The forthcoming budget is being framed at a very difficult time for families. These are particularly tough times for the more than 400,000 people on the live register — some of whom are working greatly reduced hours and some of whom have lost their jobs. Many of them have long years of employment behind them and never thought that they would be out of work. Many are young graduates who worked hard to get the points for college and to get good qualifications in the expectation of starting their careers immediately.
As Minister for Social and Family Affairs, I am acutely conscious of the needs of the 412,407 people who were on the live register at the end of October 2009. I also fully understand that a wide range of other groups — such as people with disabilities, carers and pensioners — depend on the welfare budget for vital support. I assure the House that this Government has done and will continue to do the very best it can to protect the most vulnerable people in society.
Over the past decade there have been very significant increases in welfare payments. The State contributory pension has increased from €113 to more than €230 per week; the weekly rate of jobseeker's allowance has been raised from €93 to €204 per week; child benefit has increased from €44 to €166 per month. We have provided increases in welfare rates that were far in excess of increases in both prices and wages. Even throughout the economic difficulties of the past two years, the Government has done its best to prioritise social welfare. The October 2008 budget provided for increases of between 3% and 3.8% in the basic payment rates at a time when inflation for 2009 was expected to be 2.5% and in reality, prices have dropped considerably this year. By September 2009, prices — as measured by the consumer price index — had fallen by 6.5% and are now forecast to drop by an average of between 4% and 5% for the year. I appreciate it is important to consider not just the overall change in the consumer price index but the impact this could have on individual groups. To that end, the Department of Finance has carried out a technical analysis which suggests that between September 2008 and September 2009, the CPI fell by approximately 3.25% for retired households; 5.75% for unemployed households; and 7.5% for working households. Prices fell by about 7.5% for the highest income decile and 5.25% for the lowest income decile. Therefore, while decreases in the cost of items like mortgages and cars would naturally have had a greater impact on higher income families, the overall cost of living has also dropped significantly for pensioners, for the unemployed and for low income households in general.
In framing the April supplementary budget, very tough decisions had to be made across the whole range of Government expenditure. In that context, the provision of €21.3 billion for social welfare services in 2009 — 20% more than the amount spent in 2008 — was a clear demonstration of our commitment to protecting the most vulnerable people in society. Tax rates and borrowing had to be increased to fund this extra expenditure on social welfare. We know from the pre-budget outlook that if we do nothing next year, just to cater for the increased numbers under all the various headings, that budget will go well beyond €22,000 million next year. Unfortunately, that is not a sustainable position.
In framing next month's budget, the Government is facing very difficult choices. We know we must reduce expenditure by €4 billion next year but we also know that there is no easy or pain free way of doing this. Social welfare spending makes up the largest single block of Exchequer gross current voted expenditure, accounting for 37% of the total, at just over €21 billion this year. Public pay and pensions, at €19.8 billion, accounts for 35%, while other programme expenditure, not including pay, at €15.8 billion, accounts for the remaining 28%. The scale of the savings required from public expenditure as a whole means that some reductions will have to be made in the social welfare area.
I appreciate that any decrease in welfare spending may be hard for people to cope with. However, if the Government does not take steps now to reduce overall public expenditure and restore stability to the public finances, we risk making the economic situation far worse for everyone, including welfare recipients, in the long term. It is clear that excessive borrowing and an unsustainable increase in the national debt will hamper our ability to fund social services, including welfare, in the future. We must find an appropriate balance between protecting the most vulnerable people in the short term and taking necessary action to avoid prolonging our country's current economic difficulties. To that end, I assure Deputies that our deliberations on the welfare budget are not just being informed by analysis and proposals from groups such as the Commission on Taxation, the McCarthy group, the OECD or the ESRI. They are also being influenced by the understanding that each of us has -not just as Ministers but also as constituency TDs — of the real difficulties facing families at this time.
As Minister for Social and Family Affairs, I have met a wide variety of groups recently to listen to their views about the forthcoming budget. The very successful pre-budget forum attended by nearly 30 different groups gave them an opportunity to voice their concerns and to give their views on the budget. I have also met separately major groups representing national interests such as the St. Vincent de Paul Society, the Irish National Organisation for the Unemployed, the Disability Stakeholder Group, the National Women's Council, Accord, the Carers Association and the Family Support Agency Network. Each has genuine concerns about the needs of the people they represent and genuine worries about the future. I assure Deputies that the views of these and other groups have informed my Department's consideration of potential budget measures.
The Government has not yet made a final decision on the welfare budget and I would welcome any suggestions from Deputies as to how expenditure by the Department of Social and Family Affairs could be reduced, with a view to protecting social services in the longer term. The scale of the current crisis demands much from us as public representatives. It demands that Government and Opposition Members put aside any concerns about political popularity and be frank and open with people about the choices that must be made. Pretending to be all things to all men will not help to get this country back on track.
The Fine Gael spokesperson on finance stated earlier in this debate that we cannot leave the social welfare budget immune. However, he has so far refused to set out any proposals that deliver significant savings in welfare spending. I look forward to genuine engagement and to hearing real proposals, not empty rhetoric. That is what the people deserve at this difficult time.
Child benefit is one area where there are proposals in the public domain. The rates of child benefit have increased significantly since 2001 — having trebled for the first two children and increased by more than 185% for the third and subsequent children. Overall expenditure on the scheme grew from just under €965 million in 2001 to nearly €2.5 billion in 2008 and this year approximately 12% of all social welfare spending will go on child benefit.
The Commission on Taxation recommended in principle that the payment be taxed, while the McCarthy group recommended an across the board cut in child benefit payment rates. The issues involved in either taxing or means-testing the payment for everyone are complex. For a start, we would have to determine the household income of all 600,000 families who currently receive the payment. While the household income of married couples who are jointly assessed by the Revenue would be readily available, the joint income of cohabiting couples would be much harder to determine. I am conscious that child benefit payment has made a significant contribution towards reducing child poverty. I am also conscious of those young working couples who are stretched with mortgages and with difficulties with employment and who perhaps are not on social welfare but whom also have great need of their child benefit payment. The Government is still considering the potential options and no final decision has been made. I am trying to find the fairest way of achieving savings while protecting those on low incomes as much as possible and not penalising any group too much. I appreciate the value of that money to very many people. To reassure people, I reiterate that no final decision has been made. I look forward to hearing the views of other groups who have yet to speak.
The best way to reduce overall spending on welfare is to keep as many people as possible in work and get as many as possible back to work. To that end, the Government has focused increasingly in the past two years on labour market activation measures. My Department is co-operating well with the Department of Enterprise, Trade and Employment with initiatives such as the back to education allowance and the back to work enterprise allowance. New programmes such as the short-term enterprise allowance and a work placement scheme, which are specifically designed to meet emerging needs in the current environment, have been introduced. I assure the House that the Government will do all it can to support employment. We will do all in our power to ensure that every last cent of taxpayers' money is spent as efficiently and effectively as possible. However, we must also act now to avoid excessive borrowing and get the public finances back on track in the interests of everyone, including those dependent on the welfare system.
