I move: "That the Bill be now read a Second Time."
I am very pleased to introduce the second of two Bills intended to implement the €874 million social welfare package announced in budget 2005. This sum represents a 40% increase of €244 million on the 2004 package of €630 million and brings the projected level of social welfare expenditure in 2005 to over €12.25 billion. That represents a 9% increase of €1 billion on the allocation for 2004. This level of expenditure is the highest ever on social welfare and is indicative of the Government's priority to protect and improve the living standards of social welfare recipients. It is a clear demonstration of this Government's commitment to addressing the needs of people with disabilities and their carers, children, the elderly, widowed persons, the unemployed, those who are parenting alone and many others who are disadvantaged, vulnerable or on the margins of society. It continues substantial year-on-year increases in social welfare spending, representing an increase of almost 60% in four years and double that which was spent in 1997.
The budget for my Department, at more than €12 billion, is the largest spending allocation of any Department. It means that for every €3 that will be spent by this Government in 2005, almost €1 will go in social welfare entitlements, benefits and supports. An estimated 970,000 people are expected to claim weekly social welfare payments this year. Almost 1.5 million people, including dependents, will benefit from these payments. That is two out of every five people in the State who are, in one way or another, receiving vital welfare supports.
Since this Government took up office, Ireland has changed dramatically and the facts speak for themselves. The number of people at work has increased to almost 1.9 million; the rate of unemployment has fallen dramatically from 10% to 4.3%, which is the lowest in the EU and among the lowest in the world; the number of low-paid removed from the tax net has increased and all those on the minimum wage will be completely taken of the income tax net this year; while spending on social welfare has more than doubled from €5.74 billion in 1997 to an expected €12.25 billion in 2005. Over the past decade, while gross average industrial earnings have increased by 71%, social welfare payments have improved by between 87% and 95% and by even more for larger families. Substantial improvements in the conditions for entitlement to a range of social welfare schemes and services have been implemented. New social welfare benefits such as the farm assist scheme, carer's benefit, the widowed parent grant and the respite care grant have been introduced and enhanced. The social welfare increases of budget 2005 range from more than 7% to over 10%, while inflation this year is expected to come in at 2.5%.
I could spend a long time quoting more facts and figures that confirm the pivotal role the Department plays in the lives of so many people and the great strides that have been made in just a few years. However, the Department of Social and Family Affairs is about more than statistics. The payments, benefits and supports that go directly to almost 1 million people are a weekly lifeline for many struggling to make ends meet. More often than not, the Department is the final safety net for those descending towards poverty, marginalisation and economic and social distress.
However, the Department is more than an efficient and effective administrative structure for processing and delivering State entitlements. It is above all else about people and it must be people centered. The response of the Department must always be to shape the welfare system to meet individual and family needs. That must be the guiding principle for the way my Department does its work. It will continue to react and respond speedily and sympathetically to all those who reach out to the welfare lifeline. It will not be guided only by rules and regulations that may sometimes blur the real purpose. Put simply, a one-size welfare system does not fit all. The Department is about the welfare and the overall well being of those who are caught in the daily struggle to make ends meet. Such people include the children at risk of poverty, the carers who look after those unable to care for themselves, older people, the unemployed and the many others who must be supported. We are now enjoying a new wave of economic growth and this time around the rising tide must lift those boats that are left behind.
I will now outline the main provisions of the Bill which amends both the Social Welfare (Consolidation) Act 1993, which is the principal Act, as well as the Pensions Act 1990. I propose making the following amendments to the social welfare code. In the area of child income support, the Government's policy is to concentrate resources on enhancing the child benefit scheme. Child benefit now accounts for over 66% of child income support, while in 1994 it constituted less than 30%. There are sound reasons for this policy. Child benefit is both neutral vis-à-vis the employment status of the parents of the child, and it does not contribute to poverty traps. As a universal payment, child benefit is not taxable, is not assessed as means for other secondary benefits and is payable to the primary carer, usually the mother. When account is taken of these aspects of payment, child benefit is a most effective child income support mechanism. Section 3 provides for increases in the monthly rates of child benefit as announced in budget 2005. The lower rate of benefit, payable in respect of each of the first two children, is being increased by €10 per month to €141.60. The rate for the third and each subsequent child is to increase by €12 per month to bring the rate from €165.30 to €177.30. The increases will come into effect from 1 April.
