Does the Minister agree that the only long term way to solve the poverty trap and to remove the disincentives to many of those on social welfare to take up employment — in particular a married man with two or more children — is to integrate both systems? Because of the way in which the system operates, if you are employed and seeking a medical card gross income is taken into account, whereas if you are on social welfare net income is taken into account. There is no incentive to take up a job because the differential between being working and not working is so small.
I would certainly look closely at anything that emerged from the point of view of the people I represent. While the exact proposals for integration differ from country to country, there is a number of common arguments put forward in favour of integration. For example, taxation and social security are seen as two sides of the same coin rather than as two separate entities for policy and administration. Those are the views put forward by the technical people who examine the differences from country to country. Conventional social security systems are seen as unable to cope with the overlaps between the tax and benefit systems — the incentive problems and the poverty traps. On the tax side, taxes need to have incentives, we want to have something else, therefore, there are overlaps from that point of view.
Social security systems have become extremely complex for the administrator and claimant alike with consequential problems of high administration costs and low take up of entitlements. The reason we have administrators is to deal with complex situations. We have to simplify them and go as far as we can in that regard. I would enter the caveat that at the end of the day the person being served is the one who counts, not the system, the computers or the administrators.
Finally, insurance based social security systems are not seen as being efficiently targeted as income support to households and not closely related to income needs. I do not agree with that because I happen to be a believer in the social insurance system for peoples' sake. I believe in an insurance system whereby a person makes a contribution and has something as a right at the end of the day and the tax system will even it out as at present. If one happens to have a good social insurance pension and from the job a pension which may be good, medium or poor, the tax system levels it out afterwards. Those are the reasons put forward for that type of integration. Obviously it is logical to integrate the two systems as far as possible. The Commission on Taxation highly recommended integration of the two systems. I should state that I am a customer's man and I am there on behalf of the social welfare customer. At the end of the day I want the system to serve the customer rather than the other way round. That may sound like a simplification but it is an important caveat in any of the studies which will be done in relation to that whole area.
While it sounds very nice to be wedded to the insurance system, with its tremendous value of awarding people entitlements as of right, is it not a reality that many of the rights under insurance have been cut back? I have heard workers say that if they had paid into a private insurance scheme the money they had paid into the State scheme they would be able to meet all their crises, whereas on the State scheme they had to cut back on what was due. I do not expect the Minister to acknowledge that, but in the context of the integration of the two systems is the support of children not one of the critical issues? Is it not a fact that our social welfare system acknowledges children and awards extra payments for children, whereas our tax system gives absolutely no recognition? Is this not a vital issue in the context of integrating the two systems?
I do not think one could be critical of social welfare on that issue. There is a need to find a balance between the two systems. It is done in social welfare because the incomes are needed. Earlier Deputy De Rossa talked about the need for minimum wages, the wage structure, and the whole wage problem. The Programme for a Partnership Government contains a commitment to examine intensively the closer integration of the tax and social welfare systems. I would emphasise it is not a simple situation. I would like to see something solid before I would be prepared to depart from the social insurance fund because it is a valuable support to workers generally.
I am calling Deputy De Rossa for a brief question. The time for dealing with questions is exhausted.
I will be brief. I am disappointed that the Minister has not identified the specific poverty traps which he thinks might result from an integration of the tax and social welfare codes. Does he foresee such an integration eliminating the anomalies that exist with regard to the family income supplement? Will it eliminate the anomaly whereby a person who is working gets mortgage relief on his mortgage, but as soon as he becomes unemployed loses that relief and has to go to the community welfare officer at whose discretion he will get assistance? I could continue to list anomalies. Does he foresee that those kinds of anomalies would be eliminated? When does he expect the expert group will be established and working?
We have overrun Question Time now.
I did mention the family income supplement and the assistance which is given on the tax side with the exemption limits. While these were introduced with the best of intentions, they creat poverty traps. Obviously, the question of mortgage relief is one of the issues that would be considered. The group will have a very broad brief and will be consulting with the social partners and the social forum. This expert group is being set up by the Minister of State, Deputy Burton, who is unable to be present today. She will announce the composition and terms of reference of the working group, presumably before the end of this month.
That disposes of questions for today.
