The primary object of this Bill is to provide for the implementation of the proposals for increases in social welfare payments and other changes in social welfare schemes announced in the budget. It also contains a number of other provisions affecting the social welfare code. Provision is made across the board for increases of 10 per cent in short-term benefits and 12 per cent in long-term benefits. These increases will take effect from the end of June. There has been some criticism of the fact that the increases will not take place earlier. I would much prefer to be able to come to the House with a Bill providing for increases not alone from an earlier date but also much better increases. The Government, however, find themselves in a very difficult financial position. We have been going through a period of prolonged recession, minimal economic growth and increasing unemployment. This all adds up to financial problems of the most difficult kind. As Minister for Social Welfare I am particularly affected by this situation. More people are unemployed, resources are limited and the high inflation rates of recent years have added immeasurably to the problem of providing and maintaining adequate social welfare services.
Each week at present the Department of Social Welfare pay out benefits to about 635,000 people. When you add to these a further 530,000 spouses and dependent children the total number of those benefiting in one way or another from weekly social welfare payments reaches the huge total of some 1,165,000 people. This is the reality of the situation: this is the magnitude of the problem that must be faced in finding the money to finance payments.
The single biggest element of social welfare expenditure is the mounting cost of unemployment. An indication of this is the fact that in 1980 when there were some 106,000 unemployed the cost of unemployment payments amounted to £107 million. In 1983 provision has been made for £473 million on unemployment payments for an estimated 203,000 unemployed. The cost of unemployment payments has reached such dimensions that it now amounts to a quarter of all expenditure on social welfare. Another way of looking at it is that these payments now represent more than half the amount to be borrowed to meet the estimated overall current budget deficit of £897 million.
I will now turn to the effect of the increases on individual payments. Section 2 of the Bill provides for the increases in social insurance payments and occupational injuries benefits. The personal rate of old age contributory pension for persons under 80 years of age is being increased by £4.85 to £45.10, while pensioners aged over 80 will receive an additional £5.15 per week. The amount payable in respect of an adult dependant under pensionable age is being increased to £28.80 and for an adult dependant over age 66 years to £33.65. Accordingly a married couple both over pensionable age will get £78.75 as compared with £70.30 at present and if the pensioner is over 80 the new rate will be £81.85 as against £73.10 at present.
In addition to the weekly payments all pensioners over the age of 66 years are entitled to free travel and they may also qualify, if living alone, for increased living alone allowances of £3 a week, free electricity, free telephone rental and free TV licences. These additional benefits enhance the overall value of their pensions.
The new personal rate of widow's contributory pension and deserted wife's benefit will be £40.60 for a person under pensionable age, an increase of £4.35. Higher increases are paid to such persons over age 66 years. The new rate of pension for a widow with three dependent children will be £75.40, an increase of £8.10 a week.
An invalidity pensioner aged under 66 years will get an increase of £4.25, bringing the personal rate to £39.75, while a married couple with two children will get an additional £9.10, bringing their rate up to £84.80. The personal rate of disability and unemployment benefit is increased to £34.80 from £31.65 a week and a married couple will receive £57.35 as against £52.15 at present. Maternity allowance is also being increased to £34.80. Section 2 also provides for increases in occupational injuries benefit in line with the general increases in social insurance payments.
Increases in social assistance payments are provided for in section 3. The maximum personal rate of old age non-contributory pension is being raised by £4.15 to £38.60 for persons aged under 80 years. It will go up to £41.40 for persons aged 80 or over. The overall maximum payment for a pensioner under 80 with a dependent spouse under age 66 will go up from £51.75 to £58. The increase payable in respect of a prescribed relative giving full time care and attention to an incapacitated pensioner is raised to £21.60 a week.
The maximum weekly personal rate of widow's non-contributory pension is being increased from £33.80 to £37.85. A widow with two dependent children will receive an increase of £6.25 a week bringing her new rate to £58.55 per week. These increases will automatically apply to the social assistance allowances for deserted wives, unmarried mother and prisoners' wives.
The personal rates of unemployment assistance will go up to £28.90 for persons living in urban areas and to £28 for persons living elsewhere. There are also increases for dependants. The new rate for a married person with two dependent children will be £65.15 as compared with the present rate of £59.20.
The rates of unemployment assistance payable to smallholders in certain designated areas whose means are notionally assessed by reference to their rateable valuation are not being increased. This is because of the High Court judgment which declared unconstitutional the rateable valuation system in which the means of smallholders were notionally assessed. Payments to small holders based on the notional system of assessment must therefore be maintained at their present levels. It is, however, open to any smallholder to have his means assessed on a factual basis if he considers it would be in his favour to do so.
