Seanad Éireann debate -
Friday, 3 Apr 1987

Vol. 115 No. 15

Social Welfare Bill, 1987: Committee and Final Stages.

Sections 1 to 4 inclusive agreed to.

SECTION 5.

Question proposed "That section 5 stand part of the Bill."

Mr. O'Leary

Will the Minister indicate the reason the amount of reckonable earnings is increasing at a faster rate than inflation? I accept this Government, as well as the previous Government have had to raise additional finance and I recognise this is one of the ways in which they thought it appropriate to raise finance but I never had an intellectual commitment to support 100 per cent anything the last Government did. The Minister will not be surprised to know that I do not have an intellectual commitment to support 100 per cent anything he does either.

As I understand it — the Minister will correct me if I am wrong — the amount of this maximum is being increased by approximately 7 per cent at a time when inflation is running at 3 per cent. It represents an escalation rather than leaving things as they are. I recognise the difficult budgetary situation this Government and the last Government faced. The real solution to these problems is to reduce the amount of money the State is spending, not to increase taxation. Whatever way one looks at this it is an increase in taxation. The increase from £14,700 to £15,500, an increase of £800 or an increase of approximately 5 per cent or 6 per cent at a time when inflation is running at under 4 per cent, represents an increase in taxation.

I am against this proposal for two reasons. First, I do not think it is a fair kind of tax and, secondly, I do not think we should be increasing taxation at all. I understand that the State finances are in a dire situation but the Minister should tackle the problem by reducing expenditure but not in the social welfare area and not by increasing taxation. Will the Minister tell us why this ceiling under this Government and previous Governments has been increasing at a rate faster than inflation? This is a very worrying trend and one I certainly do not support.

Minister for Social Welfare (Dr. Woods)

There are several reasons for the increase from £14,700 to £15,500 which was, of course, part of the Fine Gael budget proposal. There is another problem in relation to this. If the books and ready reckoners and so on that relate to this had not already been circulated at this stage one could not implement anything from 6 April. That is another restriction on either increasing or reducing that level or changing the previous proposal. The figure represents a 5.4 per cent increase and that is broadly in line with projected increases in average earnings over the period as distinct from the 3 per cent to which the Senator referred in regard to social welfare. One of the problems is that it is necessary to keep the social insurance fund solvent. As the Senator was not here when I mentioned the figures before I should like to tell him that the employees contribution to the fund this year will be £310 million and the Exchequer contribution will be £417 million. The employers' contribution will be £640 million. This means that notwithstanding this increase from £14,700 to £15,500 the Exchequer is still having to put 30 per cent into the fund. They are the practical considerations. The money is needed. I appreciate the Senator saying that it should be found somewhere else. That goes along the lines suggested by Senator O'Donoghue, that there is no such thing as a fund, that it is really all a tax in any event. That is a different matter. There is a fund so far as I am concerned as Minister and it is one which is operated for the beneficiaries, the PRSI contributors. The existing position is that the State, through the Exchequer, will be providing 30 per cent to make up the fund.

Mr. O'Leary

Is the Minister saying that it is a matter of Government policy? I am not impressed when he says that this was the previous Government's policy because if it was another Minister who was present I would say precisely the same thing to him. Is the Minister saying that he has, as a policy, a limit on the State's contribution to that fund? Is it the policy that that will be 30 per cent or whatever percentage the Minister would like to indicate to the House? Has he a further policy as to what the proportional contribution between employers and employees should be? If the Minister helps us in that regard might it explain why there seems to be a disproportionate increase in this ceiling.

Mr. Ferris

There should have been the same cut-off point as in the previous legislation because there is a certain element of confusion now. Apparently there is an administrative reason for it. I should like to dwell for a moment on Senator O'Leary's comment about the State's contribution bringing in £417 million. Obviously, that was a set Government decision. It is possible for the Government to decide to wave some of the contribution from employers and that may prove an incentive for them to employ more people. That can be varied up and down. The level of employees' percentage at 23 per cent is not varied, although the benefits can be undermined and have been undermined by this Bill. The level of percentage by employees because it is not indexed means that it goes up which makes it another system of taxation. The Minister's answer to a question about this worries me. He has already had ready reckoners printed to send out to employers to bring in this money and he has said that if he did not have it done by now he would be in difficulty. That is a frightful insult to this House. I warn the Minister never to presume so far as this House is concerned because it can, even with the vast majority he is likely to have after the election, express very strong views on certain elements of legislation coming from another place. Legislation has had to be amended in this House on numerous occasions; otherwise it would have been bad legislation. The Minister should never print or publish ready reckoners in anticipation of being able to walk into the House and get legislation through, ignore what we have to say about it and then walk out again. The last reason in the world that he should put forward is that there are ready reckoners printed. I am sorry if I sound cross about this but I do respect this House and the contribution it makes to legislation. I would not like any Minister to presume what we might do on any section of a Bill.