Disability benefit payment rates are determined in part by the level of the claimant's weekly earnings. Currently, where a person in receipt of long-term unemployment assistance becomes ill or unfit for work, he or she may qualify for only a reduced rate disability benefit as a consequence of having low or non-existent earnings during the governing contribution year. Section 4 of the Bill provides that in such cases a person may be eligible to receive disability benefit at the maximum rate where he or she satisfies the qualifying conditions and has paid a minimum of 260 social insurance contributions and 39 credited contributions in the governing contribution year. The section further provides that such customers shall be exempted from the requirement to have paid 13 of the required 39 contributions and to satisfy the prescribed earnings limit. The measures will take effect from the beginning of May.
Currently, where a person in receipt of injury benefit suffers a second injury and establishes entitlement to disablement benefit, the total amount payable is restricted to 100% of the disablement benefit rate. Section 5 provides for the abolition of the limit to permit payment of disablement benefit together with the appropriate rate of injury benefit. The measure will be effective from 2 May.
As the House knows, I am committed to the cause of carers. I set out in the budget process to recognise and support in a special way the contribution carers make to society. Carers provide a valued and valuable service and everyone in this House and society in general knows of the commitments and sacrifices involved. The package of measures I agreed with the Minister for Finance commits additional spending of close to €35 million to enhance supports for carers and to allow more of them to qualify for entitlements. The range of measures I propose includes an increase of €14 per week in carer's allowance and carer's benefit payments. The increase has been applied since January and was initially provided for in last year's Social Welfare Act. The annual respite care grant is to increase from €835 to €1,000 and will be received by almost 33,000 full-time carers this year. The respite care grant is to be extended to include irrespective of income all carers who provide full-time care subject to the conditions that they are not otherwise employed for more than ten hours per week, in receipt of an unemployment payment or signing for unemployment credits. The measure will result in the receipt of the grant by an estimated additional 9,200 full-time carers for the first time.
Section 7 of the Bill provides for the implementation of all respite care grant enhancements with effect from June this year. In recognition of the particular challenges faced by those carers who provide care for three or more people, the respite care grant will be paid in respect of each of their care recipients. The carer's package this year expands the income limits for carer's allowance by increasing the weekly means test income disregard by €20 to €270 for a single person and by €40 to €540 for a couple to allow all those earning an average industrial income to qualify. The measure will permit a couple with two children to earn up to €30,700 and receive the maximum rate of carer's allowance. The same couple will be able to earn up to €49,200 and receive the minimum rate of carer's allowance, free travel, the household benefits package of free schemes and the respite care grant. The improvements set out will result in the qualification of an additional 1,000 new carers for payment while 2,400 existing carers currently in receipt of a reduced payment will receive an increase in their weekly carer's allowance payment.
The earnings threshold for carer's benefit recipients who work for up to ten hours per week outside the home is to increase by €120 to €270 per week. The revised earnings disregard, which will be provided for in regulations, will be effective from April. In addition, I intend to ease somewhat the qualification conditions for entitlement to carer's benefit to extend entitlement to certain seasonal and atypical workers who have difficulty meeting the current employment related conditions. While it was originally proposed to remove the conditions, this was not considered on further examination to constitute the best way forward. To remove the conditions would be to break the link with employment, which was not the original intention. Given the issue's complexity, I do not want to make changes with the potential to cut across proposals to accommodate certain patterns of care sharing which my Department is currently examining. I have decided, therefore, to revisit section 6 of the Bill and propose to bring forward an amendment to it on Committee or Report Stage.
I assure the House that my intention is to make carer's benefit more accessible to those who work. The measures set out in the 2005 budget and previous initiatives will go some way towards responding to the specific needs of carers. There will be further opportunities to address the issues which face carers and I hope to take them. I will continue to meet with and listen to carers to further develop the entitlements and supports which best assist them in the valuable work they do. While a great deal has been done, we must acknowledge that there is a lot more which should and, I assure the House, will be done to recognise and reward carers.
With some exceptions, disability allowance is not generally payable to a person who resides in an institution. Section 8 of the Bill provides for the introduction of a means-tested payment of up to €35 per week for persons currently excluded from the disability allowance scheme by virtue of their residence in an institution. It is estimated that some 2,400 people will benefit from the provision which will be effective from 1 June.
