The main improvements provided for in this Bill were announced in the budget last January and include an increase of 8 per cent in rates of unemployment assistance for the long-term unemployed and 7 per cent for other social welfare recipients. The Bill also provides for the introduction of a new scheme of family income supplement and for a number of changes in various social welfare schemes.
Before dealing specifically with the measures contained in this Bill, I would like to outline the context in which social welfare policy must be considered. Since the Department of Social Welfare were set up there has been a continuing development of schemes and services. Contributory old age, retirement and invalidity pension, pay-related benefit, death grants, deserted wife's benefit and allowance and supplementary welfare allowance have all been introduced, as well as special support for prisoners' wives, unmarried mothers, and single women. In addition a variety of supplements and benefits-in-kind, such as free travel and free electricity have been provided.
The progressive development of the social welfare system over the years has had a number of objectives. The first and most important has been to assist people in particular situations, where they were unable to provide for the necessities of life from their own resources. There are always people, not necessarily easily identified, who are on the margins of society in terms of their ability to support themselves and make a contribution to community life. It is the task of a social welfare system to identify groups of people with a high risk of poverty and to provide direct income support related to need. In the case of loss of income arising from short-term absences from the work-force due to sickness or unemployment, the objective is to provide through pay-related benefits a replacement income which bears a reasonable relationship to the person's normal take home pay.
Another important purpose of social welfare is to redistribute resources from the better-off sections of the community to those in need. The social welfare system achieves this by transferring resources in a number of ways, from those at work who are contributors to those who are sick, unemployed, widowed or old and who generally need support. There is also redistribution from people without dependants towards those with families, in recognition of the additional costs of living in such circumstances. Contributions are levied on workers through the PRSI system in proportion to earning levels, giving, in the overall, a redistribution towards those on the lowest incomes.
The dramatic growth in social welfare spending, particularly in the last decade, highlights the extent of the development of services and the increase in levels of individual support as well as population and employment changes. Gross social welfare spending amounted to £204 million in 1973-74, while in the same price terms, this year's overall spending on social welfare will amount to £491 million. This illustrates the magnitude of the real two-and-a-half fold increase over the decade. Social welfare expenditure now accounts for one-seventh of our gross national product.
The scale of spending in 1984 gives a good indication of the central place of social welfare in our society today, the level of commitment made by the community and also the extent of relative need. Because of this scale of commitment, even marginal changes in social welfare rates, scope or entitlement can have, in the aggregate, very significant economic and budgetary consequences. Furthermore, the number of people who depend on social welfare in one form or another is never static. Provision for increase in numbers must be made in estimating the amount of Exchequer commitment to social welfare parallel with consideration of improvements in individual entitlements.
One of the major pressures on social welfare support comes from the high and growing number of people, with their dependants, who rely on unemployment payments. The current disturbing numbers of unemployed, which on average will be about 30,000 people a week more than in 1983, poses the most serious problem for our community and not just in the social welfare area. Unemployment has now reached into every sector and stratum of our society, bringing with it complete dependence on social welfare for many of the households involved. The hardships associated with prolonged unemployment are well documented and the increasing numbers of people experiencing long-term unemployment are a matter of particular concern.
Social welfare spending in 1984 on unemployment support will amount to about £580 million, over a quarter of all social welfare expenditure. This is some 28 per cent higher than the unemployment provision needed in 1983 reflecting the growth in numbers unemployed and higher rates of individual payment. These figures say nothing about the extent of personal hardship and loss of status in the community associated with unemployment.
The need for effective action to correct the situation was never more pressing but my most immediate concern is to ensure that social welfare support for unemployed households is available as quickly and as effectively as possible and that the special problems facing the long term unemployed are dealt with. This is an essential parallel to overall Government action on the economic front to correct the unemployment situation itself.
I have outlined the purpose of social welfare provision and the growth in the range and scope of services over the years, the cost of which is now being accelerated because of unemployment, in order to place the developments contained in this Bill in their context.
The Bill provides for an increase of 8 per cent in the rates of unemployment assistance for the long-term unemployed and 7 per cent for other social assistance payments, children's allowances, social insurance benefits and occupational injuries payments. These increases will take effect from the beginning of next July for weekly payments and from August in the case of children's allowance.
The increases are in line with the specific commitment given by this Government on coming into office to maintain the living standards of the section of the community dependent on social welfare payments. I am confident that the rates increases provided in the Bill, at a cost of nearly £70 million this year, will protect the purchasing power of benefits until well into 1985.