Dr. Woods

I will be frank with the Senator, we are faced with a decision made by our predecessor which, had they not made it, could not be implemented next Monday. That is what the rush is about and there is no point in us playing games with one another here. It could be cancelled entirely.

Mr. Ferris

It does not make it correct.

Dr. Woods

It could be cancelled entirely as a Senator suggested and left until July with no income for those on social welfare, the old age pensioners, the sick and the widows whom I am looking after. There is no point in me pretending to Senator that that is not the reality. I would be hypocritical if I did not say that the decision to prepare that documentation, those computer programmes and those books had to be taken a month ago. It could all be scrapped if both Houses decided not to go ahead with this legislation. An election took place about the time a budget should have been going through the House and I wish that we did not have that happening again. It throws all the State's administration into chaos including the collection of funds which are essential particularly for the weaker sections of our society.

That is the reality. I am not blaming anyone. That is how it turned out this year. I cannot send my officials out tonight to get the computer programmes organised around the country for next Monday. I am sure Senators realise that. However, we could tell people to cancel it and keep the money.

As regards the amount of the increase, under section 10 (2) (b) the Minister is required, when making regulations, to take into account any changes in the average earnings of workers in transportable goods industries as recorded by the Central Statistics Office.

Senator O'Leary asked about the 30 per cent. If we go back a few years we will see that the State would not have gone above 20 per cent because of the burden on the taxpayer. Gradually because of the increase in unemployment and the greater numbers involved the percentage increased. It represents a substantial contribution in historical terms from the Exchequer's point of view. This fund is a very important one for the beneficiaries. They benefit substantially and that is why I would not be in favour of some of the suggestions which are made from time to time that the fund should be regarded as a tax and done away with. The fund is an excellent one from the point of view of the worker. If a worker dies, Senators and Deputies are very glad to be able to say that there is an automatic contributory pension available from this fund. When workers fall ill or become unemployed there are benefits available for them.

These are difficult times. The difference between this level and the level of the health charges is one which perhaps in the future will be overcome. Now that they are so close together it is difficult to see why there should be such a difference between them.

Question put and agreed to.

SECTION 6.

Question proposed: "That section 6 stand part of the Bill."

Mr. O'Leary

This is the extension of the scheme which previously operated with regard to additional employees.

Dr. Woods

Yes.

Mr. O'Leary

It is an excellent scheme and I congratulate the Minister for extending it. It is a positive contribution towards additional employment, which is important. The enactment of a scheme like this creates a cost on the fund by way of the contributions which are foregone. Is that contribution to the fund made good by a special subvention from the Exchequer or does the shortfall in the fund fall to be divided in the three ways to which the Minister referred. What we are saying is that we think it is good from the point of view of the policy of the State for certain employers to be given exemptions from making their full contributions in respect of additional employees. As a result there is a shortfall in funds. Is there a special subvention from general taxation or does the cost of this scheme fall upon the fund itself? If it does, the cost of the scheme is borne by the insured workers rather than by the general body of taxpayers. Is it proposed that a special subvention should be made from general Exchequer funds to the social insurance fund to offset the shortfall which will result from the implementation of this scheme?

Mr. Ferris

I welcome this. It had a beneficial effect on unemployment figures and was taken up by employers. It was an incentive to them to employ additional workers. Any legislation which would encourage employers to give employment must be welcomed. In the event of employees who are taken on by employers under this scheme qualifying for unemployment or disability benefit, will they be guaranteed their full rate of benefit from the fund? In other words will the fact that the employers did not pay their contribution for them count against the employee? The employee should not be penalised.

Dr. Woods

Taking the last point first, they will be as fully entitled as if they had made a contribution in the normal way. As regards Senator O'Leary's point the cost is £500,000. That is taken up by the State.

Mr. O'Leary

I appreciate that. When the Minister speaks about 30 per cent being given by the Exchequer, I am anxious that a special and identifiable contribution should be made in respect of this scheme so that it does not distort the percentages being paid by the various parties to the fund. Would the Minister consider in the administrative operation of this scheme or some future scheme, the identification of a separate contribution, clearly identifiable, as being the State's contribution to the scheme rather than just including it as part of the State's residual liability?

