The Social Welfare Bill also provides for changes to the jobseeker's allowance which are designed to incentivise 18 and 19 year old jobseekers to avail of education and training opportunities and avoid becoming welfare dependent from a young age.
The rate of jobseeker's allowance that will be paid to new claimants under the age of 20 is being reduced from €204.30 per week to €100 per week, with effect from the first week of May 2009. When a person on the reduced rate of jobseeker's allowance reaches the age of 20, if he or she still qualifies for the allowance, he or she will be entitled to the full adult rate. The full adult rate of the relevant scheme will be paid to 18 and 19 year olds who participate in a full-time Youthreach course for young early school leavers or a full-time course in a senior Traveller training centre or qualify for the back to education allowance for pursuing a full-time second level course or post-leaving certificate course. To qualify for the back to education allowance, they must have been out of formal education for at least two years and been in receipt of a jobseeker's payment for at least three months; or participate in a full-time FÁS training course. They can also participate on a PLC course or third level course on the same basis as any other young person and may qualify for a third level grant. This measure also applies to new claimants of supplementary welfare allowance who are under 20 years of age.
The numbers affected will be small at first as it will only affect new applicants from the first week in May. The numbers affected will rise on a weekly basis. Based on current figures, and an expected overall live register average for 2009 of 440,000, we expect a weekly average of 5,000 18 and 19 year olds to be affected by this change in 2009 and a weekly average of 9,000 to be affected by it in 2010.
These changes have the potential to generate savings of €12 million in 2009 and €26 million in 2010. If take up of the education and training opportunities is high, fewer savings will be achieved in the short term but the long-term savings generated by helping young people to avoid welfare dependency would be expected to be significant.
The qualified adult rate for a spouse or partner payable in these cases will also be reduced to €100 per week. This will mean that a couple, where the primary payment is to the 18 and 19 year old, will get a total of €200 per week, down from €339.90.
It is important to note that the following people will not be affected: existing claimants, young people with dependent children, those who qualify for the jobseeker's benefit and people transferring to jobseeker's allowance immediately after exhausting their entitlement to jobseeker's benefit or those transferring from the disability allowance directly to jobseeker's allowance, thereby avoiding their being faced with a large income drop.
Also, where an existing jobseeker's allowance claimant under age 20 being paid €204.30 gets a job and leaves jobseeker's allowance, but loses that job and ends up back on jobseeker's allowance within 12 months, he will get €204.30, rather than €100 a week. If this was not done, there would be little incentive for those currently on jobseeker's allowance to take up offers of work. I am conscious that 18 and 19 year olds leaving the care of the Health Service Executive might be particularly vulnerable to these reductions in the rate of jobseeker's allowance and I propose to make an amendment on Committee Stage to ensure that the additional needs of this group are protected.
The rationale for this change is straightforward. Receiving the full adult rate of a jobseeker's payment at 18 years of age without a strong financial incentive to engage in education or training can lead to welfare dependency from an early age. While many young people with low levels of education and training were able to get work in construction and other areas when the economy was doing well, they are likely to find it much harder to get work over the next few years. If they do not improve their skills, they are at risk of becoming long-term unemployed from a young age. They are considered to be at a greater risk of having difficulty securing a job than older jobseekers who might have low skills but at least have some work experience. Therefore, it is considered necessary to provide 18 and 19 year old jobseekers with a strong financial incentive to engage in education or training or to take up employment that pays more than €100 per week.
The fact that 18 and 19 year olds who participate in a FÁS or similar training or education course will get the full rate of the relevant payment, for example, the FÁS training allowance, community employment rate or back to education allowance, instead of €100 on jobseeker's allowance should be a major incentive for such participation.
Another reason for making this change is the experience we have of a recent pilot initiative. FÁS and the Department of Social and Family Affairs are currently running a pilot exercise in Clondalkin and Letterkenny for all 18 and 19 year olds who wish to sign on the live register for the first time. Instead of getting jobseeker's allowance, they will be immediately placed on a six-week programme designed to improve their chances of securing employment, in return for which they receive the normal FÁS training allowance, which is slightly more than jobseeker's allowance. Failure to attend means they receive no payment.