Since these rates increases were announced in the budget there has been some criticism of the adequacy of the increases in the face of price increases. Reference has been made to apparently large increases in social welfare benefits given by previous administrations. We should not forget, however, that nominally large increases in rates often did little more than compensate for correspondingly large increases in inflation. Another important consideration was the real increases in PRSI contributions by workers and employers which were necessary to pay for the increases in benefits. This Government on the other hand have managed to maintain the real value of pensions and benefits without increasing PRSI contributions above their 1982 rates.
According to the latest figures for the consumer price index, the Government's recent budget measures added about ½ per cent to the underlying inflation rate. This Government's containment of inflation, together with the retention of food subsidies, increased tax-free allowances and income levy exemptions, will allow the most vulnerable groups in the community to benefit from the slight upswing in national prosperity this year and into 1985. It now appears as though inflation will be equivalent to about 5 per cent into 1985 and likely to hold this level for the period for which the increase granted to social welfare recipients is intended to apply. This is why I am confident that the real value of pensions and benefits will be maintained in the period to mid-1985.
This indexation of benefits levels has been provided for within the most severe limitations of Exchequer resources. You will appreciate this more when you consider that social welfare spending will increase by 13 per cent in 1984 relative to 1983 in spite of the weekly payments increase of 7 per cent generally. The additional increase in expenditure would have to be provided for in any event this year due to the growth in numbers of recipients, particularly of unemployment payments and the need to meet the full year cost of last year's 10 per cent to 12 per cent increases. Indeed, the proportion of social welfare spending to be met by the Exchequer this year will be nearly 15 per cent, or £161 million greater than in 1983, representing a recognition by the Government that the capacity of the workforce and employers to make further direct contributions to social insurance through PRSI is severely limited.
I am particularly pleased that it was possible this year to provide a further special increase for people who have been unemployed for 15 months or more. I have already alluded to the particular hardships faced by this group and I consider that the 8 per cent to be paid to people in this situation together with the increase provided last year will provide significant real additional help. This special increase follows the extra 5 per cent which was given to this group last October. In aggregate, therefore, the long-term unemployed will have received an increase of almost 25 per cent in their rates, taking the increase in June and October 1983 and next July into account — more than sufficient to secure a real improvement in their situation.
I would like to refer now to the main provisions contained in the Bill. I do not propose to detail the individual rates increases but Senators will find them summarised in the explanatory memorandum accompanying the Bill, which I hope they will find helpful.
Section 5 of the Bill makes a technical amendment to the Social Welfare (Consolidation) Act, 1981, to allow for certain expenses in relation to the administration of the social insurance and occupational injuries schemes to be paid to An Post rather than to the Minister for Posts and Telegraphs as was formerly the case.
Section 6 provides for an increase of 0.1 per cent to 0.4 per cent in the rate of contribution to be paid by employers into the Occupational Injuries Fund through the PRSI system. This contribution will be levied on employers in respect of employee earnings up to a ceiling of £13,000 a year, as at present.
The Occupational Injuries Fund is entirely financed by employer contributions and by fund investments. This increase in employer contribution is necessary to maintain the solvency of the fund in the light of estimated expenditure on occupational injuries compensation this year.
The "floor" for the calculation of pay-related benefit is increased in section 7 of the Bill. Pay-related benefit (PRB) is payable with unemployment, disability and injury benefits and with maternity allowance. It has been a feature of the PRB scheme since its introduction in 1974 that a certain proportion of reckonable earnings is disregarded in calculating entitlement. This disregard or "floor" was set at £14 a week in 1974, over twice the prevailing level of the flat-rate benefit. The floor was not increased until 1981 even though flat-rate benefits rose significantly in that period. Since 1981, the floor has been steadily raised. Section 7 continues this process, raising the floor by £7 from £36 to £43 a week. This increase will apply to new claimants only from 2 April next. Even with this latest increase the floor will still be just over half of its relative level in 1974.
Section 8 provides for the possibility of payment of pay-related benefit in a lump sum to persons who qualify under the enterprise allowance scheme administered by the Department of Labour. That scheme was introduced by the Government at the end of 1983 to provide financial support for unemployed people who wished to start up their own businesses. As an alternative to unemployment payments people who qualify under the scheme can receive a weekly allowance of £50, or £30 if they are single. The scheme is administered through the National Manpower Service. The response so far to the scheme has been most encouraging and, as an additional incentive, section 8 provides that any pay-related benefit to which enterprise allowance scheme applicants would be entitled to receive if they had remained unemployed can now be paid to them as a lump sum. This lump sum will be equivalent to the amount of PRB that applicants would otherwise have received for the remaining portion of the relevant period of interruption of employment, subject to a maximum of 26 weeks. This will provide lump sums up to a maximum of about £1,150, depending on individual entitlements which will be a useful extra support at the start of a business when credit can often be difficult to obtain.