Dr. Woods

I appreciate the Senator's point. Since the problem is that the State acts as the residual contributor it is difficult to identify a separate contribution. It would be up to the Minister for Social Welfare to make clear that the separate amount should be identified. The percentage varies each year so it is not as simple as saying that such and such is the percentage and that is the situation. However, I take the Senator's point in relation to an identifiable contribution.

Question put and agreed to.

SECTION 7.

Question proposed: "That section 7 stand part of the Bill."

Mr. O'Mahony

The Minister made the comment that the fund provided certain guarantees to insured people in respect of their being eligible for these schemes but would he not agree that we have reached a point where, while the fund is there, in practice the Government can change the contribution or eligibility conditions or change the rate of payments? Despite the fact that employees are paying their social insurance contributions any Minister can bring in legislation stating that pay-related benefits will be effectively halved that is from 25 per cent to 12 per cent. Let me ask the Minister whether he envisages the situation next year where public finances would be roughly in the same financial difficulty as they are this year where the pay-related benefit element social insurance benefits might well be eliminated altogether.

Mr. Ferris

We disagree fundamentally with this section. We feel there is no longer a real benefit in insurance terms, or pay-related terms to the beneficiary because of this final movement to the floor situation. This can be judged from the figures announced by the Minister for Finance on budget day. This provision which admittedly had been proposed by the outgoing Fine Gael Government is expected to save the Exchequer £13 million. The Labour Party contend that that £13 million is being taken out of the pockets of people who could be and would be beneficiaries under a pay-related scheme to which they have contributed and to which there is no reduction in the rate of contribution. Their concept of pay-related is fast diminishing. We find ourselves totally in disagreement with this section. I do not want to disturb the House with another vote, but if the Minister persists in continuing with the section I would like the Chairman to record on the record of the House that the seven Labour Party Senators dissent from this section if that is allowed by Standing Orders.

Dr. Woods

Senator O'Mahony mentioned the question of the Minister having the power to change the provision. It is only the Houses of the Oireachtas that can change it. I appreciate the points made both by Senator O'Mahony and Senator Ferris. I would just point out for your information that an interesting point arose when I came to look at this because I can assure you that I went into all of this in great detail because I would value it greatly for those who would become unemployed. Nevertheless I am aware of the fact that it has been done away with in Britain. As regards the question of the future position, as far as I can recollect the Commission on Social Welfare suggested that if the levels were brought up sufficiently then it would not be necessary. That is a long way down the road, as you will understand from the general economic situation. But the interesting thing when you look into it is that people on the lower earnings of £120, £130 and that sort of figure a week are not affected by the removal of the pay-related benefit because they never got it. They did not get it because of the wage stop at 85 per cent. If you like they were caught in a Catch 22 situation, because of the 85 per cent limit on their take home pay they could not actually benefit from it. Even on the average industrial earnings, of £210 a week for a married couple with four children, the wage stop applies and they would lose £10.30 on PRB as against the present situation. It is mainly the people on the higher incomes, £300, for instance, where the difference is greater — it is £15.80 at that level. That gives an idea of operation of PRB at present. Certainly this measure is only being taken because of the overall economic situation, the vast number of people who are in need of support in this area and the difficulty experienced by the State in providing the additional funding which would be required to maintain the present level.

Mr. O'Mahony

The fact that the low income earner does not benefit from pay-related benefit is of course a problem of low incomes, rather than of the pay-related benefit system itself necessarily. As the Minister will know the whole concept of pay-related benefit is to cushion workers who are made redundant or become unemployed from a very dramatic fall in their living standards in the first 15 months of unemployment, the expectation being that they may well be in a position to find alternative employment over that 15 month period. It is designed to cushion them, from a dramatic drop in income. Of course workers pay the contributions to the Social Insurance Fund on the basis of their income, so it would in those circumstances be expected that the higher the income the higher the pay-related benefit.

Would the Minister not agree that if it has come to the point where pay-related benefit now is only 12 per cent of reckonable earnings, that it is virtually nonexistent and if we interfere with the system — and I am not being again personal to the Minister; I am talking about Government or the Legislature — to the extent that pay-related benefit is almost eliminated, we really are dismantling in a very radical way a social security system which was built up over many years and under enormous pressure and concern on the part of workers and their representatives to set it in place. I think the Minister implied that depending on economic circumstances next year, despite the fact that we are talking about a social insurance fund, it is quite conceivable that the remaining negligible 12 per cent pay-related benefit which remains after this Bill is passed can be eliminated altogether and I was interested to hear the Minister say that was not beyond the bounds of possibility and that he would have a difficult task to try to protect what remains of pay-related benefit. But I wonder if the Minister can give us any insight into what is likely to happen in relation to pay-related benefit in the next 12 months, because it seems to me that we are really at the point where we are threatening to dismantle the whole system.