The rates of supplementary welfare allowances are being increased in line with the rates of unemployment assistance payable to persons in rural areas. A recitation of the various increases and the new rates that will be payable for different benefits in differing circumstances may not make for very exciting listening. These provisions are, however, a central feature of the Bill and it is important to place on record what the Bill is providing in this respect.
The provisions in this Bill relating to short-time workers have been widely published and have given rise to much controversy. I am afraid there has also been a lot of confusion about the provisions. I would like therefore to take this opportunity to explain the facts.
First of all, there has been widespread misunderstanding as to who are affected. Short-time employment is clearly defined in section 5 of the Bill as employment in which, for the time being, a number of days is systematically worked which is less than the number of days which is normal in a working week in the employment concerned. The measures in the Bill do not apply to casual workers such as dockers, seasonal workers or part-time or temporary workers.
A critical examination was made of the benefit entitlements of short-time workers and the examination showed that they were very often better off working short-time than working a full normal week.
The most common arrangement for short-time working is where workers, normally engaged on a five-day week, work for three days and are laid off for two. In general these workers receive three-fifths of their basic pay and, after the statutory waiting period, three days flat-rate unemployment benefit and pay-related benefit, representing half the appropriate weekly rate of these benefits. To illustrate the extent to which short-time workers are better off than when working full-time, I would cite the following examples. As a percentage of his normal take-home pay when working full-time, a worker on a three-day week with gross earnings of £100 a week would receive by way of pay and benefits amounts ranging from 104 per cent if he is single to 113 per cent if he is married with two children. The corresponding replacement ratio for a worker earning £145 a week ranges from 103 per cent to 114 per cent. In addition, many short-time workers also qualify for income tax refunds because of their entitlement and their reduced earnings.
The measures contained in section 5 to 7 are aimed at ensuring that short-time workers' pay and benefit will be somewhat less than their normal full-time take-home earnings. This I believe to be fair and reasonable. It is somewhat more than the limit of 85 per cent which applies in the case of those fully unemployed. The limitation is being achieved by restricting benefit payments to two days flat-rate, instead of three days as at present and also by abolishing pay-related benefit.
I should perhaps mention here an amendment that was made on Committee Stage to section 6 of the Bill in the Dáil. During the course of the debate a number of Deputies referred to the calculation of the flat-rate benefit payable to short-time workers. It was calculated on the basis of one-sixth of the weekly rate for each day on which benefit was paid. The point was made that short-time workers are effectively being restricted to a five-day week for benefit purposes and their daily rate of flat-rate benefit should accordingly be calculated on the basis of a fifth rather than a sixth of the weekly rate. The validity of this point was accepted and accordingly I introduced an amendment on Committee Stage to deal with it.
The overall levels of pay-related benefit available during sickness or full unemployment have been the subject of such concern for some time. An examination of the position indicates that despite the existence of various limits, the level of benefits, particularly when account is taken of tax refunds, can be relatively high when compared with previous take-home pay. For example, a married man with three children whose gross earnings are £145 a week can now receive disability benefit and pay-related benefit amounting to 98 per cent of his normal take-home pay. This does not take account of any tax refund which may accrue.
Sections 8, 9 and 10 therefore provide for changes to remedy the position. The effects of these changes will mean that in the case I have mentioned of a married man with three children earning £145 when working will, when sick, qualify for disability benefit plus pay-related benefit amounting to 86 per cent of his net weekly earnings increasing to 88 per cent from June. The same man drawing unemployment benefit and pay-related benefit will continue to be limited to 85 per cent of his take-home pay.
As a result of the changes in the Bill the rates of pay-related benefit will be 25 per cent for 23½ weeks and 20 per cent for 39 weeks. The waiting period for pay-related benefit is being increased from two to three weeks while at the same time the earnings floor for calculating pay-related benefit is being raised from £32 to £36. Separately by means of regulations, the overall benefit ceiling for disability benefit purposes is being set at 80 per cent of reckonable weekly earnings instead of the present 100 per cent with effect from April. Regulations will also provide for an increase in the earnings ceiling for the purposes of calculating pay-related benefit from £9,500 to £11,000. This will also take effect from April and will mean increased levels of benefit for persons in that earnings bracket.