Section 9 of the Bill changes the method of assessment of income from the leasing of land. The Government are concerned to encourage greater use of medium-term land leasing as part of their policy in relation to farming. At present, the means assessment for social welfare purposes of leased land favours the less efficient conacre or 11-month system and this, in turn, restricts the access to land of younger and possibly more progressive farmers. At present the capital value of land is used for means assessment purposes where it is being leased for a number of years. The land in such cases is deemed not to be personally used or enjoyed by the owner. On the other hand, land let on a short-term basis is taken to remain in the occupation and use of the owner and means for pension and other purposes are calculated on the basis of the profits from the lettings.
This section of the Bill provides that, where land has been leased with the approval of the Land Commission, the lessor's means for social assistance purposes will be calculated by reference to the profits from the lease rather than to the capital value of the holding.
Sections 10 and 11 deal with two minor changes to the children's allowance scheme. At present, children's allowances in respect of a child resident outside the State can be paid to the father while he is working abroad for the Government, the State or an international organisation. Section 10 extends this provision to a qualified person other than the father, in other words, the mother.
Section 11 extends the validity of the orders in children's allowance books from three to six months. This measure will reduce the amount of payable orders issued by my Department in respect of children's allowance orders and will enable arrears payments to be made to a much greater extent by order book rather than by separate payment. This problem arises particularly in relation to children aged between 16 and 18 who continue in full-time education and in respect of whom arrears payments for the summer months are generally made at the beginning of the school year.
Section 12 of the Bill provides that the amount of disability benefit, associated pay-related benefit or invalidity pension payable for up to a period of five years to a person arising from injuries received as the result of a road traffic accident will be taken into account in assessing damages for those injuries. This is in line with similar arrangements which already exist in relation to occupational injuries benefits and follows a recommendation in the report on the inquiry into the cost and methods of providing motor insurance.
Part III of the Bill deals with a new development in social welfare, the provision of direct cash support for employees on low earnings with families through a family income supplement scheme.
In discussing the background to this Bill, I outlined the functions of social welfare in relieving poverty and in redistribution of income. This new scheme is concerned with both issues. By a combination of the structures of the social welfare and income tax codes, workers on low earnings can find themselves in a "poverty-trap" whereby it could be more advantageous to them to claim social welfare support than to work. The benefits system has higher rates of payment with increasing family size, whereas earnings are paid regardless of marital or family status.
The family income supplement scheme will provide additional cash support in direct relation to family size and to other income. This will result in improved redistribution of resources to lower paid workers. The scheme will be introduced from next November. It will provide additional support for about 35,000 families at a cost of £2.2 million in 1984 and £13 million in a full year.
Payments of the supplement will be made to families with children where one or more parent is in full-time paid employment and where the income of a family is less than a specified amount. The actual rate of payment to recipients under the scheme will depend on two factors — the number of children in the family and the amount of the family income. The supplement will be calculated in each case as one-quarter of the difference between the family's actual income and the appropriate upper level of income for the family size in question.
The maximum family earnings up to which a supplement will be payable will be £95 in the case of a one-child family. An additional £15 earnings will be allowed for each subsequent child up to the fifth. At this family size the maximum earnings allowable will be £155 a week. As this level of earnings will correspond to average male earnings in the transportable goods industries this year, I do not consider it appropriate to supplement incomes above this level. Accordingly, families with more than five children will all be assessed according to the income limits for a five-child family.
Similarly, the lower income limits will vary from £63 in the case of a one-child family to £95 a week in the case of families with five or more children. The maximum family income supplement payable where earnings are at or below these limits will range from £8 to £15, a week depending on family size. It will be payable to the principal wage earner in the family and the supplement will not be subject to income tax or PRSI.
Sections 13 to 17 provide for the introduction of this scheme along the lines I have indicated, with consequential amendments to the social welfare code. Section 15 provides for the making of regulations to adjust payment of the supplement where the recipient ceases to work and draws unemployment benefit or assistance, disability benefit or retirement pension.