Dr. Woods

I do not want to go back over the old ground. The Senator is aware of the fact that in 1983 the level was reduced under difficult circumstances, during the Coalition Government period from 40 per cent down to the 25 per cent followed by 20 per cent. Another point that I would like to make clear at this stage is that while the saving which Senator Ferris referred to is there — and I referred to £13 million in my speech there is £30 million altogether; the fund gets £17.3 million in this year from the Exchequer, the balance of the £30 million goes to the assistance schemes. The other point is that the maximum pay-related benefit is still a £19 supplement. A supplement of £19 a week still applies.

Senator O'Mahony referred to the position one finds one's self in when one is unemployed. At present for a married couple with four children the income would be £131.20 on average industrial earnings of £210, the position on 12 per cent would be £120.90 and that is the £10 difference. If you take a person on £120 a week it does not matter how many children they have. It is the same in both cases, it does not change. There is a drop at the higher level but there is still a £19 maximum supplement.

Mr. O'Mahony

I should like to clarify the last figures the Minister has kindly given us and which his party were not prepared to give to the public at large before the last election. It seems, and I suppose it should be repeated because it may well be of interest to people outside, that a spouse with four children who previously had been earning the average industrial wage of £210, were he or she to become unemployed at present would benefit to the extent of about £131 per week. Following the enactment of this Bill, unless there is a time stop on it and I do not think there is, that person will face a cut of £10 a week.

Dr. Woods

Only in the case of new claimants. It does not affect existing claimants. I should point out in my own defence, at this stage, that it was proposed to put that down to 12 months instead of 15 months. I am now going for 15 months and I regard that as something of an achievement. I am in agreement with Senators in relation to the need to maintain an adequate level of income for people who become unemployed and to give them an opportunity over a reasonable period to find some other employment. The Commission on Social Welfare talked about continuing that beyond the 15 months. My first task was to get it back to 15 months which I have achieved, and that is the position now. There will be 12 per cent for 15 months and it will affect only new claimants.

Mr. O'Mahony

Regarding a similar type proposal, admittedly with the difference that the Minister has correctly retained the 15 months provision for pay related benefit compared with the 12 months proposed by Fine Gael, would he not accept that, as the electorate decided, in the way they voted on the Fine Gael proposal to cut pay related and other social welfare benefits to reject that proposal, it behoved his party in Government to observe that mandate and to leave intact the welfare system? Fianna Fáil did not indicate, prior to the election, that in the case of a worker with four children who was a new claimant and who had been on the average industrial wage the benefit would be reduced by £10 a week. Something similar was said by Fine Gael and it was rejected. Would the Minister not agree that there was no mandate for that decision?

Dr. Woods

I would not dare suggest why the electorate rejected Fine Gael so whole heartedly on this occasion.

Mr. Duncan

We were honest.

Dr. Woods

If the Senator were to be present at one of our Parliamentary Party meetings, he would find that we are a very big group now, that we have quite a number of extra seats. You have to accept that we removed some of the harshest elements from the proposals. One of the steps taken was to bring forward the 3 per cent in any event. That is a very important step. You would have to go back to the foundation of the State before you would find pension increases, and other increases, being applied from as late as October, never mind November. In the current circumstances it was not easy to bring forward the date because it meant finding an additional £19 million. In addition we have been able to take some steps in relation to pay related and unemployment benefit by restoring the 15 months and the three to six waiting days provisions. I am surprised that the Labour Senators did not come out stronger on the Fine Gael proposal in that respect because it would have had a major impact on many working people. I had to make it one of my personal priorities because I realised that many ordinary working people would be very badly affected by a change to 12 months. In the circumstances in which we find ourselves we have done a reasonable job overall to soften some of the harshest elements in the package we found before us. I hope the Senators appreciate that.

Mr. Ferris

In case the Minister thinks I do not appreciate what he has done in regard to the three to six days period I want to put it on the record that I do appreciate that change because to have fiddled around with the number of waiting days would have cost recipients about £5.5 million. On the other side of that section, because you rescinded the decision of the outgoing Government, you expect to save a further £1 million pounds in 1987 through adjustments in the sick pay schemes operated by State and semi-State employers. We have not been told anything about that. How is the Minister to get that other £1 million? I presume if it is to be done through the employers, the employees, or the beneficiaries, will suffer. In applauding the Minister on the £5.5 million perhaps he would now tell me what he is doing about the other £1 million, where it is to come from and who is going to lose it.