Initial feedback showed that many candidates did not wish to participate, preferring to get almost the same money without having to attend a course, and consequently they were sometimes disruptive and difficult to manage. This obstacle of a lack of a substantial financial incentive is now being addressed with the introduction of the reduced rate of jobseeker's allowance for those under 20.
It is also questionable that 18 and 19 year olds without child dependants need an income of €204.30 per week and the current income differential between young jobseekers and young third level students can be considered to be unjustifiable. The maximum amount of third level grant, including the special top-up grant, paid to young people from the poorest families whose family home is near their college is just €2,680. The maximum amount of third level grant, including the special top-up grant, paid to young people from the poorest families whose family home is near their college is just €2,680. If such young people have to live away from home to go to college, the maximum they can get is €6,690. The current rate of jobseeker's assistance which is currently paid to 18 and 19 year olds amounts to €10,624 per annum, while the reduced rate of €100 per week amounts to €5,200 per annum, which is still almost twice the third level grant rate paid to young people from the poorest families whose family home is near their college. Overall, I believe this change will incentivise 18 and 19 year olds to take up education and training opportunities and this will leave them in a much better position in the long term.
As Deputies will be aware, the budget contained a major focus on helping people to stay in employment and to get back to work, with initiatives such as a €100 million enterprise stabilisation fund, a pilot training scheme for workers on a three day week and increased training places both through FÁS and in the education sector. These will be enhanced by improvements in the welfare supports. The back to education allowance scheme allows jobseekers who qualify for it to return to education and maintain their welfare payment. The number of recipients of the allowance has increased significantly in recent years — from 5,247 in 2004 to 7,952 in 2008.
The Government is determined to maximise the potential of this scheme, so improvements provided for in this Bill are outlined as follows. Jobseekers who have been out of formal education for at least two years will now be able to access the second level back to education allowance, BTEA, once they have been in receipt of jobseeker's allowance or benefit for at least three months. That is down from six months. Earlier access is also being provided to the BTEA third level scheme. Currently, there is a general requirement that a person be receiving a jobseeker's payment for 12 months before he or she can access the scheme. They can access it at nine months if this is recommended by a FÁS employment services officer. This is now being extended so that they will also be able to access it at nine months if this is recommended by one of the facilitators of the Department of Social and Family Affairs.
In order to respond effectively to the growing numbers on the live register, the changing profile of jobseekers generally and the current employment situation, it has been decided to refocus the existing resources from the back to work schemes on helping people into self-employment. The intention is to support enterprises that will, in due course, create further employment opportunities. To this end, the employee strand of the back to work allowance will be closed to new applicants and the duration of the enterprise scheme will now be up to two years, as distinct from four years. These resources will be used to support significant improvements in the back to work enterprise allowance, BTWEA.
Currently, to qualify for BTWEA a person must be in receipt of a jobseeker's payment for 24 months. Access will now be available much earlier under two distinct BTWEA schemes. First, people who are entitled to jobseeker's benefit and have been awarded statutory redundancy or have been employees paying full rate PRSI contributions for at least two years prior to their claim to jobseeker's benefit can access a shorter back to work enterprise allowance scheme immediately. This new scheme will be payable for the duration of their jobseeker's benefit entitlement while they are establishing their enterprise, for example, for a maximum of either nine or 12 months. The key feature is that they can access it immediately. Second, access to the general BTWEA scheme is also being improved. It will now be possible to access the BTWEA at 12 months, instead of 24 months, provided a person has an underlying entitlement to jobseeker's allowance.
Further flexibilities are also being introduced into the scheme, including allowing a person who has previously availed of the BTWEA scheme and exhausted his or her entitlement to participate a second time after a period of at least five years has elapsed. The overall purpose of the new arrangements is to financially assist those on the live register to set up a business almost immediately when they become unemployed, thereby ensuring that their knowledge, skills and expertise are fully utilised at an early stage and thereby promoting enterprise and employment in the economy.
In addition to the areas already outlined, the Bill also provides for changes in PRSI and other areas. I will outline the main provisions. Sections 3 and 4 of the Bill provide for adjustments to PRSI as announced in the budget, increasing the earnings ceiling applicable to employees and optional contributors from €52,000 to €75,036 per annum. Section 5 provides for an amendment to customer activation and information profiling for jobseeker's benefit. It also provides for a new short-term support scheme under the back to work enterprise allowance scheme for a person who qualifies for jobseeker's benefit or who qualifies for statutory redundancy.