Section 9 of the Bill provides that the amount of capital disregarded for means test purposes for all schemes except supplementary welfare allowance will be increased from €12,694.38 to €20,000. This is an increase of over €7,300. The improvement is being introduced following an examination of current arrangements for the assessment of capital and property, especially in so far as they apply to special savings investment accounts, or SSIAs. The enhanced disregard will apply to all capital regardless of whether it is held in an SSIA or credit union, post office or other account with a bank or other financial institution. The increased disregard will provide, for example, that a single non-contributory pensioner with no other means can hold capital of up to €28,000 while continuing to qualify for a pension at the maximum rate. A single pensioner will be able to hold capital of up to €76,000 while continuing to qualify for a minimum pension. The figures are double in the case of a pensioner couple.
SSIAs were introduced in 2001 as part of an overall Government strategy to encourage a regular savings culture among the population in general. The new measures are consistent with this strategy and are designed to ensure that social welfare means-testing procedures do not act as a disincentive to claimants to become savers or harshly penalise those who have been regular savers in the past. The provisions will take effect from early April in respect of carer's allowance and from early June for other relevant means-tested schemes.
Section 10 provides for an entitlement to island allowance for those in receipt of certain payments from other EU member states which correspond to the social welfare payments with which island allowance is normally payable. The measure will take effect on the enactment of the Bill. Section 11 standardises the transitional arrangements introduced following the alignment of the income tax and calendar years in 2001 for determining entitlement to certain insurance-based social welfare schemes. Section 11 confirms that the second last complete contribution year will continue to be used to determine entitlement to short-term benefit schemes such as those for unemployment and disability benefit. Sections 12 and 13 provide for the same treatment which applies to unemployment benefit, unemployment assistance and farm assist payments for the community employment scheme for the purposes of employment under the rural social scheme operating under the aegis of the Minister for Community, Rural and Gaeltacht Affairs.
As I mentioned at the outset, the Bill makes a number of miscellaneous amendments to the social welfare code. The amendments are contained in sections 14 to 22. They include a technical amendment which provides that only one carer's benefit or carer's allowance payment may be made in any week in respect of the full-time care of a care recipient. The Mental Health Commission will be added to the list of specified bodies authorised by legislation to use a personal public service number as a unique public service identifier. According to another amendment, bereavement grants may be awarded and six-weeks-after-death payment arrangements applied without the need for referral to a deciding officer.
The Bill amends the timeframe for initiating summary prosecution proceedings in cases of fraud and abuse and modifies payment arrangements to allow orphan's payment to be made directly to an orphan aged over 18 years where he or she is not residing with a guardian. A further amendment allows for the defining in regulations of the types of employment from which a portion of earnings may be disregarded in the assessment of entitlement to rent or mortgage interest supplements. The Bill further provides that the approach to recovery of social welfare overpayments will be prescribed in regulations and the alignment of the residency conditions attaching to the home-maker's scheme, in so far as it applies to people providing care to ill or elderly persons, with those which apply to carer's allowance, carer's benefit and respite care grant schemes.
The Bill also amends the text of certain provisions of the principal Act in advance of the publication of the social welfare (consolidation) Bill 2005 which is being prepared. The amendments will reflect the changes effected by the Health Act 2004 by providing in section 23 and Schedule 1 for changes consequent on the dissolution of the health boards and the establishment of the Health Service Executive.
Section 24 and Schedule 2 provide for the substitution of Schedule 3 to the principal Act with the reorganised accessible version of the text. This Schedule contains the rules governing the calculation of means. Section 25 and Schedule 3 provide for further amendments required on foot of the revised Schedule. Section 26 and Schedules 4 and 5 provide for a number of technical and textual amendments to the text of the principal Act required in advance of consolidation of the Social Welfare Acts.
I regard the area of occupational and supplementary pensions as one of the key challenges of my ministry. This is my first time to address the House with regard to this aspect of my brief in the context of a Bill, and therefore I will briefly set out some views. Regarding occupational pension cover, my philosophy is that the State has a responsibility to encourage people to make pension provision. It also has a responsibility to step in and fill gaps where they exist. There are gaps: only 59% of workers over the age of 30 have supplementary pensions, despite our target of 70%; only 43% of women in the State have pensions; and people in their twenties taking up jobs generally make no pension provision.
These are fundamental issues to which I, the Government and the House must turn our minds. Pension coverage and adequacy of cover is a multifaceted problem and there is no single solution. These challenges were recognised by those involved in the national pensions policy initiative and progress has been made under the strategy pursued since. However, I am concerned at the pace of change. I have therefore asked the Pensions Board to bring forward completion of the review of the current strategy required under the Pensions Act from the originally agreed date of September 2006 to June 2005. Getting a balanced strategy is a real challenge and I will keep the House apprised of developments.