I do not claim that the scheme provided for in this Bill will solve all the problems faced by workers trying to provide for their families on low earnings. However, I consider that the family income supplement scheme will provide a significant level of support for a section of the community whose needs could not be catered for adequately within the scope of the existing social welfare system or the taxation system as currently structured.
Part IV of the Bill, comprising sections 18 to 30 inclusive, provide for the abolition of old age pensions committees and for the transfer of their function in deciding pension entitlement to deciding officers in my Department. There are a number of consequential amendments to existing legislation.
The effect of these measures is to provide that applications for old age non-contributory pensions will go through the same adjudication process as for other social welfare benefits and assistance claims. The system being replaced is out of date and actually obstructs the prompt and effective payment of pensions and this reform will, I believe, be welcomed by those involved in the welfare of the elderly.
The old age pensions committees were first set up under the Old Age Pensions Act, 1908. They are appointed by county councils and county borough and borough councils to determine individual entitlement to old age, non-contributory, pensions. There are currently about 355 committees and sub-committees around the country.
Under the present system each old age pension claim is investigated by a social welfare officer whose report to the old age pension committee, or sub-committee, includes a recommendation as to the amount of pension entitlement in accordance with the relevant legislation. The claim must then await the next meeting of the committee for consideration.
The committees are voluntary and part-time and are required to meet once a month but frequently there are delays of as much as three months in deciding claims. To counteract this problem, provision was made in 1978 to enable pensions recommended by the social welfare officer to be put into payment pending the committees' decisions. Committees may cause further delays when they award pensions which are not payable or which are clearly higher than those payable under the legislation. This is a frequent occurrence which necessitates appeals by social welfare officers against such decisions. These appeals are decided by statutorily appointed appeals officers.
At this stage, I would like to pay tribute to the work of the local pensions committees in fulfilling their statutory duties down through the years. The fact that I might not agree with the basic policy under which the committees were established and operated does not take from my appreciation of the contribution, commitment and dedication which individual voluntary members have brought to their task.
Section 19 of the Bill provides for the consequential abolition of the post of clerk to the old age pensions committee or sub-committee and for the provision of appropriate compensation to the clerks in line with Civil Service practice. My remarks about the dedication and commitment of the committees apply with equal validity to the work of clerks to those committees over the years. Their role in co-ordinating the work of committees and in liaising with Department officials has ensured that the system of adjudication worked as efficiently as it could within the constraints which it faced.
Sections 20 to 28 make necessary consequential amendments to relevant sections of the Social Welfare (Consolidation) Act, 1981. It is the intention to bring these provisions into operation by regulation in the near future.
I spoke at the start about the context in which social welfare operates and the objectives that the community has set for the system of welfare as we see it today. This Bill has provided for a number of improvements to the social welfare code, notably in the increase in rates and in the introduction of a family income supplement. Much work remains to be done to ensure the most effective and desirable redistribution of resources to those in relative need. The family income supplement, together with the indexation of rates for social welfare recipients, will help to maintain progress in this area.
I also referred in my opening remarks to the massive financial commitment involved for the community in providing social welfare services. It is undoubtedly necessary at the present time and will be in the foreseeable future to exercise a greater degree of control on public expenditure than has been the practice in the past. It seems to me that what may well be of paramount importance is the effectiveness and quality of the services we are providing. It is a question of ensuring that what we are spending is given to best effect and that waste in expenditure is eliminated.
For these reasons, the time is opportune to review the social welfare system to ensure that it meets its objectives effectively and the Government have established a Commission on Social Welfare to carry out this important task. The commission's task is to undertake a fundamental appraisal of social welfare and its interaction with other forms of social support and fiscal welfare and to report its recommendations within two years. I consider the work of the commission to be of crucial importance to the long-term development and effectiveness of the social welfare system.
Ultimately, the purpose of social welfare must be to achieve a more just redistribution of income, wealth and power and thereby remove poverty as far as possible. As a parallel to the commission's review of existing social welfare provisions, the Minister, with the approval of the Government, established an Interim Board of the Combat Poverty Organisation. This interim board will report to the Minister by the end of June next with regard to the structure of a permanent Combat Poverty Organisation and its detailed terms of reference. The Minister has also asked the interim board to advise him on the Irish input into the forthcoming EEC poverty programme.
I consider that the three forms of action I have outlined — the measures contained in this Bill, the Commission on Social Welfare's examination and the renewed combat poverty programme — indicate the Government's commitment to the least well-off sections of our community despite the economic and financial constraints facing us all today.
I commend this Bill to the Seanad for favourable consideration.