Section 11 provides for the withdrawal of maternity grant in respect of confinements on or after 4 April 1983. This grant of £8 is no longer of any real significance in the context of the maternity allowance scheme which was substantially improved two years ago for employed women on maternity leave. The scheme for working women now provides average payments of about £900 for about 10,000 claimants while the remaining 10,000 women receive on average £500 under the general scheme. These schemes are of far greater importance to women than the once-off grant of £8 being discontinued.
Section 12 provides for the removal from entitlement to children's allowances of apprentices with effect from 1 July 1983. In the past, apprentices aged between 16 and 18 may have had little or no wages but they may now earn between £30 and £50 a week. At a time when financial resources are scarce, the continued payment of children's allowances to apprentices can, therefore, no longer be justified as a priority. Young unemployed workers between the ages of 16 and 18 lose their children's allowances.
I come now to measures which are included in the Bill but not within the scope of the budget. Section 147 of the Social Welfare (Consolidation) Act, 1981 provides land-owners in certain areas of the country with the option of having their means assessed for unemployment assistance purposes by reference to the rateable valuation of their land where the valuation does not exceed £20. Following the High Court judgment of 30 July 1982 that sections of the Valuation (Ireland) Act, 1852, were unconstitutional, the Attorney General advised that the continued use of the notional method of assessment of means is unlawful and that the Social Welfare Act should be amended as soon as possible. Provision is therefore made under section 13 for discontinuing the notional method of assessment of means on the basis of the rateable valuation of land. Some 14,000 smallholders who are at present notionally assessed will, under section 13, retain entitlement to unemployment assistance on the present basis of calculation until such time as their means can be assessed on a factual basis. The factual assessments will be carried out as quickly as it is possible to do so but the Bill provides that they must in any event be completed within three years.
Following the introduction of increased rates of PRSI contributions in April 1982 representations were received about the impact of the increased contributions on workers who received retrospective lump sum pay awards which went back to the preceding contribution year. The then Taoiseach gave a commitment that refunds would be made as early as practicable where a rate is charged on back money at a level higher than that which applied when it was earned. Section 14, accordingly, provides a statutory basis for the determination of the rate of social insurance contributions payable in respect of lump-sum wage settlements paid in the 1982-83 contribution year but which related in whole or in part to the preceding contribution year.
Section 15 provides that the share of the cost of supplementary welfare allowance payable by local authorities in respect of 1981, 1982 and subsequent years and their liability for administration costs for 1982 and subsequent years may be limited by regulations made in consultation with the Minister for the Environment and with the consent of the Minister for Finance. Provision is also made for Exchequer subvention of administration costs where such costs are not fully defrayed by the local authorities.
Under existing legislation local authorities are obliged to meet a share of the expenditure on the supplementary welfare allowance scheme and the balance is met by the Exchequer. The local authorities recoup the health boards the full costs of administration as there is no provision for an Exchequer subvention. In recent years the payment of these sums has caused problems for local authorities as the annual rate of increase in supplementary welfare allowance expenditure has exceeded the rate of increase in their incomes prescribed by the Minister for the Environment. Local authorities were advised in April 1982 of limits in their liability in 1982 to contribute to the cost of supplementary welfare allowance, including certain amounts due in 1982 in respect of allowances paid in 1981. This provision enables the position to be regularised by regulation.
The scope of the occupational injuries benefit scheme is being extended under section 16 to trainees under schemes approved of or provided by the Youth Employment Agency. This brings their insurance cover into line with trainees under AnCO schemes. These amendments follow on the advice of the Attorney General in connection with defects in the existing legislation for dealing with fraud in relation to social welfare. Under the provisions of sections 17 to 25, the Department's powers to prosecute for offences are being strengthened and clarified. These are necessary so that we can take effective measures to deal with abuse of the social welfare system.
The existing provisions are now being tightened up to ensure that any person acting on behalf of an employer who aids, abets, counsels or procures an employee to obtain benefit fraudulently is guilty of an offence and liable to a fine or imprisonment. This is being done under section 17 which refers to social insurance and sections 19 and 24 which relate to unemployment assistance and supplementary benefit ("Wet-time") respectively. Previously no action could be taken against such persons because the existing provisions of the Social Welfare (Consolidation) Act 1981 refer only to the employer.
Under section 116 of the 1981 Act the time limits within which proceedings in relation to social insurance may be commenced are
(a) three months from the date on which it is certified in writing, sealed with the official seal of the Minister, that evidence to justify the institution of a prosecution comes into the possession or procurement of the Minister, or
(b) two years from the commission of the offence whichever period latest expires.
