Dáil Éireann debate -
Thursday, 10 Feb 1994

Vol. 438 No. 6

Written Answers. - Changes in Social Welfare Benefits.

Ivan Yates

Question:

65 Mr. Yates asked the Minister for Social Welfare if there will be any alleviating measures for seasonal workers who will be affected severely by virtue of the decisions to tax unemployment benefit and abolish pay-related benefit for those who are on unemployment benefit after 5 April; if the Government has reconsidered this measure or is prepared to introduce any alleviating measures; and the weekly cut in income for families affected by both these measures for those on £25,000 income per annum, £20,000 per annum, £15,000 per annum or £10,000 per annum who have become unemployed and who are married with two children.

Minister for Social Welfare (Dr. Woods)

As indicated by the Minister for Finance in his Budget Statement unemployment benefit and pay-related benefit will become reckonable as income for tax purposes with effect from 6 April 1994. The necessary Commencement Order was approved by the House on 2 February 1994.

The inclusion of these benefits for tax purposes is to ensure that people in similar circumstances, with similar amounts of incomes, are treated in the same way under the income tax code. Under the proposed arrangements, my Department will continue to pay gross unemployment and pay-related benefits, that is without deduction of income tax. The Revenue Commissioners will take account of the amount of these benefits when determining the amount of tax payable. These arrangements will apply to all recipients of unemployment and pay-related benefit including seasonal workers.

As recommended by the Commission on Social Welfare in relation to pay-related benefit, the Government decided to complete the phasing out of this supplement and to direct the resources thereby released towards improving the basic rates of unemployment and disability benefit. Accordingly, with effect from July next, pay-related benefit with unemployment benefit will be discontinued for new claimants. Existing claimants will continue to retain their entitlement to the supplement.

A special increase of 4 per cent is being made in the personal rates of disability and unemployment benefit. This special increase together with the general and priority rate increases provided for in the budget will mean that disability and unemployment benefit recipients will receive an overall increase of 10 per cent or £5.40 per week. In addition, to utilising the resources arising from the phasing out of pay related benefit, this special additional increase will cost £2.7 million in 1994. All recipients of disability benefit and unemployment benefit will benefit from this special increase. Less than half (45 per cent) of unemployment benefit recipients receive a pay related supplement.

It is not possible to indicate precisely the effect of these measures on an unemployed person with a family of 2 children at various income ranges on the basis of the information supplied by the Deputy. Persons or couples whose sole income is unemployment benefit will not be liable for tax as their total income would be below the relevant tax exemption limits. Entitlement to pay-related benefit is based on a person's reckonable earnings between £80 and £220 per week in a previous tax year and the rate of entitlement varies according to earnings.

The impact of taxation will similarly vary from case to case depending on the particular circumstances (including tax free allowances) of the individual taxpayer.