The measures I introduced today provide for the implementation of a major EU directive on pensions and measures to address the very real problems experienced by defined benefit occupational pension schemes.
EU Council Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision is generally referred to as the IORPs directive. The directive sets out a framework for the operation and supervision of occupational pension schemes in all member states and will facilitate pan-European pension plans. In Ireland, the Pensions Act 1990 already provides for much of that framework and requires only a small number of amendments to ensure compliance, including the insertion of a section regulating cross-Border activity. However, there are three issues of change that are important to note.
The first relates to emerging opportunities for Ireland in the context of pan-European pensions under this directive. A task force, on which my Department was represented, was established under the auspices of the IFSC clearing house group to consider how Ireland might best respond to these emerging opportunities. That group recommended Ireland position itself as a domicile of choice for such pan-European pensions schemes while recognising that this is a medium-term objective. One of my overriding concerns in transposing this directive is to ensure it is transposed in a way that facilitates that aim and, as late as yesterday, I had discussions with the chairperson of the group as to how best we can progress this agenda. In Ireland, occupational pension schemes have traditionally been trust-based vehicles and, in the months following enactment of this Bill, I intend to engage with interested parties to establish whether there are other suitable pension arrangements that may facilitate those considering pan-European schemes. For the moment, institutions establishing in Ireland will have to be on a trust basis.
The second issue relates to Article 18 of the directive that deals with investment rules. Under that article, borrowing by pension schemes is prohibited other than for liquidity purposes and on a temporary basis. Section 36 implements this requirement. The directive allows for schemes with less than 100 members to be exempted from this requirement. However, I took the view that if this is a prudent rule for some schemes it is prudent for all, an approach supported by the Pensions Board. Equally, the borrowing prohibition cannot be seen in isolation from the investment rules that relate, inter alia, to a requirement to ensure assets are invested predominantly on regulated markets and are properly diversified.
The third issue relates to the requirement that those who run pension schemes must be of good repute and must possess appropriate qualifications and experience. To deal with this aspect of the directive, section 34 sets out the circumstances under which a person must not act as trustee of a scheme, such as having a conviction for dishonesty or being prohibited from acting as a director of a company. The requirements with regard to qualifications and experience will be set out in regulations. The Pensions Board will be empowered to make a determination as to whether a trustee satisfies these requirements and a determination that they do not have the effect of removing the person as a trustee. The section includes appropriate appeal mechanisms.
The other aspect of the Pensions Act amendments relate to recommendations made to me by the Pensions Board on foot of a review of the funding standard for defined benefit schemes. In 2003, my predecessor, the Minister, Deputy Coughlan, introduced short-term measures designed to alleviate the funding crisis in pension schemes. The review recommends retention of these provisions, which it found largely successful. However, what has emerged clearly since these provisions were introduced is that the liability side of pension funds is also under pressure. Improved longevity and lower interest rates are just some of the trends increasing these liabilities. I have therefore provided that an extension may also be granted with regard to difficulties on the liability side and details of this measure will be specified in regulations. These measures, being introduced after extensive consultation, achieve the required balance between member protection and the encouragement of continued pension provision.
Other amendments to the Pensions Act include: a change to section 7(a ) to ensure that where guidance issued by the Society of Actuaries in Ireland is specified in regulations made under that section, it may not be altered by the society without ministerial consent; an amendment to section 18 to allow the board to require certain documents or seek certain information in the context of an investigation of a scheme; a requirement that trustee consent should always be required where early retirement is being granted in the case of a defined benefit scheme that is under-funded; an increase, from €4,000 to €10,000, in the transfer value in respect of which a certificate comparing potential benefits from the occupational pension scheme to those from the PRSA will not be required; and an increase from 15 days to 30 days in the cooling off period required when taking out a PRSA contract, which is in line with the period provided for with regard to distance marketing of consumer financial services.
This Social Welfare and Pensions Bill builds further on the development of social inclusion measures adopted by the Government in recent years. It safeguards the living standards of those who rely on social welfare income and other supports and prioritises the allocation of resources in favour of those most in need. My priority in this Bill is to make significant progress in delivering on social welfare commitments contained in the programme for government, Sustaining Progress and the national action plan against poverty and social exclusion.
Resources will be targeted on helping those most in need in order, not alone to raise their standard of living, but to ensure that everyone is a valued citizen capable of making his or her own individual contribution to society regardless of his or her circumstances.
I commend the Bill to the House and look forward to a constructive debate.