The period of three months specified in the certificate is being extended under section 18 to six months to allow sufficient time for the completion of inquiries and the processing of any appeals.
The provisions in section 18 refer only to social insurance. Sections 20, 21, 22, 23 and 25 bring the provisions for social assistance payments into line with those in section 18 and also effect uniformity in all of these provisions.
The Bill has been criticised because it has been stated that the increase in benefits are inadequate. The overall cost of these increases in 1983 will, however, amount to almost £81 million. This figure cannot be taken in isolation because next year the cost will add up to £160 million and this is before any provision is made for further increases next year. Overall in 1983 we will spend £1,870 million on social welfare and finding the money for this is now an extremely serious problem. I referred in my opening remarks to the difficult economic situation in which we find ourselves. There are widespread demands for increased rates of benefit. Most people will favour this but it is extremely difficult to find anybody who will come up with practical proposals for levying the additional finances that are necessary.
Let us look at how the £1,870 million will be spent in 1983. Non-contributory social assistance services will cost £799 million; social insurance schemes will cost £976 million and, administration costs will amount to £75 million, making a total of £1,870 million.
All of the cost of the social assistance services is borne by the Exchequer. The cost of the social insurance services is paid for by the contributions of employers, employees and the Exchequer. The main fund covering the social insurance services is the Social Insurance Fund. In 1983 the income of that fund will be £1,019 million. Employers will contribute 52.7 per cent of this, employees will contribute 25.6 per cent and the Exchequer will contribute the balance of 21.7 per cent.
It is, perhaps worthwhile at this stage to say a few words about the PRSI contribution system. There has been a lot of confusion and misunderstanding about what it means and what it does. Originally social insurance contributions were essentially flat-rate. Everybody paid the same amount of contribution — the worker earning £20 a week paid exactly the same as the worker earning £100 a week. This was rightly regarded as regressive and unfair and penal in its effect on lower paid workers. In 1979 the flat-rate system was replaced by a wholly pay-related system whereby every worker paid a contribution in proportion to his earnings up to the ceiling. Now the stage has been reached when some people maintain that because they pay pay-related contributions they are automatically entitled to pay-related benefits. This is not so. Pay-related contributions are simply a method of financing the entire system of social insurance benefits which covers flat-rate pensions for old age, survivors and invalidity and also the short-term flat-rate payments for sickness and unemployment. In addition, there are the pay-related supplements for the short-term benefits. Pay-related contributions help to pay for all of these but in order to qualify for any particular benefit a claimant must satisfy the conditions for receipt of that benefit. The social insurance system is a pay-as-you-go system whereby those who are fortunate enough to be at work pay contributions which help to fund benefits for those who may be sick, unemployed, retired or may have lost a husband.
I can understand the resistance that has developed to the payment of PRSI contributions, particularly since they have reached their present level. On reflection, however, I hope people will see the necessity for paying contributions and will realise that there is a real social equity about this. Those who have jobs are fortunate and any community with a social conscience can hardly complain about making a contribution towards the support of those who are sick, unemployed, old or widowed.
I appreciate the burdens that must be borne by all in times of recession and the existing financial stringency but it is only by sharing the burden all round that we can live up to the responsibilities of a civilised and caring society. This year when there has been so much talk about the burden of taxation, I think it is only fair to point out that there has, in fact, been no increase in the actual rates of PRSI contributions. The contribution rates will be exactly the same in the coming year as they have been in the present year though the ceiling on which the contribution is levied is being increased from £9,500 to £13,000.
There is one final point I would like to make about the PRSI contribution. In this Bill we are dealing only with the social insurance contribution. Also collected side by side with the PRSI contribution is a 1 per cent youth employment levy, a 1 per cent health contribution and from April next the newly introduced 1 per cent income levy. These contributions have nothing to do with social welfare. They are not covered by this Bill and provision is made for them separately in other legislation.
It has often been the practice to compare our system of social security with that of Britain and Northern Ireland. There, I would point out, pay-related supplements with short-term benefits were abolished last year. We have no intention whatsoever of doing so in the Republic. Apart from this, and even allowing for different currency values, the level of our flat-rate disability and unemployment benefit is much higher than that of similar benefits in the United Kingdom.
This, then, is the setting in which I bring this Bill before the House. Everybody would like to see bigger and better benefits and so would I. However, in a situation of economic recession where there is an absolute need to utilise scarce resources in the most effective way possible I am satisfied that this Bill will provide the means of safeguarding our social welfare system and guaranteeing protection for those who are genuinely in need. I commend the Bill to the House.