Section 6 provides for an amendment to customer activation and information profiling for jobseeker's allowance. It also provides for an amendment to the rate of jobseeker's allowance payable to a person aged 18 and 19 years where that person does not have a qualified child. This section also provides for a proportional adjustment in respect of the amount payable to a person in this category in respect of his or her qualified adult. Section 7 provides for an amendment to the provisions governing supplementary allowance and rent supplement by providing for a revised rate of payment to persons under the age of 20 years, where that person does not have a qualified child, and incorporating in primary legislation circumstances in which the supplement may be payable.
Section 8 provides for amendments to the early child care supplement by reducing the annual amount of the payment to €498 and a consequent reduction in the monthly rate to €41.50 from 1 May. This section further provides for the abolition of the supplement from 1 January 2010. Section 9 provides for the making of regulations setting out the information to be provided by claimants when making a claim for benefit. Section 10 provides for an amendment to the domiciliary care allowance scheme to facilitate payment of up to six months arrears in the case of a late claim. This is in line with recent practice when the scheme was administered by the Health Service Executive. This scheme was transferred to the Department of Social and Family Affairs in April 2009.
Section 11 provides for revised rates of payment for jobseeker's allowance and supplementary welfare allowance as provided for in sections 6 and 7. Section 12 amends the Health Contributions Act 1979, by providing for an increase in the rate of the contribution and lowering the earnings threshold. This section also provides for the aggregation of earnings, emoluments and income for the purpose of calculation of contribution and adjustment to take account of aggregate calculations.
Given the very short timescale involved in bringing this Bill to the House, there are a number of areas where legislative changes are considered necessary but which could not be finalised in time to be included in the Bill as initially presented to the House. I will, therefore, table several amendments to the Bill on Committee Stage. First, I am very conscious of the impact the current global recession is having on the value of Irish pension funds. It is estimated that in excess of 90% of defined benefits pension schemes are in deficit. This is presenting trustees of pension schemes with significant challenges in their efforts to optimise the benefits for pension scheme members.
Deputies will be aware that the Government put a number of measures in place last December to ease the funding pressures on these schemes. While these measures were helpful in the short term, I wish to signal my intention to bring forward a number of further measures which will support the job of the trustees of these schemes in meeting the challenges that confront them and provide greater flexibility and regulatory support to improve the affordability and viability of defined benefit pension schemes. I will also be amending the National Treasury Management Act.
I have already mentioned that I propose to introduce an amendment to protect 18 and 19 year olds leaving the care of the Health Service Executive to ensure that their additional needs can be met. I will also be making a technical amendment to section 7 dealing with the supplementary welfare allowance. It may also be necessary to make some technical amendments to section 12 dealing with amendments to the Health Contributions Act. I will also be introducing an amendment to the Financial Emergency Measures in the Public Interest Act 2009 to provide for the changes announced in the supplementary budget regarding the public service pension levy.
Chun críoch, the main changes provided for in this Bill relate to improvements in the back to education and back to work schemes, measures designed to generate savings in respect of the rent supplement and the early child care supplement and an increase in the PRSI ceiling. The Bill will also provide a legislative basis for the changes being made to the jobseeker's allowance to incentivise 18 and 19 year old jobseekers to avail of education and training opportunities and try to avoid them becoming welfare dependent from a young age.
It is important for each of the savings measures to be considered in the context of the overall economic situation and the need for immediate action to reduce the major gap between public income and expenditure. It is also important to note that while the budget included measures designed to reduce expenditure on certain welfare schemes by €300 million in 2009, provision has been made for an overall increase of 20% in the welfare budget next year — bringing it to almost €21.3 billion. This Bill is necessary to implement some of the changes announced on budget day, while other changes do not require legislation. In deciding on where to achieve savings in welfare expenditure, there were no easy options but, with both borrowing and taxes having to increase to pay the rising welfare bill next year, choices had to be made.
The harsh reality is that if some cuts were not made now, much tougher ones would have to be made later. It is important that all of us as public representatives are up-front with the people about the stark choices that are required at this time. The changes in this Bill are necessary and some of them are very positive and have an incentivising effect. I hope we can have an informed debate about them over the course of the next two days.