Dr. Woods

Perhaps we can discuss that another day or another night at great length. Where employees are covered it could be reasonable to have an extension to six days if they were to get the full compensation in that period. Basically that is the thinking in that area. As the Senator is aware, many employers pay the full amount to the employee and then recoup from this fund. If an arrangement could be reached whereby they would leave it at six days instead of just three days that would obviously benefit the fund but that is a matter for negotiation and discussion. It is not part of this Bill.

Question put and agreed to.

SECTION 8.

Question proposed: "That section 8 stand part of the Bill."

Mr. Ferris

Section 8 makes additional requirements on employees in that the Minister is substituting 26 weeks for 39 contribution weeks so that people would benefit. Subsection (2) also amends the number of contribution weeks from 156 to 208. This section represents a substantial saving for the Exchequer and as a result of that I am extremely worried that the people who suffer this £5 million cut in social welfare will be the people we had hoped would be covered under any Social Welfare Act. Therefore, in changing the number of contribution weeks in subsection (1) and (2) the Minister is making it much more difficult for people to benefit in future and, as a result of this section the Exchequer will get £5 million extra.

Dr. Woods

This first subsection deals with entry into the scheme. The 26 contribution weeks are the paid contributions for entry to the scheme. Those contributions are for entitlement to benefits. In the circumstances and with the pressures on the funds it is reasonable to require 39 paid or credited contributions for entry into the first fund. The second is the long term benefit — the five years which we have reduced to four years. Obviously, I had to make sure money would be found elsewhere to cover difference. Currently it takes three years' contributions to get long term disability and invalidity benefits. The proposal was to increase that to five years. We have gone back to four years because we regarded the increase from three to five as being too harsh.

The conditions for entry can take account of contributions paid at any time. In my introductory speech I said "at any time". It looks peculiar but it is a technicality, because they can be paid at any time. They can be paid at different times but once you have 39 contributions you are into the scheme. Certainly it is a change from 26 to 39, but in all the circumstances and with the pressure on the fund generally I do not think that is unreasonable. It was, of course, part of the proposals.

Acting Chairman

Is the section agreed?

Mr. Ferris

We report our abstension from that section too because we are extremely worried about such changes. At least the Minister is honest in admitting that the changes are being made for economic reasons, but we are dealing with the poorest, lowest section of our community in income terms. Because something is done for economic reasons it is not necessarily socially just. Therefore, I want to record the fact that we are dissenting from that.

Acting Chairman

Dissenting? You said "abstention".

Mr. Ferris

Dissenting. You are one of us so you should know what I mean.

Question put and agreed to.

Sections 9 to 13, inclusive, agreed to.

Schedule A agreed to.

Schedule B agreed to.

Title agreed to.

Bill reported without amendment and received for final consideration.

Question proposed: "That the Bill do now pass."

Mr. Ferris

I thank the Minister for the patience he showed to us on this side of the House, in particular the Labour Party Senators who realise that he has financial difficulties to contend with. However, I hope he appreciates our position. We are dealing with a section of the people for whom we have responsibility because they are part of our electorate. They may not necessarily vote for us. Probably they voted for the Minister's party and now he has done this to them. We realise the responsibilities he has in his ministry, but I hope he will appreciate that there are fundamental sections in the Bill to which we could not agree. For that reason we had to have a full debate. I hope he will understand and appreciate the function and role we tried to perform today in the limited time available to us. His material was printed.

Minister for Social Welfare (Dr. Woods)

I mentioned the material only because it is a reality. There is no point in being hypocritical about it. Of course, that could all be set aside, at very considerable expense needless to say.

I thank Senators for what I believe was a very valuable and constructive debate today. It was very thorough and searching. There are considerable benefits in this Bill and the steps being taken in it. I have pointed them out and I will not repeat them now. They include the dental and other benefits which we want to see in operation. The harsh elements in the Bill are less harsh now than they were previously, and I assure the Senators that I have worked very hard in an effort to bring that about. I cannot say much more about the other factors which affect that, but I accept entirely what the Senators say. I assure them that my priority will be to give my full commitment, strength and any vigour I have to defending the people in need of support at this very difficult time nationally.

Question put and agreed to.