Dáil Éireann debate -
Thursday, 15 Jun 2000

Vol. 521 No. 3

Adjournment Debate. - Social Welfare Increases.

Mr. Broughan

All sides of the House recognise that in 2000 there will be no increases in social welfare benefit or social welfare assistance. It is clear that the rates of inflation which the CPI disclosed yesterday show that the increases across the assistance range, from unemployment assistance through to the carer's allowance, survivor's pensions etc., have been wiped out. Indeed, we face the awful prospect of an inflation rate of up to 7% this year and a real decrease in social welfare rates.

Yesterday when I heard the Minister for Finance, Deputy McCreevy, on the radio, I thought he displayed a breath-taking arrogance in this regard when he stated that unfortunately while it would be possible to meet the social partners regarding wage rates and a review of the Programme for Prosperity and Fairness, the 1.5 million people dependent completely on social welfare must wait for budget 2001. That means there will be no change until May 2001 or certainly mid-April 2001. Therefore, for the next ten months, with an inflation rate of 5.2%, which is rising, the Minister, the Minister for Social, Community and Family Affairs, Deputy Dermot Ahern, and their colleagues are saying that there will be no further increases whatsoever in social welfare.

The CPI May figure of 5.2% is certainly bad news for the poorest segments of society. The prospect of inflation of 6% or 7% with an actual decrease in social welfare is a horrendous prospect. It is probably the most serious issue to have been raised today in the House.

The Taoiseach and the Minister for Social, Community and Family Affairs, Deputy Dermot Ahern, indicated that they can go back to the social partners regarding wage rises, but wage rises are averaging 8% or 9% while there is no way in which most assistance schemes will be able to catch up on the inflation rate. The key problem is that in the PPF there is no review mechanism for social welfare and nothing can be done, as the Minister, Deputy McCreevy, told us.

The poor, in effect, can eat cake. According to the CPI figures, housing costs are rising at 2.2% per month, tobacco at 1.4%, food at 1.3%, drink at 1.2%, transport at 8.3%, fuel and light at 7.1% and services and related expenditure at 6.4% – that is an appalling figure for anybody who can expect an increase of only 5.2%. Of course the figures are on a year on year basis.

Some of the senior constituents in Tipperary, where I have spent a significant time over the past few weeks, reminded me that the cost of a sliced pan has risen by 6p or 7p this year. They asked why politicians were placing emphasis on the increase in the price of drink when the price of bread, the most fundamental food, is rising dramatically. As Dr. Michael Smurfit noted a few years ago, the poorest people in society spend a far higher proportion of their income on food and basic services, and the types of food which have been affected by the CPI rises include poultry, fresh fruit and vegetables. In all those areas the Minister can expect that people must change to poorer quality food, and the impact on the poorest in society will be dramatic. Likewise the rising cost of transport will have a major impact on those 1.5 million people.

Although the House has not been told, two days ago we received information through the Irish Independent regarding the levels of child poverty in society. According to an article in that newspaper, one in six, that is nearly 17%, of Irish children live in poverty and only the UK, Turkey, Italy and Mexico have a worse child poverty rate than Ireland. In that context this year the Minister is not prepared to give any further increases across the range of social welfare schemes. Basically the Minister granted an increase of £4. For example, unemployment assistance rose from £73.50 to £77.50, carer's received £80.50 instead of £76.50, blind pensioners received £77.50 instead of £73.50 etc.

It seems it is critical that the Minister come into the House with a Finance (No. 2) Bill and a new social welfare Bill. The constituents of the Leas-Cheann Comhairle and the Minister of State at the Department of Finance, Deputy Cullen, in Waterford, and my constituents are most dependent on social welfare. We urgently need a new social welfare Bill with adequate increases. The Labour Party asked for an increase of £10 per week and the Minister for Social, Community and Family Affairs, Deputy Dermot Ahern, said "No".

Minister of State at the Department of Finance (Mr. Cullen)

I listened carefully to what Deputy Broughan said. It is a pity he did not urge his colleagues the way he is urging me when they were in Government. Its record bears no comparison with what the Government has done in the social welfare area. To come in here in this way begs a few questions. The figures published by the CSO yesterday showed that inflation stood at 5.2% in May. This is above our expectations and above the forecasts of most other independent commentators and forecasters. The latest position is clearly disappointing.

In the Minister's financial statement to the House last December he outlined a range of social welfare expenditure increases that continued to build upon the social inclusion policy of the Government since it assumed office. It will be recalled that budget 2000 contained full year social welfare improvements costing in the region of £400 million as compared to £215 million in the 1997 budget. Total spending on social welfare in the current year is now almost £5.4 billion or 20% above the 1997 level.

In the Minister's previous two budgets it is worth noting that the general social welfare rate increases were in excess of 4% per annum, substantially above the inflation rate of approximately 2% per annum. This was particularly the case for old age pension recipients who enjoyed increases in the order of 6% to 8% in each year.

In the 2000 budget, provision was made for further substantial increases in all social welfare payments of approximately 5.5% for general rates and 8% to 9% in respect of social welfare old age pensions. Furthermore, the Minister announced improvements in the level of the qualified adult allowance payments such that they will increase from their level of roughly 60% of the personal rate to approximately 70% over three years. As the first stage in this increase, the 2000 budget provided for a general increase in qualified adult allowances of £3.80 per week or 9%, while qualified adult allowance increases in respect of social welfare old age pensions were £4.70 per week or approximately 8%.

It will be recalled that the main themes of the social welfare package in the last three budgets were to: secure the future of our older people; improve the living standards of everybody on social welfare; give particular support to people with disabilities and carers; and support families and communities, which the Government achieved in an extraordinary way.

The action programme promised that the old age contributory pensions would reach £100 per week within the lifetime of the Government. Over our first two budgets in 1998 and 1999 we provided record increases, bringing us half way to reaching the figure of £100 in just two years. In the review of the action programme the Government promised to bring forward that target for contributory old age pensioners and to extend the commitment to all social welfare pensions for older people. We are well on target to meeting this.

It is clear from these increases, allied to various other improvements such as increased child benefit, improvements in the system of capital assessment and the earlier effective date of payments which have now been brought forward to the month of May, that social welfare recipients continue to enjoy real improvements in their standard of living.

More generally, the Government is concerned about the recent increase in inflation and shares the concerns expressed by the Irish Congress of Trade Unions, the IBEC and the other social partners. The Government is fully committed to the partnership process which has brought such enormous benefits to the country. We intend to ensure that this process remains intact. We will shortly meet the social partners to discuss the situation.

Appropriate responses, however, need to take account of the reasons for the increase in inflation. These include: higher oil prices, the weak euro, higher excise duties on tobacco, increases in mortgage interest rates and higher services prices. Clearly, a number of these factors are outside our control, for example, the value of the euro or the price of oil on international markets. Over time, inflation will start to ease back as some of these factors become less important. The Government is determined that our economic success continues so that we can ensure we have the resources to look after the less well-off in the community. Therefore, in areas where we have influence we are determined to take appropriate action against inflation.

As regards price pressures in the housing market, we announced a package of measures today. These measures will complement the existing policies which are having some success. I hope they will improve the housing market.

In addition, it is Government's view that some of the increase in prices, most notably in the services sector, is partly the result of anti-competitive practices. The ongoing increase in the price of alcoholic drinks is a clear example of this. The Government is committed to increasing competition and tackling anti-competitive practices.

The Dáil adjourned at 5.20 p.m. until 2.30 p.m. on Tuesday, 20 June 2000.